2021 Annual Report
fmbankva.com
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
fmbankva
fmbankva
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
2021 was a record year for F&M
Bank Corp and the most profitable
in our Company’s 114-year history.
During a time of economic
Our greater scale, coupled with
challenges and Covid-19 variants,
improvements in asset quality,
our associates continued to support
position F&M for continued success.
Earnings were driven by growth
in net interest income, strong non-
interest income due to our subsidiary
organizations, and improved asset
quality and fees earned under the
Paycheck Protection Program (PPP).
Continued improvements in asset
quality and economic conditions
resulted in the ability to reduce
the allowance for loan losses to
1.16% of loans held for investment
(1.18% excluding PPP loans) which
was accretive to income by
$2.8 million year to date, and $590
thousand in the fourth quarter.
the bank’s growth and positive
These successes, along with
changes. In addition to re-alignment
surpassing the $1 billion asset
with a focus on improving processes
milestone, is a testament to the
and strengthening leadership,
commitment and dedication of
we took steps to better align our
associates across our organization.
revenue, expenses and balance
sheet for the future.
F&M Bank Corp’s executive team
and board are planning thoughtfully
Our deposit growth of 68.3% over
and setting our sights on a great
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
of our ability to generate organic
and the Shenandoah Valley.
growth. We continue to focus
strategically on improving our
infrastructure and digital experience
as we expand our reach to new
banking relationships.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Dealer Finance Division
Executiv
Board of Directors
Service Milestones
es
Offices
4759 Spotswood Trail, Penn Laird, VA
F&M Mortgage
Associates are recognized for their
Corporate Headquarters
Stephanie Shillingburg
Mark Hanna
Anne Keeler
Dean Withers
Mark Hanna
Chief Experience Officer
Vice Chairman of the Board
Vice President for Finance and
President & Chief Executive Officer
President & Chief Executive Officer
outstanding service at five year
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
F&M Bank
540-442-8583
(540) 896-8941
Treasurer (Retired)
Former F&M Bank President & CEO
milestones. We thank these
(retired)
Bridgewater College
Barton Black
Kevin Russell
NMLS# 414464
19 Myers Corner Drive, Suite 105, Staunton, VA
employees for their dedication.
President of Mortgage, Title,
Chief Operating Officer
Michael Pugh
540-466-8540
Hannah Hutman
and Financial Services
Chairman of the Board
Chris Runion
Carrie Comer
Partner & Creditor/Debtor Attorney
Transfer Agent for F&M Bank Corp. Stock (FMBM)
Kitty Purcell and Julie Reeves,
161 South Main Street, Woodstock, VA
President
President
Hoover Penrod, PLC
Mike Wilkerson
Chief Financial Officer
Old Dominion Realty, Inc. President,
Eddie Edwards Signs, Inc
Broadridge Corporate Issuer Solutions
two longtime mortgage advisors,
540-459-3707
Chief Lending Officer
Colonial Appraisal Service, Inc.
NMLS# 275173
P.O. Box 1342, Brentwood, NY 11717
retired in 2021. Both are active
Paul Eberly
John Willingham
Daniel Harshman
P: 844-318-0135 F: 215-553-5402
members of our community and we
Chief Credit Officer
Peter Wray
Mayor
CPA
VS Title
Principal Broker
Town of Edinburg
E: shareholder@broadridge.com
President of Stoneridge Companies
wish them the best in their
Melody
Emswiler
W: http://shareholder.broadridge.com/FMBM
410 Neff Avenue, Harrisonburg, VA
Triangle Realtors
future endeavors.
Larry Caplinger
Chief Human Resources Officer
Daphyne Saunders Thomas
540-434-8571
Ray Burkholder
Secretary of the Board
Professor Department of Finance and
1707 Jefferson Highway, Fishersville, VA
Former F&M Bank Chief Lending Of
Business Law, James Madison
Garth Knight
Owner
ficer
540-213-0419
Chief Banking Officer
Balzer and Associates, Inc.
(retired)
University
154 Hansen Road, Suite 202-C, Charlottesville, VA
NMLS# 414464 / NMLS# 275173
434-202-4336
Mary Pavlovskaya
Business Deposit Services Officer
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Senior Vice Presidents
Vice Presidents
Branches
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Timberville
Harrisonburg
Bridgewater
Gregory Berkshire
Matthew Robinson
Teresa Helmick
Deborah Andes
Jeffrey Lam
Dale Shoop
Retail Loan Administrator
Investment Consultant, Infinex
Dealer Finance Manager
Elkton Branch Manager
Collections Manager
President, VS Title
165 New Market Road
80 Cross Keys Road
100 Plaza Drive
540-896-1716
540-433-7575
540-828-6300
Sara Berry
Natalie Strickler-Alt
Donna Brown
Sean Ryman
John Meyer
Calan Jansen
2030 Legacy Lane
Northern Market Manager
Southern Market Manager
Information Security Officer
Commercial Relationship Manager
Investment Consultant, Infinex
Contoller
Waynesboro
Broadway
540-433-0112
eet
2701 W Main Str
126 Timber Way
Katherine Preston
Jordan Dean
Krista Suter
John Sargent
Terri Bradley
Ryan May
Staunton
540-943-2080
540-896-7071
F&M Mortgage
Finance Director
Valley Market Executive
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
2813 N. Augusta Street
Steele
William
Carolyn Burnett
Holly Thorne
Karen Rose
Keith Deeds
Jacob Mowry
(loan office)
Winchester
Edinburg
540-213-8686
ficer
Commercial Relationship Manager
Deposit Operations Of
Marketing Director
Facilities Manager
Marketing Manager
Senior Credit Analyst
45 E. Boscawen Street
300 Stoney Creek Boulevard
30 Gosnell Crossing
540-686-1030
540-984-4128
540-946-8160
Cynthia Sherman
Bobby Williams
Charles Driest
Carolyn Dove
Jason Withers
Kevin Nixon
ficer
Loans Operations Of
Director of Digital Banking
Agriculture & Rural Programs Leader
Timberville Branch Manager
Commercial Relationship Manager
Credit Manager
Woodstock
Elkton
Stuarts Draft
Chris Gunter
Jonathan Reimer
161 South Main Street
127 West Rockingham Street
2782 Stuarts Draft Highway
Brooke
Zirk
540-459-3707
540-298-1251
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
540-609-2363
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
2021 Annual Report
01
02
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
$1.2B
Asset
milestone
$28.75
Stock Price
12 /31
68.3%
Deposit
Growth
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
2021 was a record year for F&M
Bank Corp and the most profitable
in our Company’s 114-year history.
Earnings were driven by growth
in net interest income, strong non-
interest income due to our subsidiary
organizations, and improved asset
quality and fees earned under the
Paycheck Protection Program (PPP).
Continued improvements in asset
quality and economic conditions
resulted in the ability to reduce
the allowance for loan losses to
1.16% of loans held for investment
(1.18% excluding PPP loans) which
was accretive to income by
$2.8 million year to date, and $590
thousand in the fourth quarter.
During a time of economic
challenges and Covid-19 variants,
our associates continued to support
the bank’s growth and positive
changes. In addition to re-alignment
with a focus on improving processes
and strengthening leadership,
we took steps to better align our
revenue, expenses and balance
sheet for the future.
Our deposit growth of 68.3% over
the last two years is significantly
higher than our peers and indicative
of our ability to generate organic
growth. We continue to focus
strategically on improving our
infrastructure and digital experience
as we expand our reach to new
banking relationships.
Our greater scale, coupled with
improvements in asset quality,
position F&M for continued success.
These successes, along with
surpassing the $1 billion asset
milestone, is a testament to the
commitment and dedication of
associates across our organization.
F&M Bank Corp’s executive team
and board are planning thoughtfully
and setting our sights on a great
year ahead and a bright future for
our company, our teammates,
and the Shenandoah Valley.
Earnings Per Share
Stock Price (at close 12/31)
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
2021
2020
2019
$1.30
$3.12
$2.56
ROAA
2021
2020
2019
0.98%
0.95%
2021
2020
2019
ROAE
2021
2020
$23.01
$28.75
$29.00
10.84%
9.46%
0.57%
2019
4.93%
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Dealer Finance Division
Board of Directors
Offices
4759 Spotswood Trail, Penn Laird, VA
F&M Mortgage
Corporate Headquarters
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
President & Chief Executive Officer
Vice Chairman of the Board
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
205 South Main Street, Timberville, VA
Treasurer (Retired)
Former F&M Bank President & CEO
F&M Bank
540-442-8583
(540) 896-8941
Bridgewater College
(retired)
19 Myers Corner Drive, Suite 105, Staunton, VA
NMLS# 414464
Michael Pugh
540-466-8540
Hannah Hutman
Chairman of the Board
Chris Runion
Transfer Agent for F&M Bank Corp. Stock (FMBM)
Partner & Creditor/Debtor Attorney
161 South Main Street, Woodstock, VA
President
President
Hoover Penrod, PLC
Eddie Edwards Signs, Inc
Old Dominion Realty, Inc. President,
Broadridge Corporate Issuer Solutions
540-459-3707
Colonial Appraisal Service, Inc.
NMLS# 275173
P.O. Box 1342, Brentwood, NY 11717
John Willingham
Daniel Harshman
P: 844-318-0135 F: 215-553-5402
CPA
Peter Wray
Mayor
VS Title
E: shareholder@broadridge.com
President of Stoneridge Companies
Principal Broker
Town of Edinburg
W: http://shareholder.broadridge.com/FMBM
410 Neff Avenue, Harrisonburg, VA
Triangle Realtors
Larry Caplinger
Daphyne Saunders Thomas
540-434-8571
Ray Burkholder
Secretary of the Board
Professor Department of Finance and
1707 Jefferson Highway, Fishersville, VA
Former F&M Bank Chief Lending Of
Business Law, James Madison
Owner
ficer
540-213-0419
Balzer and Associates, Inc.
(retired)
University
154 Hansen Road, Suite 202-C, Charlottesville, VA
NMLS# 414464 / NMLS# 275173
434-202-4336
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Sara Berry
John Meyer
Southern Market Manager
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Karen Rose
Commercial Relationship Manager
Deposit Operations Officer
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Bobby Williams
Vice Presidents
Branches
Timberville
Harrisonburg
Bridgewater
Teresa Helmick
Matthew Robinson
Deborah Andes
Elkton Branch Manager
Investment Consultant, Infinex
Collections Manager
165 New Market Road
80 Cross Keys Road
100 Plaza Drive
2030 Legacy Lane
Commercial Relationship Manager
Investment Consultant, Infinex
Contoller
540-896-1716
540-433-7575
540-828-6300
Donna Brown
Sean Ryman
Calan Jansen
Waynesboro
Broadway
540-433-0112
eet
2701 W Main Str
126 Timber Way
Jordan Dean
John Sargent
Ryan May
Staunton
540-943-2080
540-896-7071
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
2813 N. Augusta Street
Steele
William
Edinburg
(loan office)
Winchester
Keith Deeds
Jacob Mowry
540-213-8686
Facilities Manager
Marketing Manager
Senior Credit Analyst
45 E. Boscawen Street
300 Stoney Creek Boulevard
30 Gosnell Crossing
540-686-1030
540-984-4128
540-946-8160
Carolyn Dove
Jason Withers
Kevin Nixon
Woodstock
Elkton
Stuarts Draft
Chris Gunter
Jonathan Reimer
161 South Main Street
127 West Rockingham Street
2782 Stuarts Draft Highway
Brooke
Zirk
540-459-3707
540-298-1251
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
540-609-2363
Agriculture & Rural Programs Leader
Timberville Branch Manager
Commercial Relationship Manager
Credit Manager
2021 Annual Report
03
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
31.97%
Deposit
Increase
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
John Sargent
Commercial Relationship Manager
Mike Wilkerson
Chief Lending Officer
Ronda Gross
Business Relationship Specialist
Gail Pryde
Business Relationship Specialist
Jon Reimer
Commercial Relationship Manager
Bill Steele
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
Frederick County Markets
Augusta County Markets
Paycheck Protection Program
Preferred Stock Redemption
Dividends Declaration
Digital Upgrades
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
In January, F&M announced
expansion into the Winchester/
Frederick County markets and
brought on a well-versed
commercial banking team (pictured
above) with extensive knowledge
of the market.
The thriving Winchester economy
and community has proven to be
a great fit for the team and the
company – with growth of over
$36 million in deposits last year –
and sights set on opening a second
Winchester location in 2022.
Identifying opportunities for organic
loan and deposit growth, while
remaining an independent
community bank for the long-term,
is an integral component of our
strategic goals. In line with these
initiatives, F&M Bank entered into
an agreement with Carter Bank
and Trust last spring to purchase
its Waynesboro branch deposits.
The City of Waynesboro is a
$586 million market (FDIC data,
June 30, 2020) with a growing
local economy.
Economic Stimulus and the
Paycheck Protection Program
were a major driver of deposit
growth in 2020-2021 and provided
our associates with the opportunity
to help our neighbors during
unprecedented times.
F&M processed 1,080 PPP
& CARES Act loans during 2020
and 2021 totaling $87.1 million.
On September 1, 2021,
F&M gave notice to preferred
shareholders that it would redeem
all Series A Preferred Stock on
October 29, 2021.
As a result of this announcement,
180,261 shares of the 205,327
shares of preferred stock converted
to common shares and 25,066
shares were redeemed for cash.
On January 21, 2022, our Board
of Directors declared a fourth
quarter dividend of $.26 per share
to common shareholders.
Based on our most recent trade
price of $31.38 per share this
constitutes a 3.31% yield on
an annualized basis.
The dividend was paid March 1,
2022, to shareholders on record
as of February 14, 2022.
F&M Bank migrated to a new online
and mobile banking platform,
digitizing typical banking functions
to take user experience and service
options to the next level.
F&M customers now have access
to a personalized, secure, and
convenient experience through
digital channels.
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
2021 was a record year for F&M
During a time of economic
Our greater scale, coupled with
Bank Corp and the most profitable
challenges and Covid-19 variants,
improvements in asset quality,
in our Company’s 114-year history.
our associates continued to support
position F&M for continued success.
the bank’s growth and positive
These successes, along with
Earnings were driven by growth
changes. In addition to re-alignment
surpassing the $1 billion asset
in net interest income, strong non-
with a focus on improving processes
milestone, is a testament to the
interest income due to our subsidiary
and strengthening leadership,
commitment and dedication of
organizations, and improved asset
we took steps to better align our
associates across our organization.
quality and fees earned under the
revenue, expenses and balance
Paycheck Protection Program (PPP).
sheet for the future.
Continued improvements in asset
F&M Bank Corp’s executive team
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
the allowance for loan losses to
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
(1.18% excluding PPP loans) which
growth. We continue to focus
was accretive to income by
strategically on improving our
$2.8 million year to date, and $590
infrastructure and digital experience
thousand in the fourth quarter.
as we expand our reach to new
banking relationships.
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Board of Directors
(retired)
Hannah Hutman
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
Vice Chairman of the Board
President & Chief Executive Officer
Former F&M Bank President & CEO
F&M Bank
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Daniel Harshman
Mayor
Town of Edinburg
Eddie Edwards Signs, Inc
Hoover Penrod, PLC
Partner & Creditor/Debtor Attorney
President
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
John Willingham
CPA
President of Stoneridge Companies
Larry Caplinger
Secretary of the Board
Peter Wray
Principal Broker
Triangle Realtors
Ray Burkholder
Former F&M Bank Chief Lending Officer
Owner
(retired)
Balzer and Associates, Inc.
Michael Pugh
Chairman of the Board
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Vice Presidents
Deborah Andes
Collections Manager
Donna Brown
Teresa Helmick
Elkton Branch Manager
Calan Jansen
Matthew Robinson
Investment Consultant, Infinex
Commercial Relationship Manager
Investment Consultant, Infinex
Jordan Dean
Ryan May
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
Sean Ryman
Contoller
John Sargent
William Steele
Senior Credit Analyst
Jason Withers
Credit Manager
Brooke Zirk
Chris Gunter
Jonathan Reimer
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Offices
(540) 896-8941
NMLS# 414464
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
Transfer Agent for F&M Bank Corp. Stock (FMBM)
161 South Main Street, Woodstock, VA
19 Myers Corner Drive, Suite 105, Staunton, VA
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
540-442-8583
540-466-8540
540-459-3707
NMLS# 275173
VS Title
540-434-8571
540-213-0419
434-202-4336
410 Neff Avenue, Harrisonburg, VA
1707 Jefferson Highway, Fishersville, VA
NMLS# 414464 / NMLS# 275173
154 Hansen Road, Suite 202-C, Charlottesville, VA
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Sara Berry
John Meyer
Southern Market Manager
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Karen Rose
Commercial Relationship Manager
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Kevin Nixon
Timberville Branch Manager
Commercial Relationship Manager
2021 Annual Report
05
06
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
2021 was a record year for F&M
During a time of economic
Our greater scale, coupled with
Bank Corp and the most profitable
challenges and Covid-19 variants,
improvements in asset quality,
in our Company’s 114-year history.
our associates continued to support
position F&M for continued success.
the bank’s growth and positive
These successes, along with
Earnings were driven by growth
changes. In addition to re-alignment
surpassing the $1 billion asset
in net interest income, strong non-
with a focus on improving processes
milestone, is a testament to the
interest income due to our subsidiary
and strengthening leadership,
commitment and dedication of
organizations, and improved asset
we took steps to better align our
associates across our organization.
quality and fees earned under the
revenue, expenses and balance
Paycheck Protection Program (PPP).
sheet for the future.
Continued improvements in asset
F&M Bank Corp’s executive team
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
the allowance for loan losses to
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
(1.18% excluding PPP loans) which
growth. We continue to focus
was accretive to income by
strategically on improving our
$2.8 million year to date, and $590
infrastructure and digital experience
thousand in the fourth quarter.
as we expand our reach to new
banking relationships.
F&M Mortgage
Agricultural & Rural Programs
F&M Financial Services
ICBA Subcommittee
The Financial Brand
ICBA Recognition
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Second best year in history
$81.9 million loan portfolio
$1.5 million pre-tax profits
30.5% growth
820 loans closed
$190 million total loan volume
VS Title
$2.07 million in gross revenue
$521 thousand pre-tax profits
1355 real estate transactions closed
Indirect Dealer Division
$107 million portfolio balance
$2.97 million in net income
.72% past due ratio
Ranked third among peers in
the nation in 2021
$356 million in assets
under management
22% growth year over year
Securities and Insurance Products:
Not Insured By FDIC or any Federal
Government Agency. May Lose Value.
Not a Deposit of or Guaranteed by
the Bank or any Bank Affiliate.
The Independent Community
Bankers of America (ICBA) named
Mark Hanna, President & CEO of
F&M Bank, to its Housing Finance
Subcommittee in March 2021.
Mr. Hanna also serves as the ICBA’s
Elected Federal Delegate for
Virginia, elected in March 2020
for a three-year term.
In addition to helping shape and
advocate ICBA’s national policy
positions and programs, Hanna
promotes pro-community bank
policies and serves as a liaison
between community banks and
ICBA in Washington, D.C.
Annual reports are one of financial
marketers’ toughest creative tasks.
Which is why receiving recognition
for producing one of the “Best
Annual Reports in Banking” was
a great honor for F&M and our
marketing team.
The Financial Brand is a digital
publication focused on marketing
and strategy issues affecting retail
banks and credit unions.
Paul Eberly, F&M Bank’s EVP/Chief
Credit Officer, was recognized as
an “Emerging Community Bank
Leader 40 under 40” by The
Independent Community Bankers
Association (ICBA), and the only
recipient from the Commonwealth
of Virginia in 2021.
The ICBA awards community-
minded, innovative leaders under
40 years old who represent the
future of the community banking
industry.
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Board of Directors
(retired)
Hannah Hutman
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
Vice Chairman of the Board
President & Chief Executive Officer
Former F&M Bank President & CEO
F&M Bank
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Daniel Harshman
Mayor
Town of Edinburg
Eddie Edwards Signs, Inc
Hoover Penrod, PLC
Partner & Creditor/Debtor Attorney
President
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
John Willingham
CPA
President of Stoneridge Companies
Larry Caplinger
Secretary of the Board
Peter Wray
Principal Broker
Triangle Realtors
Ray Burkholder
Former F&M Bank Chief Lending Officer
Owner
(retired)
Balzer and Associates, Inc.
Michael Pugh
Chairman of the Board
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Vice Presidents
Deborah Andes
Collections Manager
Donna Brown
Teresa Helmick
Elkton Branch Manager
Calan Jansen
Matthew Robinson
Investment Consultant, Infinex
Commercial Relationship Manager
Investment Consultant, Infinex
Jordan Dean
Ryan May
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
Sean Ryman
Contoller
John Sargent
William Steele
Senior Credit Analyst
Jason Withers
Credit Manager
Brooke Zirk
Chris Gunter
Jonathan Reimer
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Offices
(540) 896-8941
NMLS# 414464
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
Transfer Agent for F&M Bank Corp. Stock (FMBM)
161 South Main Street, Woodstock, VA
19 Myers Corner Drive, Suite 105, Staunton, VA
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
540-442-8583
540-466-8540
540-459-3707
NMLS# 275173
VS Title
540-434-8571
540-213-0419
434-202-4336
410 Neff Avenue, Harrisonburg, VA
1707 Jefferson Highway, Fishersville, VA
NMLS# 414464 / NMLS# 275173
154 Hansen Road, Suite 202-C, Charlottesville, VA
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Sara Berry
John Meyer
Southern Market Manager
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Karen Rose
Commercial Relationship Manager
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Kevin Nixon
Timberville Branch Manager
Commercial Relationship Manager
2021 Annual Report
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
07
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
Danielle Ropp
President, SFS Tools & Safety (F&M Bank client)
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
2021 was a record year for F&M
During a time of economic
Our greater scale, coupled with
Bank Corp and the most profitable
challenges and Covid-19 variants,
improvements in asset quality,
in our Company’s 114-year history.
our associates continued to support
position F&M for continued success.
the bank’s growth and positive
These successes, along with
Earnings were driven by growth
changes. In addition to re-alignment
surpassing the $1 billion asset
in net interest income, strong non-
with a focus on improving processes
milestone, is a testament to the
interest income due to our subsidiary
and strengthening leadership,
commitment and dedication of
organizations, and improved asset
we took steps to better align our
associates across our organization.
quality and fees earned under the
revenue, expenses and balance
Paycheck Protection Program (PPP).
sheet for the future.
Continued improvements in asset
F&M Bank Corp’s executive team
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
the allowance for loan losses to
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
(1.18% excluding PPP loans) which
growth. We continue to focus
was accretive to income by
strategically on improving our
$2.8 million year to date, and $590
infrastructure and digital experience
thousand in the fourth quarter.
as we expand our reach to new
banking relationships.
Great Community Give
United Way
Art Gallery Sponsorship
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
F&M Bank provided title-level
sponsorship and volunteer support
for this annual April event, hosted
by The Community Foundation of
Harrisonburg and Rockingham
County. The charity supports
nonprofit organizations in the Valley
and raised $1,772,878 in 2021.
Bank Shred Days
F&M hosts free document
shredding events for the community
each year to help clients prevent
identity theft and dispose of their
sensitive personal documents.
F&M is a proud supporter of
United Way. Each year, staff
members volunteer to improve
their communities.
Big Brothers Big Sisters
Big Brothers Big Sisters of
Harrisonburg-Rockingham County
(BBBS) provides mentorship
support to local youth in need.
Our employees have participated
with BBBS as volunteers or
board members consecutively
for over 25 years, with Garth Knight,
EVP/Chief Banking Officer, currently
sitting on the board.
Art unifies communities.
Our company commits to
philanthropy for just that reason,
to bring people together in a
meaningful way. In 2021, F&M
sponsored a new art gallery
exhibition and opening reception
for Exuberance: Dialogues in African
American Abstract Painting.
Tailgate
F&M Bank hosts a corporate
tailgate event during football season
at James Madison University
each year.
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
F&M Bank family participated in the
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
Local Business You Love
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
honored small business owners
who are well-known and well-loved
by their patrons.
We support our local heroes who
continue to help our communities
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
December.
Donations
Over $300,000 in corporate and
employee donations were
made in 2021.
F&M Bank will be a strong,
independent financial organization
committed to solid shareholder
value, exceptional customer service,
active community involvement
and a fulfilling employee
experience.
Building our loyal customer base
Making the communities
by developing lasting relationships
we serve better.
in order to be the strongest bank
in our communities.
Providing flexible financial solutions.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Board of Directors
(retired)
Hannah Hutman
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
Vice Chairman of the Board
President & Chief Executive Officer
Former F&M Bank President & CEO
F&M Bank
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Daniel Harshman
Mayor
Town of Edinburg
Eddie Edwards Signs, Inc
Hoover Penrod, PLC
Partner & Creditor/Debtor Attorney
President
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
John Willingham
CPA
President of Stoneridge Companies
Larry Caplinger
Secretary of the Board
Peter Wray
Principal Broker
Triangle Realtors
Ray Burkholder
Former F&M Bank Chief Lending Officer
Owner
(retired)
Balzer and Associates, Inc.
Michael Pugh
Chairman of the Board
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Vice Presidents
Deborah Andes
Collections Manager
Donna Brown
Teresa Helmick
Elkton Branch Manager
Calan Jansen
Matthew Robinson
Investment Consultant, Infinex
Commercial Relationship Manager
Investment Consultant, Infinex
Jordan Dean
Ryan May
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
Sean Ryman
Contoller
John Sargent
William Steele
Senior Credit Analyst
Jason Withers
Credit Manager
Brooke Zirk
Chris Gunter
Jonathan Reimer
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Offices
(540) 896-8941
NMLS# 414464
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
Transfer Agent for F&M Bank Corp. Stock (FMBM)
161 South Main Street, Woodstock, VA
19 Myers Corner Drive, Suite 105, Staunton, VA
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
540-442-8583
540-466-8540
540-459-3707
NMLS# 275173
VS Title
540-434-8571
540-213-0419
434-202-4336
410 Neff Avenue, Harrisonburg, VA
1707 Jefferson Highway, Fishersville, VA
NMLS# 414464 / NMLS# 275173
154 Hansen Road, Suite 202-C, Charlottesville, VA
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Sara Berry
John Meyer
Southern Market Manager
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Karen Rose
Commercial Relationship Manager
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Kevin Nixon
Timberville Branch Manager
Commercial Relationship Manager
2021 Annual Report
09
10
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
2021 was a record year for F&M
During a time of economic
Our greater scale, coupled with
Bank Corp and the most profitable
challenges and Covid-19 variants,
improvements in asset quality,
in our Company’s 114-year history.
our associates continued to support
position F&M for continued success.
the bank’s growth and positive
These successes, along with
Earnings were driven by growth
changes. In addition to re-alignment
surpassing the $1 billion asset
in net interest income, strong non-
with a focus on improving processes
milestone, is a testament to the
interest income due to our subsidiary
and strengthening leadership,
commitment and dedication of
organizations, and improved asset
we took steps to better align our
associates across our organization.
quality and fees earned under the
revenue, expenses and balance
Paycheck Protection Program (PPP).
sheet for the future.
Continued improvements in asset
F&M Bank Corp’s executive team
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
the allowance for loan losses to
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
(1.18% excluding PPP loans) which
growth. We continue to focus
was accretive to income by
strategically on improving our
$2.8 million year to date, and $590
infrastructure and digital experience
thousand in the fourth quarter.
as we expand our reach to new
banking relationships.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
F&M Bank family participated in the
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
We support our local heroes who
continue to help our communities
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
independent financial organization
committed to solid shareholder
value, exceptional customer service,
active community involvement
and a fulfilling employee
experience.
Building our loyal customer base
by developing lasting relationships
in order to be the strongest bank
in our communities.
Making the communities
we serve better.
Providing flexible financial solutions.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
5
Promise
Cook
5
Desma
Flagle
10
Ashley
Griffith
15
Ashley
Riggleman
15
Natalie
Strickler-Alt
20
Carrie
Comer
20
Christy
Trail
35
Debbie
Andes
5
Carrie
Grimes
5
Dennis
Hohenstein
10
Melody
Emswiler
15
Yvette
McCoy
20
Linda
Spencer
20
Berlin
Smith
5
Calan
Jansen
10
Tonya
Crider
10
Ashley
McLure
15
Eddie
Reid
5
Mary
Pavlovskaya
5
Cynthia
Rice
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Sara Berry
Southern Market Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
John Meyer
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Commercial Relationship Manager
Karen Rose
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Kevin Nixon
Timberville Branch Manager
Commercial Relationship Manager
Board of Directors
(retired)
Hannah Hutman
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
Vice Chairman of the Board
President & Chief Executive Officer
Former F&M Bank President & CEO
F&M Bank
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Daniel Harshman
Mayor
Town of Edinburg
Eddie Edwards Signs, Inc
Hoover Penrod, PLC
Partner & Creditor/Debtor Attorney
President
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
John Willingham
CPA
President of Stoneridge Companies
Larry Caplinger
Secretary of the Board
Peter Wray
Principal Broker
Triangle Realtors
Ray Burkholder
Former F&M Bank Chief Lending Officer
Owner
(retired)
Balzer and Associates, Inc.
Michael Pugh
Chairman of the Board
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Vice Presidents
Deborah Andes
Collections Manager
Donna Brown
Teresa Helmick
Elkton Branch Manager
Calan Jansen
Matthew Robinson
Investment Consultant, Infinex
Commercial Relationship Manager
Investment Consultant, Infinex
Jordan Dean
Ryan May
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
Sean Ryman
Contoller
John Sargent
William Steele
Senior Credit Analyst
Jason Withers
Credit Manager
Brooke Zirk
Chris Gunter
Jonathan Reimer
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Offices
(540) 896-8941
NMLS# 414464
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
Transfer Agent for F&M Bank Corp. Stock (FMBM)
161 South Main Street, Woodstock, VA
19 Myers Corner Drive, Suite 105, Staunton, VA
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
540-442-8583
540-466-8540
540-459-3707
NMLS# 275173
VS Title
540-434-8571
540-213-0419
434-202-4336
410 Neff Avenue, Harrisonburg, VA
1707 Jefferson Highway, Fishersville, VA
NMLS# 414464 / NMLS# 275173
154 Hansen Road, Suite 202-C, Charlottesville, VA
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
2021 Annual Report
fmbankva.com
fmbankva
fmbankva
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
App Stores: F&M Bank - VA
eport is growth & transparency.
The theme of this year’s annual r
educed
To decrease environmental impact, this document has been designed for r
color printing and printed on recycled/responsibly-sourced paper.
2021 was a record year for F&M
During a time of economic
Our greater scale, coupled with
Bank Corp and the most profitable
challenges and Covid-19 variants,
improvements in asset quality,
in our Company’s 114-year history.
our associates continued to support
position F&M for continued success.
the bank’s growth and positive
These successes, along with
Earnings were driven by growth
changes. In addition to re-alignment
surpassing the $1 billion asset
in net interest income, strong non-
with a focus on improving processes
milestone, is a testament to the
interest income due to our subsidiary
and strengthening leadership,
commitment and dedication of
organizations, and improved asset
we took steps to better align our
associates across our organization.
quality and fees earned under the
revenue, expenses and balance
Paycheck Protection Program (PPP).
sheet for the future.
Continued improvements in asset
F&M Bank Corp’s executive team
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
the allowance for loan losses to
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
(1.18% excluding PPP loans) which
growth. We continue to focus
was accretive to income by
strategically on improving our
$2.8 million year to date, and $590
infrastructure and digital experience
thousand in the fourth quarter.
as we expand our reach to new
banking relationships.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
11
Service Milestones
Executives
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Sara Berry
Southern Market Manager
Board of Directors
Anne Keeler
Vice President for Finance and
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Eddie Edwards Signs, Inc
Daniel Harshman
Mayor
Town of Edinburg
Dean Withers
Vice Chairman of the Board
Former F&M Bank President & CEO
(retired)
Hannah Hutman
Partner & Creditor/Debtor Attorney
Hoover Penrod, PLC
John Willingham
CPA
President of Stoneridge Companies
Mark Hanna
President & Chief Executive Officer
F&M Bank
Michael Pugh
Chairman of the Board
President
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Peter Wray
Principal Broker
Triangle Realtors
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
Larry Caplinger
Secretary of the Board
Former F&M Bank Chief Lending Officer
(retired)
Ray Burkholder
Owner
Balzer and Associates, Inc.
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Vice Presidents
Deborah Andes
Collections Manager
Teresa Helmick
Elkton Branch Manager
Matthew Robinson
Investment Consultant, Infinex
John Meyer
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Donna Brown
Commercial Relationship Manager
Calan Jansen
Investment Consultant, Infinex
Sean Ryman
Contoller
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Commercial Relationship Manager
Karen Rose
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Jordan Dean
Commercial Relationship Manager
Ryan May
Dealer Division Relationship Manager
John Sargent
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
William Steele
Senior Credit Analyst
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Timberville Branch Manager
Kevin Nixon
Commercial Relationship Manager
Jason Withers
Credit Manager
Chris Gunter
Broadway Branch Manager
Jonathan Reimer
Commercial Relationship Manager
Brooke Zirk
Commercial Relationship Manager
Offices
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
(540) 896-8941
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
NMLS# 414464
19 Myers Corner Drive, Suite 105, Staunton, VA
Transfer Agent for F&M Bank Corp. Stock (FMBM)
161 South Main Street, Woodstock, VA
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
NMLS# 414464 / NMLS# 275173
154 Hansen Road, Suite 202-C, Charlottesville, VA
540-442-8583
540-466-8540
540-459-3707
NMLS# 275173
VS Title
540-434-8571
540-213-0419
434-202-4336
410 Neff Avenue, Harrisonburg, VA
1707 Jefferson Highway, Fishersville, VA
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
2021 Annual Report
fmbankva.com
Welcome
Mark Hanna
fmbankva
fmbankva
fmbankva
App Stores: F&M Bank - VA
fmbankva
An introduction by F&M Bank President & CEO
eport is growth & transparency.
The theme of this year’s annual r
educed
To decrease environmental impact, this document has been designed for r
color printing and printed on recycled/responsibly-sourced paper.
Our greater scale, coupled with
2021 was a record year for F&M
During a time of economic
improvements in asset quality,
challenges and Covid-19 variants,
Bank Corp and the most profitable
position F&M for continued success.
in our Company’s 114-year history.
our associates continued to support
These successes, along with
the bank’s growth and positive
surpassing the $1 billion asset
changes. In addition to re-alignment
Earnings were driven by growth
with a focus on improving processes
in net interest income, strong non-
milestone, is a testament to the
and strengthening leadership,
interest income due to our subsidiary
commitment and dedication of
we took steps to better align our
organizations, and improved asset
associates across our organization.
revenue, expenses and balance
quality and fees earned under the
sheet for the future.
Paycheck Protection Program (PPP).
F&M Bank Corp’s executive team
Continued improvements in asset
and board are planning thoughtfully
quality and economic conditions
Our deposit growth of 68.3% over
and setting our sights on a great
resulted in the ability to reduce
year ahead and a bright future for
the last two years is significantly
the allowance for loan losses to
higher than our peers and indicative
our company, our teammates,
1.16% of loans held for investment
of our ability to generate organic
and the Shenandoah Valley.
growth. We continue to focus
(1.18% excluding PPP loans) which
strategically on improving our
was accretive to income by
infrastructure and digital experience
$2.8 million year to date, and $590
as we expand our reach to new
thousand in the fourth quarter.
banking relationships.
F&M Bank (Farmers & Merchants Bank)
$31.9 million core loan growth
Invested in leadership, training, and development
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
Mary Pavlovskaya
Business Deposit Services Officer
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Service Milestones
Executives
Associates are recognized for their
outstanding service at five year
milestones. We thank these
employees for their dedication.
Kitty Purcell and Julie Reeves,
two longtime mortgage advisors,
retired in 2021. Both are active
members of our community and we
wish them the best in their
future endeavors.
Mark Hanna
President & Chief Executive Officer
Stephanie Shillingburg
Chief Experience Officer
Kevin Russell
President of Mortgage, Title,
and Financial Services
Mike Wilkerson
Chief Lending Officer
Barton Black
Chief Operating Officer
Carrie Comer
Chief Financial Officer
Paul Eberly
Chief Credit Officer
Melody Emswiler
Chief Human Resources Officer
Garth Knight
Chief Banking Officer
Board of Directors
Treasurer (Retired)
Bridgewater College
Chris Runion
President
Daniel Harshman
Mayor
Town of Edinburg
Anne Keeler
Dean Withers
Mark Hanna
Vice President for Finance and
Vice Chairman of the Board
President & Chief Executive Officer
Former F&M Bank President & CEO
F&M Bank
(retired)
Hannah Hutman
Eddie Edwards Signs, Inc
Hoover Penrod, PLC
Partner & Creditor/Debtor Attorney
President
Daphyne Saunders Thomas
Professor Department of Finance and
Business Law, James Madison
University
John Willingham
CPA
President of Stoneridge Companies
Larry Caplinger
Secretary of the Board
Peter Wray
Principal Broker
Triangle Realtors
Ray Burkholder
Former F&M Bank Chief Lending Officer
Owner
(retired)
Balzer and Associates, Inc.
Michael Pugh
Chairman of the Board
Old Dominion Realty, Inc. President,
Colonial Appraisal Service, Inc.
Vice Presidents
Deborah Andes
Collections Manager
Donna Brown
Teresa Helmick
Elkton Branch Manager
Calan Jansen
Matthew Robinson
Investment Consultant, Infinex
Commercial Relationship Manager
Investment Consultant, Infinex
Jordan Dean
Ryan May
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
Keith Deeds
Facilities Manager
Jacob Mowry
Marketing Manager
Chris Gunter
Jonathan Reimer
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
Sean Ryman
Contoller
John Sargent
William Steele
Senior Credit Analyst
Jason Withers
Credit Manager
Brooke Zirk
Senior Vice Presidents
Gregory Berkshire
Dealer Finance Manager
Jeffrey Lam
Retail Loan Administrator
Dale Shoop
President, VS Title
Sara Berry
John Meyer
Southern Market Manager
Information Security Officer
Natalie Strickler-Alt
Northern Market Manager
Terri Bradley
F&M Mortgage
Katherine Preston
Valley Market Executive
Carolyn Burnett
Karen Rose
Commercial Relationship Manager
Deposit Operations Officer
Krista Suter
Finance Director
Holly Thorne
Marketing Director
Charles Driest
Director of Digital Banking
Cynthia Sherman
Loans Operations Officer
Bobby Williams
Agriculture & Rural Programs Leader
Carolyn Dove
Kevin Nixon
Timberville Branch Manager
Commercial Relationship Manager
13
Offices
Dealer Finance Division
4759 Spotswood Trail, Penn Laird, VA
Corporate Headquarters
F&M Mortgage
205 South Main Street, Timberville, VA
(540) 896-8941
NMLS# 414464
Transfer Agent for F&M Bank Corp. Stock (FMBM)
Broadridge Corporate Issuer Solutions
P.O. Box 1342, Brentwood, NY 11717
P: 844-318-0135 F: 215-553-5402
E: shareholder@broadridge.com
W: http://shareholder.broadridge.com/FMBM
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
540-442-8583
19 Myers Corner Drive, Suite 105, Staunton, VA
540-466-8540
161 South Main Street, Woodstock, VA
540-459-3707
NMLS# 275173
VS Title
410 Neff Avenue, Harrisonburg, VA
540-434-8571
1707 Jefferson Highway, Fishersville, VA
540-213-0419
154 Hansen Road, Suite 202-C, Charlottesville, VA
434-202-4336
NMLS# 414464 / NMLS# 275173
Branches
Bridgewater
100 Plaza Drive
540-828-6300
Broadway
126 Timber Way
540-896-7071
Edinburg
300 Stoney Creek Boulevard
540-984-4128
Elkton
127 West Rockingham Street
540-298-1251
Harrisonburg
80 Cross Keys Road
540-433-7575
2030 Legacy Lane
540-433-0112
Staunton
2813 N. Augusta Street
540-213-8686
30 Gosnell Crossing
540-946-8160
Stuarts Draft
2782 Stuarts Draft Highway
540-609-2363
Timberville
165 New Market Road
540-896-1716
Waynesboro
2701 W Main Street
540-943-2080
Winchester (loan office)
45 E. Boscawen Street
540-686-1030
Woodstock
161 South Main Street
540-459-3707
2021 Annual Report
fmbankva.com
fmbankva
fmbankva
F&M Bank (Farmers & Merchants Bank)
fmbankva
fmbankva
App Stores: F&M Bank - VA
The theme of this year’s annual report is growth & transparency.
To decrease environmental impact, this document has been designed for reduced
color printing and printed on recycled/responsibly-sourced paper.
2021 was a record year for F&M
Bank Corp and the most profitable
in our Company’s 114-year history.
During a time of economic
Our greater scale, coupled with
challenges and Covid-19 variants,
improvements in asset quality,
our associates continued to support
position F&M for continued success.
Earnings were driven by growth
in net interest income, strong non-
interest income due to our subsidiary
organizations, and improved asset
quality and fees earned under the
Paycheck Protection Program (PPP).
Continued improvements in asset
quality and economic conditions
resulted in the ability to reduce
the allowance for loan losses to
1.16% of loans held for investment
(1.18% excluding PPP loans) which
was accretive to income by
$2.8 million year to date, and $590
thousand in the fourth quarter.
the bank’s growth and positive
These successes, along with
changes. In addition to re-alignment
surpassing the $1 billion asset
with a focus on improving processes
milestone, is a testament to the
and strengthening leadership,
commitment and dedication of
we took steps to better align our
associates across our organization.
revenue, expenses and balance
sheet for the future.
F&M Bank Corp’s executive team
and board are planning thoughtfully
Our deposit growth of 68.3% over
and setting our sights on a great
the last two years is significantly
year ahead and a bright future for
higher than our peers and indicative
our company, our teammates,
of our ability to generate organic
and the Shenandoah Valley.
growth. We continue to focus
strategically on improving our
infrastructure and digital experience
as we expand our reach to new
banking relationships.
Welcome
An introduction by F&M Bank President & CEO
Mark Hanna
Financials
$1.2 billion in total assets
$261.7 million annual deposit growth
$297 million annual investment portfolio growth
Year in Review
Most profitable year in our 114-year history
Expansion into new markets
Launched online account opening
$31.9 million core loan growth
Invested in leadership, training, and development
$2.5 million contributed to net income by
Mortgage/Title/Investment teams
Grew agriculture portfolio by 30.5%
22% increase in F&M Financial Services assets
190K
Website
Visits
3K
New App
Users
Performance
F&M Financial Services Advisors Calan Jansen
and Matt Robinson have both ranked among the
Top Infinex Financial Professionals, based on
2021 Gross Dealer Concession (GDC) from
1,440 individual brokers.
Investment and insurance products and services are offered through
INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial
Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not
affiliated with either entity. Products and services made available through
Infinex are not insured by the FDIC or any other agency of the United
States and are not deposits or obligations of nor guaranteed or insured
by any bank or bank affiliate. These products are subject to investment
risk, including the possible loss of value. We do not provide tax advice.
Please consult your advisor.
Securities and Insurance Products:
Not Insured By FDIC or any Federal Government Agency. May Lose
Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate
Accolades
In addition to recognition by
established banking and finance
associations, F&M Bank was honored
to receive Gold recognition for
Best Bank and Silver recognition for
Best Ag Lender in the inaugural
“Shenandoah Valley’s Best” contest,
implemented by local media company,
Harrisonburg Radio Group.
HRG received 1,600 nominations
and over 35,000 votes from
community members.
Community
At F&M Bank, community has always
been a focus. We understand the
valuable role not-for-profits and small
business play in creating thriving
towns and communities.
That’s why we encourage our
employees to support local causes
and, as a company, F&M donates
time and resources to local charities
and events.
Commercial Relationship Manager
Chief Lending Officer
Business Relationship Specialist
John Sargent
Mike Wilkerson
Ronda Gross
Gail Pryde
Jon Reimer
Bill Steele
Business Relationship Specialist
Commercial Relationship Manager
Senior Credit Analyst
Calan Jansen
Infinex Financial Advisor
Matt Robinson
Infenex Financial Advisor
President, SFS Tools & Safety (F&M Bank client)
Danielle Ropp
Sammy the Squirrel
Mascot, CNO (Chief Nut Officer)
Katherine Preston
Valley Market Executive
100+
Community
Events
1000
Volunteer
Hours
27%
Social Media
Follower
Increase
Principles
At F&M Bank, we create value in every service
we offer. We apply sound banking principles to
encourage our local economy and strengthen
relationships.
From comprehensive personal and commercial
banking to loan options for individuals and businesses,
our team is committed to building brighter futures
in the community we call home.
Dealer Finance Division
Executiv
Board of Directors
Service Milestones
es
Offices
4759 Spotswood Trail, Penn Laird, VA
F&M Mortgage
Associates are recognized for their
Corporate Headquarters
Stephanie Shillingburg
Mark Hanna
Anne Keeler
Dean Withers
Mark Hanna
Chief Experience Officer
Vice Chairman of the Board
Vice President for Finance and
President & Chief Executive Officer
President & Chief Executive Officer
outstanding service at five year
205 South Main Street, Timberville, VA
2040 Deyerle Avenue, Suite 207, Harrisonburg, VA
F&M Bank
540-442-8583
(540) 896-8941
Treasurer (Retired)
Former F&M Bank President & CEO
milestones. We thank these
(retired)
Bridgewater College
Barton Black
Kevin Russell
NMLS# 414464
19 Myers Corner Drive, Suite 105, Staunton, VA
employees for their dedication.
President of Mortgage, Title,
Chief Operating Officer
Michael Pugh
540-466-8540
Hannah Hutman
and Financial Services
Chairman of the Board
Chris Runion
Carrie Comer
Partner & Creditor/Debtor Attorney
Transfer Agent for F&M Bank Corp. Stock (FMBM)
Kitty Purcell and Julie Reeves,
161 South Main Street, Woodstock, VA
President
President
Hoover Penrod, PLC
Mike Wilkerson
Chief Financial Officer
Old Dominion Realty, Inc. President,
Eddie Edwards Signs, Inc
Broadridge Corporate Issuer Solutions
two longtime mortgage advisors,
540-459-3707
Chief Lending Officer
Colonial Appraisal Service, Inc.
NMLS# 275173
P.O. Box 1342, Brentwood, NY 11717
retired in 2021. Both are active
Paul Eberly
John Willingham
Daniel Harshman
P: 844-318-0135 F: 215-553-5402
members of our community and we
Chief Credit Officer
Peter Wray
Mayor
CPA
VS Title
Principal Broker
Town of Edinburg
E: shareholder@broadridge.com
President of Stoneridge Companies
wish them the best in their
Melody
Emswiler
W: http://shareholder.broadridge.com/FMBM
410 Neff Avenue, Harrisonburg, VA
Triangle Realtors
future endeavors.
Larry Caplinger
Chief Human Resources Officer
Daphyne Saunders Thomas
540-434-8571
Ray Burkholder
Secretary of the Board
Professor Department of Finance and
1707 Jefferson Highway, Fishersville, VA
Former F&M Bank Chief Lending Of
Business Law, James Madison
Garth Knight
Owner
ficer
540-213-0419
Chief Banking Officer
Balzer and Associates, Inc.
(retired)
University
154 Hansen Road, Suite 202-C, Charlottesville, VA
NMLS# 414464 / NMLS# 275173
434-202-4336
Mary Pavlovskaya
Business Deposit Services Officer
Santa to a Senior Program
Walk to End Alzheimer’s
First Responder Appreciation
Mission
Vision
Values
Senior Vice Presidents
Vice Presidents
Branches
Each year, F&M employees
demonstrate their holiday spirit
by signing up to support a local
senior in need. As part of Home
Instead Senior Care’s “Santa to
a Senior” program, individuals
purchase Christmas presents for
those who may not otherwise
have the opportunity to celebrate
the holidays.
Last year this program provided
Christmas gifts to over 800 seniors
across the counties of Rockingham,
Augusta, and Rockbridge.
Members of the Augusta County
We support our local heroes who
F&M Bank family participated in the
continue to help our communities
2021 Walk to End Alzheimer's in
October alongside 58 teams that
collectively raised over $71,000
for this worthy cause.
during trying times.
F&M commercial associates
delivered boxed lunches to the
hardworking staff at Sentara RMH
and Augusta Health Center during
Local Business You Love
December.
Associates from four counties
celebrated the Top 10 Nominees
of F&M Bank’s “Local Business You
Love” contest at Woodstock
Brewhouse. The celebration
who are well-known and well-loved
by their patrons.
honored small business owners
made in 2021.
Donations
Over $300,000 in corporate and
employee donations were
F&M Bank will be a strong,
Building our loyal customer base
Making the communities
independent financial organization
by developing lasting relationships
we serve better.
committed to solid shareholder
in order to be the strongest bank
value, exceptional customer service,
in our communities.
Providing flexible financial solutions.
active community involvement
and a fulfilling employee
experience.
Responsive to all requests
and opportunities.
Bringing enthusiasm and a positive
attitude to our endeavors.
Adding fun into banking and
our workplace!
Timberville
Harrisonburg
Bridgewater
Gregory Berkshire
Matthew Robinson
Teresa Helmick
Deborah Andes
Jeffrey Lam
Dale Shoop
Retail Loan Administrator
Investment Consultant, Infinex
Dealer Finance Manager
Elkton Branch Manager
Collections Manager
President, VS Title
165 New Market Road
80 Cross Keys Road
100 Plaza Drive
540-896-1716
540-433-7575
540-828-6300
Sara Berry
Natalie Strickler-Alt
Donna Brown
Sean Ryman
John Meyer
Calan Jansen
2030 Legacy Lane
Northern Market Manager
Southern Market Manager
Information Security Officer
Commercial Relationship Manager
Investment Consultant, Infinex
Contoller
Waynesboro
Broadway
540-433-0112
eet
2701 W Main Str
126 Timber Way
Katherine Preston
Jordan Dean
Krista Suter
John Sargent
Terri Bradley
Ryan May
Staunton
540-943-2080
540-896-7071
F&M Mortgage
Finance Director
Valley Market Executive
Commercial Relationship Manager
Dealer Division Relationship Manager
Commercial Relationship Manager
2813 N. Augusta Street
Steele
William
Carolyn Burnett
Holly Thorne
Karen Rose
Keith Deeds
Jacob Mowry
(loan office)
Winchester
Edinburg
540-213-8686
ficer
Commercial Relationship Manager
Deposit Operations Of
Marketing Director
Facilities Manager
Marketing Manager
Senior Credit Analyst
45 E. Boscawen Street
300 Stoney Creek Boulevard
30 Gosnell Crossing
540-686-1030
540-984-4128
540-946-8160
Cynthia Sherman
Bobby Williams
Charles Driest
Carolyn Dove
Jason Withers
Kevin Nixon
ficer
Loans Operations Of
Director of Digital Banking
Agriculture & Rural Programs Leader
Timberville Branch Manager
Commercial Relationship Manager
Credit Manager
Woodstock
Elkton
Stuarts Draft
Chris Gunter
Jonathan Reimer
161 South Main Street
127 West Rockingham Street
2782 Stuarts Draft Highway
Brooke
Zirk
540-459-3707
540-298-1251
Broadway Branch Manager
Commercial Relationship Manager
Commercial Relationship Manager
540-609-2363
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2021
Commission file number: 0-13273
F & M BANK CORP.
(Exact name of registrant as specified in its charter)
Virginia
State or other jurisdiction of
incorporation or organization
54-1280811
I.R.S. Employer Identification No.
P.O. Box 1111, Timberville, Virginia
Address of principal executive offices
22853
Zip Code
(540) 896-8941
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which
registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $5 Par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Sarbanes Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]
No [x]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [x]
The registrant’s Common Stock is quoted on the OTC Market’s OTCQX tier under the symbol FMBM. The aggregate market value
of the 2,890,404 shares of Common Stock of the registrant issued and outstanding held by non-affiliates on June 30, 2021 was
approximately $85,667,846 based on the closing sales price of $29.40 per share on that date. For purposes of this calculation, the term
“affiliate” refers to all directors and executive officers of the registrant.
As of the close of business on February 25, 2022, there were 3,415,235 shares of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III: Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2022 (the “Proxy
Statement”).
Table of Contents
PART I
Page
Item 1
Business .............................................................................................................................................................. 2
Item 1A Risk Factors ...................................................................................................................................................... 10
Item 1B Unresolved Staff Comments……………..…………………………………..……………………………..10
Item 2
Properties…………………………………………………………………………………………………...10
Item 3
Legal Proceedings………………………………………………………………………………………….10
Item 4 Mine Safety Disclosures ................................................................................................................................... 11
PART II
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities……………….……………………………………………………………………...……11
Item 6
(Reserved) ..............................................................................................................................................................
Item 7 Management’s Discussion and Analysis of Financial Condition
and Results of Operations ............................................................................................................................. 14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .......................................................................... 35
Item 8
Financial Statements and Supplementary Data…………….. ......................................................................... 36
Item 9
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ..................................................................................................... 92
Item 9A Controls and Procedures ................................................................................................................................... 92
Item 9B Other Information ............................................................................................................................................. 92
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ............................................................ 92
PART III
Item 10 Directors, Executive Officers and Corporate Governance…………………………………………………..93
Item 11
Executive Compensation .................................................................................................................................. 93
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...... 93
Item 13 Certain Relationships and Related Transactions, and Director Independence ............................................... 93
Item 14
Principal Accountant Fees and Services .......................................................................................................... 93
PART IV
Item 15
Exhibits and Financial Statement Schedules ................................................................................................... 93
Item 16
Form 10-K Summary…………………………………………………………………………………….....95
Signatures ............................................................................................................................................................................ 96
PART I
Item 1. Business
General
F & M Bank Corp. (the “Company” or “we”), incorporated in Virginia in 1983, is a one bank holding company under
the Bank Holding Company Act of 1956 that has elected to become a financial holding company. The Company owns
100% of the outstanding stock of its banking subsidiary, Farmers & Merchants Bank (“Bank”) and VSTitle, LLC
(“VST”). VBS Mortgage, LLC ( “F&M Mortgage”), TEB Life Insurance Company (“TEB”) and Farmers & Merchants
Financial Services, Inc. (“FMFS”) are wholly owned subsidiaries of the Bank.
The Bank was chartered on April 15, 1908, as a state chartered bank under the laws of the Commonwealth of Virginia.
TEB was incorporated on January 27, 1988, as a captive life insurance company under the laws of the State of Arizona.
FMFS is a Virginia chartered corporation and was incorporated on February 25, 1993. F&M Mortgage was incorporated
on May 11, 1999. The Bank purchased a majority interest in F&M Mortgage on November 3, 2008 and the remaining
minority interest on April 30, 2020. The Company purchased a majority interest in VST on January 1, 2017; F&M
Mortgage, owned entirely by the Bank, owned the remaining minority interest in VST until the Company purchased
F&M Mortgage’s minority interest in VST on January 3, 2022.
As a commercial bank, the Bank offers a wide range of banking services including commercial and individual demand
and time deposit accounts, commercial and individual loans, internet and mobile banking, drive-in banking services,
ATMs at all branch locations and several off-site locations, as well as a courier service for its commercial banking
customers. TEB was organized to re-insure credit life and accident and health insurance currently being sold by the Bank
in connection with its lending activities. FMFS provides brokerage services, commercial and personal lines of insurance
to customers of the Bank. F&M Mortgage originates conventional and government sponsored mortgages through their
offices in Harrisonburg, Woodstock and Fishersville, Virginia. VST provides title insurance and real estate settlement
services through their offices in Harrisonburg, Fishersville and Charlottesville, Virginia.
The Bank makes various types of commercial and consumer loans and has a large portfolio of residential mortgages and
indirect auto lending. The local economy is relatively diverse with strong employment in the agricultural, manufacturing,
service and governmental sectors.
The Company’s and the Bank’s principal executive office is located at 205 South Main Street, Timberville, Virginia
22853, and its phone number is (540) 896-8941.
Filings with the SEC
The Company files annual, quarterly and other reports under the Securities Exchange Act of 1934 with the Securities
and Exchange Commission (“SEC”). These reports are posted and are available at no cost on the Company’s website,
www.FMBankVA.com, as soon as reasonably practicable after the Company files such documents with the SEC. The
Company’s filings are also available through the SEC’s website at www.sec.gov.
Employees
On December 31, 2021, the Bank had 152 full-time and part-time employees, including executive officers, loan and
other banking officers, branch personnel, operations personnel and other support personnel. None of the Company’s
employees is represented by a union or covered under a collective bargaining agreement. Management of the Company
considers their employee relations to be excellent. No one employee devotes full-time services to F & M Bank Corp.
Competition
The Bank's offices face strong competition from numerous other financial institutions. These other institutions include
large national and regional banks, other community banks, nationally chartered savings banks, credit unions, consumer
finance companies, mortgage companies, loan production offices, marketplace lenders and other financial technology
firms, mutual funds and life insurance companies. Competition for loans and deposits is affected by a variety of factors
including interest rates, types of products offered, the number and location of branch offices, marketing strategies and
the reputation of the Bank within the communities served.
2
PART I, continued
Item 1. Business, continued
Regulation and Supervision
General. The operations of the Company and the Bank are subject to federal and state statutes, which apply to bank
holding companies, financial holding companies and state member banks of the Federal Reserve System. The common
stock of the Company is registered pursuant to and subject to the periodic reporting requirements of the Securities
Exchange Act of 1934 (the “Exchange Act”). These include, but are not limited to, the filing of annual, quarterly, and
other current reports with the SEC. As an Exchange Act reporting company, the Company is directly affected by the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). The Company believes it is in compliance with SEC and other rules
and regulations implemented pursuant to Sarbanes-Oxley and intends to comply with any applicable rules and
regulations implemented in the future.
The Company, as a bank holding company and a financial holding company, is subject to the provisions of the Bank
Holding Company Act of 1956, as amended (the "Act") and is supervised by the Board of Governors of the Federal
Reserve System (the “Federal Reserve Board”). The Act requires the Company to secure the prior approval of the Federal
Reserve Board before the Company acquires ownership or control of more than 5% of the voting shares or substantially
all of the assets of any institution, including another bank.
As a financial holding company, the Company is required to file with the Federal Reserve Board an annual report and
such additional information as it may require pursuant to the Act. The Federal Reserve Board may also conduct
examinations of F & M Bank Corp. and any or all of its subsidiaries. Under the Act and the regulations of the Federal
Reserve Board, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements
in connection with an extension of credit, provision of credit, sale or lease of property or furnishing of services.
The permitted activities of a bank holding company are limited to managing or controlling banks, furnishing services
to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve Board
determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper
incident thereto. In addition, bank holding companies that qualify and elect to be financial holding companies, such
as the Company, may engage in any activity, or acquire and retain the shares of a company engaged in any activity,
that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve Board
in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a
substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely
determined by the Federal Reserve Board). Activities that are financial in nature include but are not limited to
securities underwriting and dealing, insurance underwriting, and making merchant banking investments. Since 1994,
the Company has entered into agreements with the Virginia Community Development Corporation to purchase equity
positions in several Low-Income Housing Funds; these funds provide housing for low-income individuals throughout
Virginia. Approval of the Federal Reserve Board is necessary to engage in certain of the activities described above or to
acquire interests in companies engaging in these activities.
The Bank as a state member bank is supervised and regularly examined by the Virginia Bureau of Financial Institutions
and the Federal Reserve Board; such supervision and examination by the Virginia Bureau of Financial Institutions and
the Federal Reserve Board is intended primarily for the protection of depositors and not the stockholders of the
Company.
Payment of Dividends. The Company is a legal entity, separate and distinct from its subsidiaries. A significant portion
of the revenues of the Company result from dividends paid to it by the Bank. There are various legal limitations
applicable to the payment of dividends by the Bank to the Company. Under the current regulatory guidelines, prior
approval from the Federal Reserve Board is required if cash dividends declared in any given year exceed net income
for that year, plus retained net profits of the two preceding years. A bank also may not declare a dividend out of or in
excess of its net undivided profits without regulatory approval. The payment of dividends by the Bank or the Company
may also be limited by other factors, such as requirements to maintain capital above regulatory guidelines.
Bank regulatory agencies have the authority to prohibit the Bank or the Company from engaging in an unsafe or
unsound practice in conducting their businesses. The payment of dividends, depending on the financial condition of
the Bank, or the Company, could be deemed to constitute such an unsafe or unsound practice. Based on the Bank’s
current financial condition, the Company does not expect that any of these laws will have any impact on its ability to
obtain dividends from the Bank.
3
PART I, continued
Item 1. Business, continued
Regulation and Supervision, continued
The Company also is subject to regulatory restrictions on payment of dividends to its shareholders. Regulators have
indicated that bank holding companies should generally pay dividends only if the organization’s net income available
to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of
earnings retention appears consistent with the organization’s capital needs, asset quality, and overall financial
condition. Further, a bank holding company should inform and consult with the Federal Reserve Board prior to
declaring a dividend that exceeds earnings for the period (e.g., quarter) for which the dividend is being paid or that
could result in a material adverse change to the organization’s capital structure.
Capital Requirements. On January 1, 2015, the Federal Reserve Board, the Federal Deposit Insurance Corporation
(“FDIC”) and the Office of the Comptroller of the Currency (“OCC”) adopted a rule that substantially amended the
regulatory risk-based capital rules applicable to us. The final rule implemented the "Basel III" regulatory capital
reforms and changes required by the Dodd-Frank Act (see definition below). The final rule included new minimum
risk-based capital and leverage ratios and refined the definition of what constitutes "capital" for purposes of calculating
these ratios. The minimum capital requirements currently applicable to the Bank are: (i) a common equity Tier 1
("CET1") capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%;
and (iv) a Tier 1 leverage ratio of 4%. The final rule established a "capital conservation buffer" of 2.5% above the
regulatory minimum capital ratios, which effectively resulted in the following minimum ratios: (a) a common equity
Tier 1 capital ratio of 7.0%; (b) a Tier 1 to risk-based assets capital ratio of 8.5%; and (c) a total capital ratio of 10.5%.
An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying
discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum
percentage of eligible retained income that can be utilized for such activities.
The CETI and Tier 1 leverage ratio of the Bank as of December 31, 2021, were 13.95% and 8.62%, respectively,
which are significantly above the minimum requirements. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible assets.
In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-
crisis regulatory reforms (the standards are commonly referred to as “Basel IV”). Among other things, these standards
revise the Basel Committee’s standardized approach for credit risk (including by recalibrating risk weights and
introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit
card lines of credit) and provide a new standardized approach for operational risk capital. Under the proposed
framework, these standards were generally effective on January 1, 2023, with an aggregate output floor phasing-in
through January 1, 2027. Under the current capital rules, operational risk capital requirements and a capital floor apply
only to advanced approaches institutions, and not to the Company. The impact of Basel IV on the Company and the
Bank will depend on the manner in which it is implemented by the federal bank regulatory agencies.
As directed by the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”),
the federal banking regulators in 2019 jointly issued a final rule that permits qualifying banks that have less than $10
billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio.” A qualifying bank
that has chosen the proposed framework would not be required to calculate the existing risk-based and leverage capital
requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under prompt
corrective action rules, provided it has a community bank leverage ratio greater than 9%. The community bank
leverage ratio rules were modified in response to COVID-19. See Coronavirus Aid, Relief and Economic Security Act
that follows.
Pursuant to the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy
Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the
Company, are not subject to consolidated regulatory capital requirements.
4
PART I, continued
Item 1. Business, continued
Regulation and Supervision, continued
Source of Strength. Federal Reserve Board policy has historically required bank holding companies to act as a source
of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory
requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at
times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank
holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to priority of payment.
Safety and Soundness. There are a number of obligations and restrictions imposed on bank holding companies and
their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of
such depository institutions and the FDIC insurance fund in the event of a depository institution default. For example,
under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of an insured
depository institution subsidiary, a bank holding company is required to guarantee the compliance of any subsidiary
bank that may become "undercapitalized" with the terms of any capital restoration plan filed by such subsidiary with
its appropriate federal bank regulatory agency up to the lesser of (i) an amount equal to 5% of the institution's total
assets at the time the institution became undercapitalized or (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution
fails to comply with such capital restoration plan. Under the Federal Deposit Insurance Act, the federal bank
regulatory agencies have adopted guidelines prescribing safety and soundness standards. These guidelines establish
general standards relating to internal controls and information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines
require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified
in the guidelines.
Anti-Money Laundering Laws and Regulations. The Bank is subject to several federal laws that are designed to combat
money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated
by U.S. authorities (“AML laws”). This category of laws includes the Bank Secrecy Act of 1970, the Money
Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. The
Anti-Money Laundering Act of 2020, the most sweeping anti-money laundering legislation in 20 years, requires
various federal agencies to promulgate regulations implementing a number of its provisions.
The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain
other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering
and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions,
between federal law enforcement agencies and financial institutions, as well as among financial institutions, for
counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company
acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities
of the applicants. To comply with these obligations, the Company has implemented appropriate internal practices,
procedures, and controls.
Community Reinvestment Act. The requirements of the Community Reinvestment Act (“CRA”) are also applicable
to the Bank. The act imposes on financial institutions an affirmative and ongoing obligation to meet the credit needs
of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions.
5
PART I, continued
Item 1. Business, continued
Regulation and Supervision, continued
A financial institution’s efforts in meeting community needs currently are evaluated as part of the examination process
pursuant to twelve assessment factors. These factors are also considered in evaluating mergers, acquisitions and
applications to open a branch or facility. The Bank was rated “satisfactory” in the most recent CRA evaluation.
Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act was signed into law on July 21,
2010. Its wide-ranging provisions affect all federal financial regulatory agencies and nearly every aspect of the
American financial services industry. Among the provisions of the Dodd-Frank Act that directly impact the Company
is the creation of an independent Consumer Financial Protection Bureau (“CFPB”), which has the ability to implement,
examine and enforce complaints with federal consumer protection laws, which govern all financial institutions. For
smaller financial institutions, such as the Company and the Bank, their primary regulators will continue to conduct its
examination activities.
The Dodd-Frank Act contains provisions designed to reform mortgage lending, which includes the requirement of
additional disclosures for consumer mortgages. In addition, the Federal Reserve has issued rules that have the effect
of limiting the fees charged to merchants for debit card transactions. The result of these rules will be to limit the
amount of interchange fee income available explicitly to larger banks and indirectly to us. The Dodd-Frank Act also
contains provisions that affect corporate governance and executive compensation.
In May 2018, the Economic Growth Act was enacted to modify or remove certain regulatory financial reform rules
and regulations, including some of those implemented under the Dodd-Frank Act. While the Economic Growth Act
maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the
regulatory framework for small depository institutions with assets of less than $10 billion, such as the Bank, and for
large banks with assets of more than $50 billion.
Among other matters, the Economic Growth Act expands the definition of qualified mortgages which may be held by
a financial institution with total consolidated assets of less than $10 billion, exempts community banks from the
Volcker Rule, and includes additional regulatory relief regarding regulatory examination cycles, call reports, mortgage
disclosures and risk weights for certain high-risk commercial real estate loans.
Consumer Financial Protection. The Bank is subject to a number of federal and state consumer protection laws that
extensively govern its relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the
Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate
Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws
governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws,
and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain
disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking
deposits, making loans, collecting loans and providing other services. If the Bank fails to comply with these laws and
regulations, it may be subject to various penalties. Failure to comply with consumer protection requirements may also
result in failure to obtain any required bank regulatory approval for merger or acquisition transactions the Company
may wish to pursue or being prohibited from engaging in such transactions even if approval is not required.
Cybersecurity. The federal banking agencies have adopted guidelines for establishing information security standards
and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of
directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and
processes related to information technology and the use of third parties in the provision of financial products and
services. The federal banking agencies expect financial institutions to establish lines of defense and ensure that their
risk management processes also address the risk posed by compromised customer credentials, and also expect financial
institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and
maintenance of the institution’s operations after a cyber-attack. If the Bank fails to meet the expectations set forth in
this regulatory guidance, it could be subject to various regulatory actions and any remediation efforts may require
significant resources of the Bank. In addition, all federal and state bank regulatory agencies continue to increase focus
on cybersecurity programs and risks as part of regular supervisory exams.
6
PART I, continued
Item 1. Business, continued
Regulation and Supervision, continued
On November 23, 2021, the federal banking agencies issued a final rule called the Computer-Security Incident
Notification Requirements for Banking Organizations and Their Bank Service Partners that requires banking
organizations to notify their primary regulator within 36 hours of becoming aware of a “computer-security incident”
that rises to the level of a “notification incident” has occurred. The rule also requires bank service providers to notify
each affected banking organization customer when it is determined a computer security incident has caused, or is
reasonably likely to cause, a material service disruption or degradation of four or more hours. The rule is effective as
of April 1, 2022 and compliance is required beginning May 1, 2022.
To date, the Bank has not experienced a significant compromise, significant data loss or any material financial losses
related to cybersecurity attacks, but the Bank’s systems and those of its customers and third-party service providers
are under constant threat and it is possible that the Bank could experience a significant event in the future. Risks and
exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly
evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile
banking and other technology-based products and services by the Bank and its customers.
Privacy Laws. Several laws and regulations issued by federal banking agencies also provide protections against the
transfer and use of customer information by financial institutions. A financial institution must provide to its customers
information regarding its policies and procedures with respect to the handling of customers’ personal information.
Each institution must conduct an internal risk assessment of its ability to protect customer information. These privacy
provisions generally prohibit a financial institution from providing a customer’s personal financial information to
unaffiliated parties without prior notice and approval from the customer.
Coronavirus Aid, Relief, and Economic Security Act. In response to the COVID-19 pandemic, President Trump signed
into law the CARES Act on March 27, 2020. Among other things, the CARES Act included the following provisions
impacting financial institutions:
Community Bank Leverage Ratio. The CARES Act directed federal bank regulators to adopt interim final
rules to lower the threshold under the community bank leverage ratio from 9% to 8% and to provide a
reasonable grace period for a community bank that falls below the threshold to regain compliance, in each
case until the earlier of the termination date of the national emergency or December 31, 2020. In October
2020, the federal bank regulators issued two interim final rules implementing this directive. The interim final
rules provided that, as of the second quarter 2020, banking organizations with leverage ratios of 8% or greater
(and that met the other existing qualifying criteria) may elect to use the community bank leverage ratio
framework. The leverage ratio requirement increased to 8.5% effective January 1, 2021 and 9% effective
January 1, 2022. The final rules also established a two-quarter grace period for qualifying community banking
organizations who fail to meet the qualifying criteria, including the leverage ratio, so long as the banking
organization maintained a leverage ratio of 7% or greater effective the second quarter of 2020, 7.5% effective
January 1, 2021, and 8% effective January 1, 2022. A banking organization that elected the community bank
leverage ratio framework when it submitted its March 31, 2022, Call Report or Form FR Y–9C was subject
to the 9 percent community bank leverage ratio requirement and must use total consolidated assets as of the
report date to determine eligibility.
Temporary Troubled Debt Restructurings (“TDR”) Relief. The CARES Act allowed banks to elect to suspend
requirements under GAAP for loan modifications related to the COVID-19 pandemic (for loans that were
not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a TDR,
including impairment for accounting purposes, until the earlier of 60 days after the termination date of the
national emergency or December 31, 2020. Federal banking regulators are required to defer to the
determination of the banks making such suspension. The Consolidated Appropriations Act, 2021, signed
into law on December 27, 2020, extended this temporary relief until the earlier of 60 days after the termination
date of the national emergency or January 1, 2022.
7
PART I, continued
Item 1. Business, continued
Regulation and Supervision, continued
Small Business Administration (“SBA”) Paycheck Protection Program. The CARES Act created the SBA’s
Paycheck Protection Program. Under the Paycheck Protection Program, funds were authorized for small
business loans to pay payroll and group health costs, salaries and commissions, mortgage and rent payments,
utilities, and interest on other debt. The loans were provided through participating financial institutions,
including the Bank, that process loan applications and service the loans. The Paycheck Protection Program
officially ended on May 31, 2021.
Future Legislation and Regulation. Congress may enact legislation from time to time that affects the regulation of
the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation
of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically
propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The
substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted,
although enactment of the proposed legislation could impact the regulatory structure under which the Company and
the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require
an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business
opportunities in an efficient manner. With the Biden administration, a Democratic controlled Congress, and changes
in leadership at federal agencies such as the CFPB, we expect that financial institutions will remain heavily regulated
in the near future and that additional laws or regulations may be adopted further regulating specific banking practices.
A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material
adverse effect on the business, financial condition and results of operations of the Company and the Bank.
Forward-Looking Statements
Certain information contained in this report may include “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking
statements are generally identified by phrases such as “we expect,” “we believe” or words of similar import. Such
forward-looking statements are subject to known and unknown risks including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The effects of the COVID-19 pandemic, including its potential adverse effect on economic conditions and
the Company’s employees, customers, credit quality, and financial performance;
Changes in the quality or composition of our loan or investment portfolios, including adverse developments
in borrower industries, declines in real estate values in our markets, or in the repayment ability of individual
borrowers or issuers;
The strength of the economy in our target market area, as well as general economic, market, or business
conditions;
An insufficient allowance for loan losses as a result of inaccurate assumptions;
Our ability to maintain our “well-capitalized” regulatory status;
Changes in the interest rates affecting our deposits and our loans;
Changes in our competitive position, competitive actions by other financial institutions, financial technology
firms and others, the competitive nature of the financial services industry and our ability to compete
effectively in our banking markets;
Our ability to manage growth;
Our potential growth, including our entrance or expansion into new markets, the need for sufficient capital
to support that growth, difficulties or disruptions expanding into new markets or integrating the operations
of acquired branches or business, and the inability to obtain the expected benefits of such growth;
Our exposure to operational risk;
Our ability to raise capital as needed by our business;
Changes in laws, regulations and the policies of federal or state regulators and agencies;
Other circumstances, many of which are beyond our control; and
Geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the
U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could
impact business and economic conditions in the U.S. and abroad; and
The Company’s potential exposure to fraud, negligence, computer theft, and cyber-crime; and
Other factors identified in reports the Company files with the SEC from time to time.
8
PART I, continued
Item 1. Business, continued
Forward-Looking Statements, continued
Although we believe that our expectations with respect to the forward-looking statements are based upon reliable
assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that our
actual results, performance or achievements will not differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Operating Revenue
The following table displays components that contributed 15% or more of the Company’s total operating revenue for
the years ended December 31, 2021 and 2020:
Period
December 31, 2021
December 31, 2020
Class of Service
Interest and fees on loans held for investment
Interest and fees on loans held for investment
Percentage of Total Revenues
69.05%
69.62%
Executive Officers of the Company
Mark C. Hanna, 53, has served as President/CEO of the Bank since July 1, 2018. Prior to that he served as President
since December 2017. Prior to joining the Company, he served as Executive Vice President and Tidewater Regional
President of EVB and its successor, Sonabank from November 2014 through October 2017. Previously, he served as
President and Chief Executive Officer of Virginia Company Bank from November 2006 through November 2014.
Carrie A. Comer, 51, has served as Executive Vice President/Chief Financial Officer of the Bank and the Company
since March 1, 2018. Prior to that she served as Senior Vice President/Chief Financial Officer from June 2013 to
March 2018, Vice President/Controller from March 2009 to June 2013, and as Assistant Vice President/Controller
from December 2005 to March 2009.
Stephanie E. Shillingburg, 60, has served as Executive Vice President/Chief Experience Officer of the Bank and the
Company since January 2022, Executive Vice President/Chief Banking Officer July 2016 to December 2021,
Executive Vice President/Chief Retail Officer from June 2013 until July 2016 and Senior Vice President/Branch
Administrator from February 2005 until June 2013. She also served as Vice President/Branch Administrator from
March 2003 until February 2005 and as Branch Manager of the Edinburg Branch from February 2001 until March
2003.
Barton E. Black, 51, has served as the Executive Vice President/Chief Operating Officer of the Bank and the Company
since June 2020. Prior to that he served as Executive Vice President/Chief Strategy & Risk Officer March 2019 to
May 2020. Prior to joining the company, he served as Managing Director at Strategic Risk Associates, a financial
services consulting company based in Virginia, from August 2012 through February 2019.
F. Garth Knight, 39, has served as Executive Vice President/Chief Banking Officer of the Bank and the Company
since January 2022, and Executive Vice President/Chief Lending Officer from June 2020 to December 2021. Prior to
joining F&M Bank, he spent 15 years at Wells Fargo Bank serving as Vice President/Business Acquisition Manager
for Mid-Atlantic and Greater Philadelphia from May 2017 until May of 2020, Vice President/Business Banking
Manager for North and South Carolina from September of 2010 to May of 2017, and Retail Market Leader from June
2005 to September 2010.
Paul E. Eberly, 39, has served as Executive Vice President/Chief Credit Officer since September 2020, Senior Vice
President/Agricultural & Rural Programs Leader from January 2020 until September 2020, and Vice
President/Agricultural & Rural Programs Leader from January 2019 until January 2020. He also served in various
sales, lending, credit, risk management and other leadership roles within the Farm Credit System from June 2005 until
January 2019. Mr. Eberly has been in the banking and finance industry since 2005.
Kevin Russell, 44, has served as the Executive Vice President/President of Mortgage, Title and Financial Services at
the Bank and the Company since June 16, 2020. Prior to that he served as the President of F&M Mortgage since 2000.
9
PART I, continued
Item 1. Business, continued
Executive Officers of the Company, continued
Aubrey Michael (Mike) Wilkerson, 63, has served as Executive Vice President/Chief Lending Officer since January
2022, and Executive Vice President/Chief Strategy Officer and Northern Shenandoah Valley Market Executive since
January 2021. Mr. Wilkerson began his banking career at Wachovia Bank on January 4, 1982. Mr. Wilkerson’s
banking includes experience in Dealer Financial Services, Retail Banking, Private Banking, Commercial Banking and
senior strategic leadership positions. From 2012 to 2018, Mr. Wilkerson was the Business Banking Division Executive
for Virginia, Maryland & Washington DC at Wachovia. Most recently, Mr. Wilkerson served as the Commercial
Banking Market Executive from 2018 through 2020 for Western Mid-Atlantic Region at Wells Fargo.
Melody Emswiler, 48, has served as Executive Vice President/Chief Human Resources Officer since January 2022,
Senior Vice President/Human Resources Director from January 2019 to December 2021, Vice President/Director of
Human Resources from February 2015 to December 2018, and Assistant Vice President/Human Resources Manager
from February 2011 to January 2015. Ms. Emswiler has been in the human resources profession since 1996.
Item 1A. Risk Factors
Not required.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
The locations of F & M Bank Corp. and its subsidiaries are shown below.
Corporate Offices 205 South Main Street Timberville, VA 22853
Timberville Branch 165 New Market Road Timberville, VA 22853
Elkton Branch 127 West Rockingham Street Elkton, VA 22827
Broadway Branch 126 Timberway Broadway, VA 22815
Bridgewater Branch 100 Plaza Drive Bridgewater, VA 22812
Edinburg Branch 300 Stoney Creek Blvd. Edinburg, VA 22824
Woodstock Branch 161 South Main Street Woodstock, VA 22664
Crossroads Branch 80 Cross Keys Road Harrisonburg, VA 22801
Coffman’s Corner Branch 2030 Legacy Lane Harrisonburg, VA 22801
Myers Corner Branch 30 Gosnell Crossing Staunton, VA 24401
North Augusta Branch 2813 North Augusta Street Staunton, VA 22401
Stuarts Draft Branch 2782 Stuarts Draft Highway Stuarts Draft, VA 24477
Waynesboro, VA 22664
Waynesboro Branch 2701 West Main Street
Winchester Branch 45 E. Boscawen Steet
Winchester, VA 22601
Dealer Finance Division 4759 Spotswood Trail Penn Laird, VA 22846
F&M Mortgage offices are located at:
Harrisonburg Office 2040 Deyerle Avenue, Suite 107 Harrisonburg, VA 22801
Fishersville Office 19 Myers Corner Drive, Suite 105 Staunton, VA 24401
Woodstock Office 161 South Main Street Woodstock, VA 22664
VSTitle offices are located at:
Harrisonburg Office 410 Neff Avenue Harrisonburg, VA 22801
Fishersville Office 1707 Jefferson Highway Fishersville, VA 22939
Charlottesville Office 154 Hansen Rd., Suite 202-C Charlottesville, VA 22911
The Company leases the North Augusta Branch, Waynesboro Branch, Winchester Branch, Dealer Finance Division, and
all locations of VST. The remaining facilities are owned by Farmers & Merchants Bank. ATMs are available at all branch
locations except the Winchester Branch. The Woodstock office of F&M Mortgage is leased from F&M Bank.
10
PART I, continued
Item 3. Legal Proceedings
In the normal course of business, the Company may become involved in litigation arising from banking, financial, or
other activities of the Company. Management after consultation with legal counsel, does not anticipate that the
ultimate liability, if any, arising out of these matters will have a material effect on the Company’s financial condition,
operating results or liquidity.
Item 4. Mine Safety Disclosures
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Stock Listing
The Company’s Common Stock is quoted under the symbol “FMBM” on the OTCQX Market. The bid and ask price are
quoted at www.OTCMARKETS.com/Stock/FMBM/quote. Any over-the-counter market quotations reflect iner-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. With
its inclusion on the OTCQX Markets, there are now several active market makers for FMBM stock.
Transfer Agent and Registrar
Broadridge Corporate Issuer Solutions
PO Box 1342
Brentwood, NY 11717
11
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Stock Performance
The following graph compares the cumulative total return to the shareholders of the Company for the last five fiscal years
with the total return of the Russell 2000 Index and the SNL Bank Index, as reported by SNL Financial, LC, assuming an
investment of $100 in the Company’s common stock on December 31, 2016, and the reinvestment of dividends.
Total Return Performance
F & M Bank Corp.
Russell 2000 Index
S&P U.S. BMI Banks Index
200
150
100
e
u
l
a
V
x
e
d
n
I
50
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
Index
F & M Bank Corp.
Russell 2000 Index
S&P U.S. BMI Banks Index
12/31/16
100.00
100.00
100.00
12/31/17
131.10
114.65
118.21
12/31/18
122.97
102.02
98.75
12/31/19
123.09
128.06
135.64
12/31/20
102.42
153.62
118.33
12/31/21
132.82
176.39
160.89
Period Ending
12
PART II, continued
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities, continued
Dividends
Dividends to common shareholders totaled $3,397 and $3,328 in 2021 and 2020, respectively. For 2021, the regular
dividends totaled $1.04 per share. Preferred stock dividends were $196 and $263 in 2021 and 2020, respectively.
Regular quarterly dividends have been declared for at least 28 years. The payment of dividends depends on the earnings
of the Company and its subsidiaries, the financial condition of the Company and other factors including capital adequacy,
regulatory requirements, general economic conditions and shareholder returns. The ratio of dividends per common share
to net income per common share was 32.00% in 2021 compared to 39.10% in 2020.
Refer to Payment of Dividends in Item 1. Business, Regulation and Supervision section above for a summary of
applicable restrictions on the Company’s ability to pay dividends.
Stock Repurchases and Holders
The number of common shareholders was approximately 2,467 as of March 7, 2022. This amount includes all
shareholders, whether titled individually or held by a brokerage firm or custodian in street name.
The Company completed the redemption of its Series A Preferred Stock on October 29, 2021. Holders of Series A
Preferred Stock were entitled to convert their shares of Series A Preferred stock to shares of the Company’s common
stock at a conversion rate of 1.111 or have their shares redeemed by the Company for $25.00 per share in cash. There
were 180,261 shares converted to common stock and 25,066 shares redeemed. As of December 31, 2021, no shares of
Series A Preferred stock were outstanding.
13
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands)
The following discussion provides information about the major components of the results of operations and financial
condition, liquidity and capital resources of F & M Bank Corp. and its subsidiaries. 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 8, Financial Statements and Supplementary Information, of this Form 10-K.
Lending Activities
Credit Policies
The principal risk associated with each of the segments of loans in our portfolio is the creditworthiness of our
borrowers. Within each segment, such risk is increased or decreased, depending on prevailing economic conditions.
In an effort to manage the risk, our loan policy gives loan amount approval limits to individual loan officers based on
their position and level of experience and to our loan committees based on the size of the lending relationship. The
risk associated with real estate and construction loans, commercial loans and consumer loans varies, based on market
employment levels, fluctuations in the value of real estate and other conditions that affect the ability of borrowers to
repay indebtedness. The risk associated with real estate construction loans varies, based on the supply and demand for
the type of real estate under construction.
We have written policies and procedures to help manage credit risk. We have a loan review policy that includes regular
portfolio reviews to establish loss exposure and to ascertain compliance with our loan policy.
We use a management loan committee and a directors’ loan committee to approve loans. The management loan
committee is comprised of members of senior management, credit administration and senior lenders; the directors’
loan committee is comprised of any six directors. Both committees approve new, renewed and or modified loans that
exceed officer loan authorities. The directors’ loan committee also reviews any changes to our lending policies, which
are then approved by our board of directors.
Construction and Development Lending
We make construction loans, primarily residential, and land acquisition and development loans. The residential
construction loans are secured by residential houses under construction and the underlying land for which the loan
was obtained. The land acquisition and development loans are secured by the land for which the loan was obtained.
The average life of a construction loan is approximately 12 months, and it is typically re-priced as the prime rate of
interest changes. Construction lending entails significant additional risks, compared with residential mortgage
lending. Construction loans often involve larger loan balances concentrated with single borrowers or groups of related
borrowers. Another risk involved in construction lending is attributable to the fact that loan funds are advanced upon
the security of the land or home under construction, which value is estimated prior to the completion of construction.
Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and related loan-to-
value ratios. To mitigate the risks associated with construction lending, we generally limit loan amounts to 75% to
90% of appraised value, in addition to analyzing the creditworthiness of our borrowers. We also obtain a first lien on
the property as security for our construction loans and typically require personal guarantees from the borrower’s
principal owners.
Commercial Real Estate Lending
Commercial real estate loans are secured by various types of commercial real estate in our market area, including
multi-family residential buildings, commercial buildings and offices, shopping centers and churches. Commercial real
estate lending entails significant additional risks, compared with residential mortgage lending. Commercial real estate
loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers.
Additionally, the payment experience on loans secured by income producing properties is typically dependent on the
successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse
conditions in the real estate market or in the economy in general. Our commercial real estate loan underwriting criteria
require an examination of debt service coverage ratios and the borrower’s creditworthiness, prior credit history and
reputation. We also evaluate the location of the property securing the loan and typically require personal guarantees
or endorsements of the borrower’s principal owners.
14
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Commercial & Industry – Non-Real Estate
Business loans generally have a higher degree of risk than residential mortgage loans but have higher yields. To
manage these risks, we generally obtain appropriate collateral and personal guarantees from the borrower’s principal
owners and monitor the financial condition of our business borrowers. Residential mortgage loans generally are made
on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real
estate whose value tends to be readily ascertainable. In contrast, business loans typically are made on the basis of the
borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as
real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of
business loans is substantially dependent on the success of the business itself. Furthermore, the collateral for business
loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate.
Consumer Lending
We offer various consumer loans, including personal loans, automobile loans, deposit account loans, installment and
demand loans, and home equity loans. We currently originate all of our consumer loans in our geographic market area.
The underwriting standards employed by us for consumer loans include a determination of the applicant’s payment
history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed
loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income
from primary employment and additionally from any verifiable secondary income. Although creditworthiness of the
applicant is of primary consideration, the underwriting process also includes an analysis of the value of the security
in relation to the proposed loan amount. For home equity lines of credit and loans we require title insurance, hazard
insurance and, if required, flood insurance.
Residential Mortgage Lending
The Bank makes residential mortgage loans for the purchase or refinance of existing loans with loan to value limits
generally ranging between 80 and 90% depending on the age of the property, borrower’s income and credit worthiness.
Loans that are retained in our portfolio generally carry adjustable rates that can change every one, three or five years,
based on amortization periods of twenty to thirty years.
Loans Held for Sale
The Bank makes fixed rate mortgage loans with terms of typically fifteen or thirty years through its subsidiary F&M
Mortgage. These loans are funded by F&M Mortgage utilizing a line of credit at the Bank until sold to investors in
the secondary market. Similarly, the Bank also has a relationship with Northpointe Bank in Grand Rapids, MI whereby
it can purchase fixed rate conforming 1-4 family mortgage loans for short periods of time pending those loans being
sold to investors in the secondary market. These loans have an average duration of ten days to two weeks, but
occasionally remain on the Bank’s books for up to 60 days. The Bank began its relationship with Northpointe Bank
in 2014 and had a similar program with a prior bank since 2003. F&M Bank does not share in the gains on sale of
loans for the Northpointe participation and only earns interest during the holding period.
Dealer Finance Division
In September 2012, the Bank started a loan production office in Penn Laird, VA which specializes in providing
automobile financing through a network of automobile dealers. The Dealer Finance Division is staffed with officers
that have extensive experience in Dealer Finance. This office is serving the automobile finance needs for customers
of dealers throughout the existing geographic footprint of the Bank. Approximately eighty dealers have signed
contracts to originate loans on behalf of the Bank. As of year-end 2021, the division had total loans outstanding of
$107,346.
15
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Critical Accounting Policies
General
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America (“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. The Company’s financial position and results of operations are affected by management’s
application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying
value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different
assumptions in the application of these policies could result in material changes in the Company’s consolidated
financial position and/or results of operations.
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. Following is a summary of the Company’s significant accounting policies that are highly dependent on
estimates, assumptions and judgments.
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) ASC 450 “Contingencies”, which requires that losses be accrued
when they are probable of occurring and estimable and (ii) ASC 310, “Receivables”, 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. The Company’s allowance for loan losses is the
accumulation of various components that are calculated based on independent methodologies. All components of the
allowance represent an estimation performed pursuant to either ASC 450 or ASC 310. Management’s estimate of
each ASC 450 component is based on certain observable data that management believes are most reflective of the
underlying credit losses being estimated. This evaluation includes credit quality trends; collateral values; loan
volumes; economic conditions, borrower and industry concentrations; changes in the experience and depths of lending
management and staff; effects of any concentrations of credit; the findings of internal credit quality assessments,
results from external bank regulatory examinations and third-party loan reviews. These factors, as well as historical
losses and current economic and business conditions, are used in developing estimated loss factors used in the
calculations.
Allowances for loan losses are determined by applying estimated loss factors to the portfolio based on management’s
evaluation and “risk grading” of the loan portfolio. Specific allowances, if required, are typically provided on all
impaired loans in excess of a defined loan size threshold that are classified in the Substandard or Doubtful risk grades
and on all troubled debt restructurings. The specific reserves are determined on a loan-by-loan basis based on
management’s evaluation of the Company’s exposure for each credit, given the current payment status of the loan, the
value of any underlying collateral or future discounted cash flows.
While management uses the best information available to establish the allowance for loan and lease losses, future
adjustments to the allowance may be necessary if economic conditions change or, if required by regulators, based
upon information available to them at the time of their examinations. Such adjustments to original estimates, as
necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels may
vary from previous estimates.
16
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), continued
Fair Value
The estimate of fair value involves the use of (1) quoted prices for identical instruments traded in active markets, (2)
quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques using significant assumptions that are observable in the
market or (3) model-based techniques that use significant assumptions not observable in the market. When observable
market prices and parameters are not fully available, management’s judgment is necessary to arrive at fair value
including estimates of current market participant expectations of future cash flows, risk premiums, among other things.
Additionally, significant judgment may be required to determine whether certain assets measured at fair value are
classified within the fair value hierarchy as Level 2 or Level 3. The estimation process and the potential materiality of
the amounts involved result in this item being identified as critical.
Pension Obligations
The accounting guidance for the measurement and recognition of obligations and expense related to pension plans
generally applies the concept that the cost of benefits provided during retirement should be recognized over the
employees’ active working life. Inherent in this concept is the requirement to use various actuarial assumptions to
predict and measure costs and obligations many years prior to the settlement date. Major actuarial assumptions that
require significant management judgment and have a material impact on the measurement of benefits expense and
accumulated benefit obligation include discount rates, expected return on assets, mortality rates, and projected salary
increases, among others. Changes in assumptions or judgments related to any of these variables could result in
significant volatility in the Company’s financial condition and results of operations. As a result, accounting for the
Company’s pension expense and obligation is considered a significant estimate. The estimation process and the
potential materiality of the amounts involved result in this item being identified as critical.
COVID-19
The World Health Organization declared a global pandemic in the first quarter of 2020 due to the spread of the coronavirus
(“COVID-19”) around the globe. As a result, the state of Virginia issued a stay at home order in March 2020 requiring
all nonessential businesses to shut down and nonessential workers to stay home. The Company, while considered an
essential business, implemented procedures to protect its employees, customers and the community and still serve their
banking needs. Branch lobbies were closed until April 12, 2021. During this time the Company utilized drive through
windows and courier service to handle transactions, new accounts were opened electronically with limited in person
contact for document signing and verification of identification, and lenders accepted applications by appointment with
limited in person contact as well. Due to high transmission rates in our service area, branch lobbies were closed again
from January 18, 2022 to March 7, 2022, and only open by appointment. The Company serviced customers in similar
methods as when the lobbies closed in 2020.
The SBA implemented the Paycheck Protection Program (“PPP”) to support small business operations with loans during
the shutdown and into the following months. The Company worked diligently to support both our customers and
noncustomers within our footprint with these loans. The Company originated a total of 1,080 PPP loans totaling $87,061
and associated fees of $3,824 through the SBA program. The fees will be recognized over the life of the associated loans.
As of February 4, 2022, there are 50 loans outstanding with a balance of $4,767 and unamortized fees of $122.
The full impact of COVID-19 and its length of duration remains uncertain at this time. The Company is closely monitoring
the effects of the pandemic on our customers. Management assessed the risks in our loan portfolio and worked with our
customers to minimize losses.
The company granted 1,266 modifications allowing principal and interest deferrals in connection with the COVID-19
related needs from first quarter 2020 to first quarter 2021. These modifications, 75% of which were short-term dealer
loan modifications, were consistent with regulatory guidance and/or the CARES Act. As of January 18, 2022, no loans
remain in deferral.
17
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), continued
COVID-19, continued
Based on the Company’s capital levels, current underwriting policies, low loan-to-deposit ratio, loan concentration
diversification and rural operating environment, management believes that it is well positioned to support its customers
and communities and to manage the economic risks and uncertainties associated with COVID-19 pandemic and remain
adequately capitalized.
Given the rapidly changing and unprecedented nature of the pandemic, however, the Company could experience
material and adverse effects on its business, including as a result of credit deterioration, operational disruptions,
decreased demand for products and services, or other reasons. The extent to which the pandemic impacts the Company
will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited
to, its duration and severity, the actions to contain it or treat its impact, and how quickly and to what extent normal
economic and operating conditions will resume.
18
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), continued
Five Year Summary of Selected Financial Data
(Dollars and shares in thousands, except per share data)
Income Statement Data:
Interest and Dividend Income
Interest Expense
Net Interest Income
(Recovery of) Provision for Loan Losses
Net Interest Income After (Recovery of) Provision for Loan
Losses
Noninterest Income
Low-income housing partnership losses
Noninterest Expenses
Income before income taxes
Income Tax Expense (Benefit)
Net income attributable to noncontrolling interest
Net Income attributable to F & M Bank Corp.
Per Common Share Data:
Net Income – basic
Net Income - diluted
Dividends Declared
Book Value per Common Share
Balance Sheet Data:
Assets
Loans Held for Investment
Loans Held for Sale
Securities
Deposits
Short-Term Debt
Long-Term Debt
Stockholders’ Equity
Average Common Shares Outstanding – basic
Average Common Shares Outstanding – diluted
Financial Ratios:
Return on Average Assets1
Return on Average Equity1
Net Interest Margin
Efficiency Ratio 2
Dividend Payout Ratio - Common
Capital and Credit Quality Ratios:
Average Equity to Average Assets1
Allowance for Loan Losses to Loans3
Nonperforming Loans to Total Assets4
Nonperforming Assets to Total Assets5
Net Charge-offs to Total Loans3
2021
2020
2019
20186
20176
$ 35,576
4,302
31,274
(2,821)
34,095
$ 36,792
5,728
31,064
3,300
27,764
$ 38,210 $ 36,377
4,832
6,818
31,545
31,392
2,930
7,405
28,615
23,987
$ 33,719
3,897
29,822
-
29,822
12,167
(861)
33,340
12,061
1,323
-
$ 10,738
13,103
(893)
29,939
10,035
1,142
(105)
$ 8.788
8,770
10,759
(767)
(839)
26,744
29,518
9,874
4,389
1,041
(250)
(130)
(10)
$ 4,509 $ 8,823
8,517
(625)
24,719
12,995
4,202
(31)
$ 8,762
$ 3.25
3.12
1.04
29.42
$ 2.66
2.56
1.04
28.43
$ 1.32 $ 2.60
2.45
1.30
1.20
1.02
26.68
27.11
$ 2.68
2.41
.94
25.65
$ 1,219,342
662,421
4,887
413,217
1,080,295
-
21,772
100,456
3,245
3,442
$ 966,930
661,329
58,679
117,898
818,582
-
33,202
95,629
3,200
3,429
$ 813,999 $ 779,743
638,799
55,910
21,844
591,325
40,116
40,218
91,401
3,238
3,596
603,425
66,798
18,015
641,709
10,000
53,201
91,575
3,189
3,460
$ 752,894
616,974
39,775
41,243
569,177
25,296
49,733
91,027
3,270
3,632
0.98%
10.84%
3.00%
75.44%
32.00%
9.05%
1.17%
0.45%
0.45%
(.01)%
0.95%
9.46%
3.61%
67.51%
39.10%
10.08%
1.58%
0.68%
0.68%
0.18%
0.57%
4.93%
4.33%
69.03%
77.27%
1.15%
9.67%
4.65%
66.04%
46.15%
1.17%
9.89%
4.48%
64.27%
35.07%
11.48%
1.39%
0.70%
0.89%
0.71%
11.90%
0.82%
1.31%
1.62%
0.58%
12.10%
0.98%
0.94%
1.21%
0.24%
1
2
3
4
5
6
Ratios are primarily based on daily average balances.
The Efficiency Ratio equals noninterest expenses divided by the sum of tax equivalent net interest income and noninterest
income. Noninterest income excludes gains (losses) on securities transactions and LIH Partnership losses. Noninterest
expense excludes amortization of intangibles.
Calculated based on Loans Held for Investment, excludes Loans Held for Sale.
Calculated based on 90 day past due loans and non-accrual loans to Total Assets.
Calculated based on 90 day past due loans, non-accrual loans and OREO to Total Assets.
The 2018 and 2017 financial information has been adjusted to reflect the correction of a prior periods error.
19
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), continued
Overview
The Company’s net income for 2021 totaled $10,738 or $3.25 per common share (basic), an increase of 22.19% from
$8,788 or $2.66 a share (basic) in 2020. Return on average equity increased in 2021 to 10.84% versus 9.46% in 2020,
and the return on average assets increased from .95% in 2020 to .98% in 2021. The Company’s net income per share
(dilutive) totaled $3.12 in 2021, an increase from $2.56 in 2020.
Changes in Net Income per Common Share (Basic)
2021
to 2020
2020
to 2019
Prior Year Net Income Per Common Share (Basic)
$ 2.66 $ 1.32
Change from differences in:
Net interest income
Provision for loan losses
Noninterest income, excluding securities gains
Noninterest expenses
Income taxes
Effect of preferred stock dividend
Change in average shares outstanding
Total Change
Net Income Per Common Share (Basic)
Net Interest Income
(0.10)
0.06
1.28
1.89
0.72
(0.08)
(0.13)
(0.16)
(0.44)
(1.05)
0.02
(0.06)
(0.01)
(0.01)
0.59
1.34
$ 3.25 $ 2.66
The largest source of operating revenue for the Company is net interest income, which is calculated as the difference
between the interest earned on earning assets and the interest expense paid on interest bearing liabilities. Net interest
income increased 0.68% from 2020 to 2021 following a decrease of 1.04% from 2019 to 2020. The net interest margin
is the net interest income expressed as a percentage of interest earning assets. Changes in the volume and mix of interest
earning assets and interest-bearing liabilities, along with their yields and rates, have a significant impact on the level of
net interest income. Tax equivalent net interest income for 2021 was $31,385 representing an increase of $231 or 0.74%
over the prior year. A 0.99% decrease in 2020 versus 2019 resulted in total tax equivalent net interest income of $31,154.
In this discussion and in the tabular analysis of net interest income performance, entitled “Consolidated Average
Balances, Yields and Rates,” the interest earned on tax exempt loans and investment securities has been adjusted to reflect
the amount that would have been earned had these investments been subject to normal income taxation. This is referred
to as tax equivalent net interest income. For a reconciliation of tax equivalent net interest income to GAAP measures,
see the accompanying table.
Tax equivalent income on earning assets decreased $1,196 in 2021 compared to 2020. Loans held for investment,
expressed as a percentage of total earning assets, decreased in 2021 to 63.77% as compared to 76.37% in 2020. During
2021, yields on earning assets decreased 86 basis points (BP) and the average cost of interest-bearing liabilities decreased
34BP. Both are a result of the declining interest rate environment experienced in 2021.
20
PART II, continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), continued
Net Interest Income, continued
The following table provides detail on the components of tax equivalent net interest income:
GAAP Financial Measurements:
Interest Income – Loans
Interest Income - Securities and Other Interest-Earnings Assets
Interest Expense – Deposits
Interest Expense - Other Borrowings
Total Net Interest Income
Non-GAAP Financial Measurements:
Add: Tax Benefit on Tax-Exempt Interest Income – Loans and Securities
Total Tax Benefit on Tax-Exempt Interest Income
Tax-Equivalent Net Interest Income
Interest Income
2021
2020
$ 32,560
3,016
3,336
966
31,274
$ 35,411
1,381
4,615
1,113
31,064
110
110
$ 31,384
90
90
$ 31,154
Tax equivalent net interest income increased $230 or 0.73% in 2021, after decreasing 0.99% or $312 in 2020. Overall,
the yield on earning assets decreased 0.86%, from 4.27% to 3.41%. Average loans held for investment increased during
2021, with average loans outstanding increasing $7,973 to $667,082. Average real estate loans decreased 4.20%,
commercial loans increased 3.26%, and consumer installment loans increased 12.29% on average. Average investment
securities increased 288.46%, with average securities outstanding increasing $175,455 to $236,280.
Interest Expense
Interest expense decreased $1,426 or 24.90% during 2021. The average cost of funds of 0.60% decreased 34BP compared
to 2020, which followed a decrease of 36BP in 2020. Average interest-bearing liabilities increased $105,694 or 17.31%
in 2021. Interest expense on deposits decreased 27.74%, in spite of a 28.17% increase in average deposits. Interest
expense on borrowings decreased 13.21% as average debt decreased 61.21%. Changes in the cost of funds attributable
to rate and volume variances are reflected in a following table.
The following analysis reveals a decrease in the net interest margin to 3.00% in 2021 from 3.61% in 2020, due to changes
in balance sheet mix during the year and decreases in interest rates in earning assets and interest-bearing liabilities. The
investment portfolio has grown significantly due to the increase in deposits and a decrease in funding loans held for sale
with Northpointe Bank. The rate environment remained low in 2021 due to uncertainties in the economy.
21
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Consolidated Average Balances, Yields and Rates1
Balance
2021
Interest
Rate
Balance
2020
Interest
Rate
ASSETS
Loans2
Commercial
Real estate
Consumer
Loans held for investment4
Loans held for sale
Investment securities3
Fully taxable
Partially taxable
Tax exempt
Total investment securities
Interest bearing deposits in banks
Federal funds sold
Total Earning Assets
Allowance for loan losses
Nonearning assets
Total Assets
$ 246,495 $ 11,667
13,506
298,983
121,604
667,082
3,844
4.73% $ 238,722 $ 11,165
15,893
312,092
4.52%
4.68%
5.09%
7,277 5.98% 108,295 7,124 6.58%
5.19%
2.84%
659,109
45,784
32,450
186
34,182
1,298
4.86%
4.84%
2,739
228,287
1.73%
125 1 0.80% 125 2 1.60%
7,868
-%
1.73%
236,280
168 2.14%
1.23%
-
1,053
-
60,825
60,700
1.20%
1,051
2,908
3
0.14%
0.24%
139 0.10% 96,127 346 0.36%
35,686 3.41% 863,072 36,882 4.27%
1,227
3
2,184
136,705
1,046,095
(9,000)
57,474
$ 1,094,569
(9,433)
67,645
$ 921,284
0.19% $ 107,961 $ 292
2,190
296,403
0.41%
0.27%
0.74%
1.05% 132,081 2,133 1.61%
0.86%
536,445
0.49%
4,615
-%
1,776
2.31%
3.36% 72,392 1,072 1.48%
0.60% 610,613 5,728 0.94%
41
203,312
14,484
828,409
92,875
$ 921,284
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand –interest bearing
Savings
Time deposits
Total interest-bearing deposits
Short-term debt
Long-term debt
Total interest-bearing liabilities
Noninterest bearing deposits
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
$ 147,008 $ 280
1,689
1,367
3,336
410,769
129,760
687,537
-
-
28,770
966
716,307 4,302
263,911
15,258
995,476
99,093
$ 1,094,569
Net interest earnings
$ 31,384
$ 31,154
Net yield on interest earning assets (NIM)
3.00%
3.61%
Income and yields are presented on a tax-equivalent basis using the applicable federal income tax rate of 21%.
Interest income on loans includes loan fees.
1
2
3 Average balance information is reflective of historical cost and has not been adjusted for changes in market value.
4
Includes nonaccrual loans.
22
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
The following table illustrates the effect of changes in volumes and rates.
2021 Compared to 2020
Increase (Decrease)
Due to Change
in Average:
Volume
Rate
Increase
Or
(Decrease)
$ 414 $ (2,146) $ (1,732)
(1,112)
79
(1,191)
2,899
-
-
(1,211)
(1)
168
1,688
(1)
168
Interest income
Loans held for investment
Loans held for sale
Investment securities
Fully taxable
Partially taxable
Tax exempt
Interest bearing deposits in banks
Federal funds sold
2
146
(2)
(353)
-
(207)
Total Interest Income
2,270
(3,466)
(1,196)
Interest expense
Deposits
Demand - interest bearing
Savings
Time deposits
Short-term debt
Long-term debt
Total Interest Expense
Net Interest Income
105
846
3,408
(117)
(1,347)
(4,174)
(12)
(501)
(766)
(41)
(646)
3,672
-
540
(5,099)
(41)
(106)
(1,426)
$ (1,402)
$ 1,633 $ 230
Note: Volume changes have been determined by multiplying the prior years’ average rate by the change in average
balances outstanding. The rate change is determined by multiplying the current year average balance outstanding by the
change in rate from the prior year to the current year.
Noninterest Income
Noninterest income continues to be an increasingly important factor for the Company in maintaining and growing
profitability. Management is conscious of the need to constantly review fee income and develop additional sources of
complementary revenue.
Noninterest income decreased 7.40% or $904, in 2021. The 2021 decrease is due primarily to a decline in the gross
revenue of F&M Mortgage and realized security losses. The decline in revenue from F&M Mortgage was due to a
decrease in refinance volume. The Company experienced growth in investment services and insurance income, title
insurance income and ATM and check card fees.
23
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Noninterest Expense
Noninterest expenses increased from $29,939 in 2020 to $33,340 in 2021, an 11.36% increase. Expenses increased
primarily in the areas of salaries and benefits ($2,003), legal and professional expense ($406), telecommunication and
data processing expense ($406), and other operating expenses ($376). Salary increases were due to expansion into the
Winchester and Waynesboro markets; this also increased legal and professional fees and data processing expenses.
Other operating expenses include loss on the sale of bank property ($112), donation of bank property ($162) and
prepayment penalties on FHLB debt repayments ($228). Total noninterest expense as a percentage of average assets
totaled 3.05% and 3.36% in 2021 and 2020, respectively. Peer group averages (as reported in the most recent Uniform
Bank Performance Report) were 2.40% for 2021 and 2.60% for 2020.
Provision for Loan Losses
Management evaluates the loan portfolio in light of national and local economic trends, changes in the nature and
volume of the portfolio and industry standards. Specific factors considered by management in determining the
adequacy of the level of the allowance for loan losses include internally generated and third-party loan review reports,
past due reports and historical loan loss experience. This review also considers concentrations of loans in terms of
geography, business type and level of risk. Management evaluates nonperforming loans relative to their collateral
value, when deemed collateral dependent, and makes the appropriate adjustments to the allowance for loan losses
when needed. Due to COVID-19, the Company had added or increased qualitative factors for the economy and
concentrations in industries specifically affected by the virus. The Company continues to evaluate these factors in
light of the changing effects the virus has on the economy, supply chains, and labor markets. The Company has
experienced improvements in past dues and nonperforming loans since December 31, 2020. Past due loans have
decreased $4,609 and nonperforming loans have decreased $1,029 since December 31, 2020.
As a result of the above factors, the current year recovery of provision for loan losses totaled $2,821 compared to a
provision of $3,300 for 2020. Net charge offs decreased from $1,215 in 2020 to net recoveries of $94 in 2021. Net
charge-offs as a percentage of loans held for investment totaled (0.01)% and 0.18% in 2021 and 2020, respectively.
The dealer finance charge-off percentage is the largest category at 0.04% of loans held for investment. Losses in the
dealer finance segment are closely monitored, and due to payment deferrals, government stimulus programs and record
high used car prices, have declined in 2021. As stated in the most recently available Uniform Bank Performance
Report (UPBR), peer group loss averages were 0.04% in 2021 and 0.08% in 2020.
The current levels of the allowance for loan losses reflect net charge-off activity and other credit risk factors that the
Company considers in assessing the adequacy of the allowance for loan losses. Management will continue to monitor
the effects of COVID-19 and nonperforming, adversely classified and past due loans to make necessary adjustments
to specific reserves and provision for loan losses should conditions change regarding collateral values or cash flow
expectations.
Balance Sheet
Total assets increased 26.10% during the year to $1,219,342 at December 31, 2021, an increase of $252,412 from
$966,930 at December 31, 2020. Cash and cash equivalents increased $9,713, the AFS security portfolio grew
$296,983, net loans held for investment increased $3,819, and loans held for sale declined $53,792. Average earning
assets increased 21.21% to $1,046,095 for 2021. The increase in earning assets is due largely to the growth in
investment securities and federal funds sold. Deposits grew $261,713 and non-deposit liabilities decreased $14,128 in
2021 as the Bank paid off long-term debt with the FHLB. Average interest-bearing deposits increased $151,092 for
2021 or 28.17%, with increases in interest-bearing demand accounts and savings while time deposits declined. The
Company continues to utilize its assets well, with 95.57% of average assets consisting of earning assets.
24
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Balance Sheet, continued
In January 2021, the Bank entered into an agreement to purchase the operations of a branch office in Waynesboro,
Virginia from Carter Bank & Trust. The Bank acquired deposits of $14,229 in the transaction and received a cash
payment of $13,758, which was net of a premium paid on deposits of $135. No loans were included in the transaction.
The transaction closed on April 23, 2021; see Note 29 to the consolidated financial statements in this Form 10-K for
additional details on the transaction.
Investment Securities
Due to the deposit growth initiatives implemented in recent years and the COVID-19 pandemic, management has
invested excess funds into securities during 2021. Total securities increased $295,319 or 250.49% in 2021 to $413,217
at December 31, 2021 from $117,898 at December 31, 2020. Average balances in investment securities increased
288.46% in 2021 to $236,280. At year end, 22.59% of average earning assets of the Company were held as investment
securities, all of which are unpledged. Management strives to match the types and maturities of securities owned to
balance projected liquidity needs, interest rate sensitivity and to maximize earnings through a portfolio bearing low credit
risk. Portfolio yields averaged 1.23% for 2021, compared to 1.73% in 2020; this is due to the overall market declines in
2021.
There were no Other Than Temporary Impairments (OTTI) write-downs in 2021 or 2020. There were $525 in realized
security losses on sales of securities in 2021; there were no realized security gains or loss on sales of securities in
2020.
Maturities and weighted average yields of securities at December 31, 2021 are presented in the table below. Amounts are
shown by contractual maturity; expected maturities will differ as issuers may have the right to call or prepay obligations.
Maturities of other investments are not readily determinable due to the nature of the investment; see Note 4 to the
Consolidated Financial Statements for a description of these investments.
Debt Securities Available for Sale:
U.S. Treasuries
U.S. Government sponsored
enterprises
Securities issued by States &
political subdivisions of the U.S.
Mortgage-backed obligations of
federal agencies
Corporate debt securities
Total
Less
Than one Year
One to
Five Years
Five to
Ten Years
Amount Yield1 Amount
Yield1
Amount
Yield1
Over
Ten Years
Amount Yield1
Total
Yield1
$ -
-
$ 14,895
95,313
0.68% $ 14,587
38,401
0.98%
0.99% $ -
-
1.37%
$ 29,482
133,714
0.83%
1.09%
2,005
0.21%
18,181
0.98%
3,730
1.63%
10,421
2.38%
34,337
1.43%
-
18,299
0.92%
11,678
1.21%
153,670
1.46%
183,647
1.39%
2,013
2.13%
$ 4,018 1.17%
-
$146,688
3.19% 1,500
0.94% $ 87,585 1.70% $165,591
19,189
3.75%
1.54%
22,702
$403,882
3.13%
1.35%
Debt Securities Held to Maturity:
U.S. Treasury & Agency
Total
$ 125 0.52%
$ 125 0.52%
$ -
$ -
$ -
$ -
$ -
$ -
$ 125
$ 125
0.52%
0.52%
1Tax equivalent yield to the lower of call or maturity date. On securities without a call date, it is the stated yield.
Analysis of Loan Portfolio
The Company’s market area has a relatively stable economy which tends to be less cyclical than the national economy.
Major industries in the market area include agricultural production and processing, higher education, retail sales, services
and light manufacturing.
25
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Analysis of Loan Portfolio, continued
The Company’s market area has a relatively stable economy which tends to be less cyclical than the national economy.
Major industries in the market area include agricultural production and processing, higher education, retail sales, services
and light manufacturing.
The Company’s portfolio of loans held for investment totaled $662,421 at December 31, 2021 compared with $661,329
at December 31, 2020. Collateral required by the Company is determined on an individual basis depending on the
purpose of the loan and the financial condition of the borrower. Real estate mortgages decreased $23,466 or 14.39%.
Construction loans increased $3,769 or 5.27%. Commercial loans, including agricultural and multifamily loans,
increased 4.25% during 2021 to $279,019; PPP loans decreased from $34,908 at December 31, 2020 to $7,936 at
December 31, 2021. Consumer loans increased $14,116 or 13.94% mainly due to the dealer finance division loans.
Consumer loans include personal loans, auto loans and other loans to individuals.
The following table shows the maturity of loans and leases, outstanding as of December 31, 2021:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real
Estate
Consumer
Dealer Finance
Credit Cards
Total
Total
$ 75,236
66,344
139,552
4,887
163,564
6,262
44,247
44,224
8,036
107,346
3,000
$ 662,698
After 15
Years
1-5 Years
5-15 Years
1 Year or less
$ 39,177 $ 25,215 $ 8,818 $ 2,026
16,605
8,540
2,116
24,490
-
1,038
4,851
24,356
-
16,442
1,187
1,965
37,143
31,832
2,530
69,670
1,836
34,247
7,745
74,824
241
52,962
3,239
6,997
-
9,091
-
1,014
-
1,976
3,000
-
$ 103,059 $ 232,108 $ 272,716 $ 54,815
19,110
1,082
66,448
-
16,023
5,940
38,922
-
26
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Analysis of Loan Portfolio, continued
At December 31, 2021, for loans and leases due after one year, interest rate information is as follows:
Construction/Land Development
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Construction/Land Development
Farmland
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Farmland
Real Estate
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Real Estate
Multi-Family
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Multi-Family
Commercial Real Estate
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Commercial Real Estate
Home Equity – closed end
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Home Equity – closed end
Home Equity – open end
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Home Equity – open end
Commercial & Industrial – Non-Real Estate
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Commercial & Industrial – Non-Real Estate
Consumer
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Consumer
Dealer Finance
Outstanding with fixed interest rates
Outstanding with adjustable rates
Total Dealer Finance
Total outstanding with fixed interest rates
Total outstanding with adjustable interest rates
Total
1-5 Years
5-15 Years
After 15
Years
Total
$ 12,052
13,163
25,215
$ 1,968 $ 1,164 $ 15,184
20,875
862
6,850
36,059
2,026
8,818
$ 218
7,527
7,745
$ 4,547 $ - $ 4,765
56,728
16,605
32,596
61,493
16,605
37,143
$ 417
74,407
74,824
$ 1,473 $ 1,807 $ 3,697
111,499
6,733
30,359
115,196
8,540
31,832
$ -
241
241
$ -
2,530
2,530
$ - $ -
4,887
2,116
4,887
2,116
$ 1,234
51,728
52,962
$ 7,694
61,976
69,670
$ - $ 8,928
138,194
24,490
147,122
24,490
$ 357
2,882
3,239
$ 1,623
213
1,836
$ - $ 1,980
3,095
-
5,075
-
$ -
6,997
6,997
$ - $ - $ -
42,282
1,038
34,247
42,282
1,038
34,247
$ 5,549
10,474
16,023
$ 12,616
6,494
19,110
$ - $ 18,165
16,968
-
35,133
-
$ 5,008
932
5,940
$ 633
449
1,082
$ - $ 5,641
1,381
-
7,022
-
$ 38,922
-
38,922
$ 63,757
$ 168,351
$ 232,108
$ 66,448
-
66,448
$ - $ 105,370
-
-
105,370
-
$ 97,002 $ 2,971 $ 163,730
$ 175,714 $ 51,844 $ 395,909
$ 272,716 $ 54,815 $ 559,639
27
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Analysis of Loan Portfolio, continued
Residential real estate loans are made for a period up to 30 years and are secured by a first deed of trust which normally
does not exceed 90% of the appraised value. If the loan to value ratio exceeds 90%, the Company requires additional
collateral, guarantees or mortgage insurance. On approximately 81% of the real estate loans, interest is adjustable after
each one, three or five-year period. The remainder of the portfolio is comprised of fixed rate loans that are generally
made for a fifteen-year or a twenty-year period with an interest rate adjustment after ten years, except for dealer loans
that generally have a term of 5 years.
Fixed rate real estate loans were partially funded with fixed rate borrowings from the Federal Home Loan Bank, which
allowed the Company to control its interest rate risk. The Company has not had a need for additional funding from the
FHLB due to the growth in deposits, but there may be a time where we match the maturities in the future. In addition,
the Company makes home equity loans secured by second deeds of trust with total indebtedness not to exceed 90% of
the appraised value. Home equity loans are made for ten or twenty year periods as a revolving line of credit.
Construction loans may be made to individuals, who have arranged with a contractor for the construction of a residence,
or to contractors that are involved in building pre-sold, spec-homes or subdivisions. The majority of commercial loans
are made to small retail, manufacturing and service businesses. Commercial construction loans are made to construct
commercial and agricultural buildings. Consumer loans are made for a variety of reasons; however, approximately 75%
of the loans are secured by vehicles.
Approximately 75% of the Company’s loans are secured by real estate; however, policies relating to appraisals and loan
to value ratios are adequate to control the related risk. Market values continue to be stable with increases in sales prices,
reduction in inventory and reduction in days on the market. Unemployment rates in the Company’s market area continue
to be below both the national and state averages.
The Bank has not identified any loan categories that would be considered loan concentrations of greater than 25% of
capital. The Bank has an approved limit of 16% for dealer loans as a percentage of total loans. The Bank has not developed
a formal policy limiting the concentration level of any other particular loan type or industry segment; it has established
target limits on both a nominal and percentage of capital basis. Concentrations are monitored and reported to the board
of directors quarterly. Concentration levels have been used by management to determine how aggressively we may price
or pursue new loan requests.
Nonaccrual and Past Due Loans
Nonperforming loans include nonaccrual loans and loans 90 days or more past due still accruing. Nonaccrual loans
are loans on which interest accruals have been suspended or discontinued permanently. The Company would have
earned approximately $276 in additional interest income in 2021 had the loans on nonaccrual status been current and
performing. Nonperforming loans totaled $5,508 at December 31, 2021 compared to $6,537 at December 31, 2020.
At December 31, 2021, there were $43 of loans 90 days or more past due and accruing compared to $102 at December
31, 2020. The remainder of nonperforming loans were on nonaccrual. Management continues their efforts to reduce
nonperforming loans, which decreased 15.74% from December 31, 2020 to December 31, 2021 and from 0.99% of
loans held for investment at December 31, 2020 to 0.83% at December 31, 2021.
Approximately 98.48% of these nonperforming loans are secured by real estate and were in the process of collection.
The Bank believes that adequate specific reserves have been established on impaired loans and continues to actively
work with its customers to effect payment. As of December 31, 2021 and 2020, the Company holds $0 of real estate
acquired through foreclosure.
28
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Nonaccrual and Past Due Loans, continued
A summary of credit ratios for nonaccrual loans is as follows:
Allowance for loan losses
Nonaccrual loans
Total Loans
2021
2020
$ 7,748 $ 10,475
$ 5,465 $ 6,435
$ 662,421 $ 661,329
Allowance for loan losses to Total Loans
Nonaccrual Loans to Total Loans
Allowance for loan losses to Nonaccrual loans
1.17%
0.83%
141.77%
1.58%
0.97%
162.78%
Potential Problem Loans
As of December 31, 2021, management is not aware of any potential problem loans which are not already classified for
regulatory purposes or on the watch list as part of the Bank’s internal grading system.
Loan Losses and the 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 trends in 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 Bank’s watch list or schedule
of classified loans.
In evaluating the portfolio, loans are segregated by segment with identified potential losses, pools of loans by type,
with separate weighting for past dues and a general allowance based on a variety of criteria. Loans with identified
potential losses include examiner and bank classified loans. Classified relationships in excess of $500,000 and loans
identified as troubled debt restructurings are reviewed individually for impairment under ASC 310. A variety of factors
are considered when reviewing these credits, including borrower cash flow, payment history, fair value of collateral,
company management, industry and economic factors.
Loans that are not reviewed for impairment are categorized by call report code and an estimate is calculated based on
actual loss experience over the last three years. As reflected in Note 6, the Company made a change in its allowance
for loan losses methodology to increase the look back period on historical losses from two years to three years. This
revised lookback period more accurately reflects the average loss history within the portfolio, as loss history during
the most recent two years was impacted by government programs in response to the COVID-19 pandemic.
A general allowance for inherent losses has been established to reflect other unidentified losses within the portfolio.
The general allowance is calculated using nine qualitative factors identified in the 2006 Interagency Policy Statement
on the allowance for loan losses. The general allowance assists in managing recent changes in portfolio risk that may
not be captured in individually impaired loans, or in the homogeneous pools based on loss histories. The Board
approves the loan loss provision for each quarter based on this evaluation.
The allowance for loan losses of $7,748 at December 31, 2021 is equal to 1.17% of total loans held for investment.
This compares to an allowance of $10,475 or 1.58% of total loans at December 31, 2020. PPP loans are 100%
guaranteed by the SBA; thus, they do not have an allowance. PPP loans totaled $7,936 and $34,908 at December 31,
2021 and 2020, respectively.
29
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Loan Losses and the Allowance for Loan Losses, continued
During 2021, three relationships reviewed for impairment improved their collateral and/or cash flow position and were
moved to the general allowance; proceeds were received on one foreclosure sale, sales of collateral to reduce the debt
and amortization; and new appraisals on three relationships decreased the calculated impairment. Due to COVID-19,
the bank increased the qualitative factor for the economy and concentrations in industries specifically affected by the
virus in 2020. Due to improvements in 2021 in the unemployment rate, nonperforming, past due and classified loans,
and the end of CARES Act modifications, the bank decreased the environmental factor for COVID-19's impact on the
economy. The Company continues to monitor COVID-19’s effects on the labor market, inflation, the supply chain,
government stimulus programs and increased used car prices. Nonaccrual loans at December 31, 2021 totaled $5,465
compared to $6,435 at December 31, 2020. Classified loans (internally rated substandard or watch) decreased from a
total of $67,592 at December 31, 2020 to $43,230 at December 31, 2021, or 36%. This remains above the pre-
pandemic total of $41,343. Management is closely monitoring the effects of COVID-19 on the loan portfolio and
makes adjustments to specific reserves, the environmental factors and the provision for loan losses as necessary.
Loan recoveries, net of losses, totaled $94 in 2021 which is equivalent to (.01)% of total loans outstanding.
30
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Loan Losses and the Allowance for Loan Losses, continued
A summary of the activity in the allowance for loan losses follows:
Balance at beginning of period
(Recovery of) Provision charged to expenses
Loan losses:
Construction/land development
Farmland
Real Estate
Multi-family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Total loan losses
Recoveries:
Construction/land development
Farmland
Real Estate
Multi-family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Total recoveries
Net loan (losses) recoveries
Balance at end of period
2021
2020
$ 10,475 $ 8,390
3,300
(2,821)
-
-
-
-
-
-
-
40
33
1,038
54
1,165
7
-
158
-
64
-
34
138
89
1,551
123
2,164
-
307
-
-
7
76
-
-
11
19
-
-
3
13
19
37
50
24
784
754
29
75
949
1,259
94
(1,215)
$ 7,748 $ 10,475
Net loan (recoveries) losses to average loans held
for investment:
Construction/land development
Farmland
Real Estate
Multi-family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Total
(.05)%
-%
(.01)%
-%
-%
-%
-%
-%
-%
.04%
-%
(.01)%
-%
-%
.02%
-%
.01%
-%
-%
.02%
.01%
.12%
.01%
.18%
Allowance for loan losses as a
percentage of loans held for investment
1.17%
1.58%
31
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Loan Losses and the Allowance for Loan Losses, continued
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
2021
2020
Percentage of
Loans in
Each
Category
12.61%
5.78%
15.00%
.38%
28.46%
.53%
5.25%
3.72%
6.71%
20.66%
.90%
100.00%
Percentage
of Loans in
Each
Category
11.92%
6.98%
15.50%
.52%
34.96%
.53%
4.42%
3.46%
4.98%
15.96%
.76%
100.00%
Balance
$ 1,249
731
1,624
54
3,662
55
463
363
521
1,674
79
$ 10,475
Balance
$ 977
448
1,162
29
2,205
41
407
288
520
1,601
70
$ 7,748
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Total
Deposits and Borrowings
The average deposit balances and average rates paid for 2021 and 2020 were as follows:
December 31,
2021
Average
Balance
Rate
2020
Average
Balance
Rate
Noninterest-bearing
$ 263,911
$ 203,312
Interest-bearing:
Interest Checking
Savings Accounts
Time Deposits
Total interest-bearing deposits
Total deposits
$ 147,008
410,769
129,760
687,537
$ 951,448
0.19% $ 107,961
296,403
0.41%
132,081
1.05%
536,445
0.48%
$ 739,757
0.35%
0.27%
0.74%
1.61%
0.86%
0.61%
Average noninterest-bearing demand deposits, which are comprised of checking accounts, increased $60,599 or
29.81% from $203,312 at December 31, 2020 to $263,911 at December 31, 2021. Average interest-bearing deposits,
which include interest checking accounts, money market accounts, regular savings accounts and time deposits,
increased $151,092 or 28.17% from $536,445 at December 31, 2020 to $687,537 at December 31, 2021. Total average
interest checking account balances increased $39,047 or 36.17% from $107,961 at December 31, 2020 to $147,008 at
December 31, 2021. Total average savings account balances (including money market accounts) increased $114,366
or 38.58% from $296,403 at December 31, 2020 to $410,769 at December 31, 2021. The bank has a competitive
money market rate to maintain and attract core deposits.
32
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Deposits and Borrowings, continued
Average time deposits decreased $2,321 or 1.76% from $132,081 at December 31, 2020 to $129,760 at December 31,
2021. The money market rate has been attractive and as time deposits matured, customers moved their deposits to the
money market account.
The maturity distribution of certificates of deposit in excess of FDIC limits is as follows:
Less than 3 months
3 to 6 months
6 to 12 months
1 year to 5 years
Total
2021
$ -
3,206
257
8,910
$ 12,373
2020
$ -
300
-
11,983
$ 12,283
Total uninsured deposits in excess of $250,000 was $323,361 and $179,218 at December 31, 2021 and 2020, respectively.
Non-deposit borrowings include Federal Home Loan Bank (FHLB) borrowings and subordinated debt notes. Non-
deposit borrowings are an important source of funding for the Bank that assist in managing short and long-term funding
needs.
Borrowings from the FHLB are used to support the Bank’s lending program and allow the Bank to manage interest
rate risk by laddering maturities and matching funding terms to the terms of various loan types in the loan portfolio.
The Company had no short-term borrowings in 2021 or 2020 due to deposit growth. Repayment of amortizing and
fixed maturity loans through FHLB totaled $11,268 during 2021. One loan with a balance of $10,000 and rate of
0.81% was outstanding at December 31, 2021.
Other long-term debt includes $11,772 of subordinated notes, net of unamortized costs at December 31, 2021. On July
29, 2020, the Company issued $5,000 in aggregate principal amount of 5.75% fixed rate subordinated notes due July
31, 2027 and $7,000 in aggregate principal amount of 6% fixed to floating rate subordinated notes due July 31, 2030.
Contractual Obligations and Scheduled Payments:
FHLB long term advances
Subordinated debt
Total
Less than
One Year
$ -
-
$ -
One Year Through Three Years Through
December 31, 2021
Three Years
$ -
-
$ -
Five Years
Total
$ 10,000
$ - $ 10,000
11,772
11,772
-
$ - $ 21,772 $ 21,772
More than
Five Years
See Note 11 (Short Term Debt) and Note 12 (Long Term Debt) to the Consolidated Financial Statements for a discussion
of the rates, terms, and conversion features on these advances.
Stockholders’ Equity
Total stockholders' equity increased $4,827 or 5.05% in 2021. Capital was increased by net income totaling $10,738,
issuance of common stock totaling $263, common stock issued in the Company’s stock incentive plan of $121, and
pension adjustment of $530. Capital was reduced by common and preferred dividends totaling $3,593, unrealized gains
on available for sale securities of $2,605, and redemption of preferred stock totaling $627. As of December 31, 2021,
book value per common share was $29.42 compared to $28.43 as of December 31, 2020. Dividends are paid to
stockholders quarterly based on decisions by the Board of Directors unless unexpected fluctuations in net income indicate
a change to this policy is needed.
33
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Stockholders’ Equity, continued
Banking regulators have established a uniform system to address the adequacy of capital for financial institutions. The
rules require minimum capital levels based on risk-adjusted assets. Simply stated, the riskier an entity's investments, the
more capital it is required to maintain. The Bank is required to maintain these minimum capital levels. Beginning in
2015, the Bank implemented the Basel III capital requirements, which introduced the Common Equity Tier I ratio in
addition to the two previous capital guidelines of Tier I capital (referred to as core capital) and Tier II capital (referred to
as supplementary capital). At December 31, 2021, the Bank had Common Equity Tier I capital of 13.95%, Tier I risked
based capital of 13.95% and total risked based capital of 15.00% of risk weighted assets. Regulatory minimums at this
date were 4.5%, 6% and 8%, respectively. The Bank has maintained capital levels far above the minimum requirements
throughout the year. In the unlikely event that such capital levels are not met, regulatory agencies are empowered to
require the Bank to raise additional capital and/or reallocate present capital.
In addition, the regulatory agencies have issued guidelines requiring the maintenance of a capital leverage ratio. The
leverage ratio is computed by dividing Tier I capital by average total assets. The regulators have established a
minimum of 4% for this ratio but can increase the minimum requirement based upon an institution's overall financial
condition. At December 31, 2021, the Bank reported a leverage ratio of 8.62%. The Bank's leverage ratio was also
substantially above the minimum. The Bank also reported a capital conservation buffer of 7.00% at December 31,
2021. The capital conservation buffer is designed to strengthen an institution’s financial resilience during economic
cycles. Financial institutions are required to maintain a minimum buffer as required by the Basel III final rules in
order to avoid restrictions on capital distributions and other payments.
Market Risk Management
Most of the Company’s net income is dependent on the Bank’s net interest income. Rapid changes in short-term interest
rates may lead to volatility in net interest income resulting in additional interest rate risk to the extent that imbalances
exist between the maturities or repricing of interest-bearing liabilities and interest earning assets. The Company’s net
interest margin decreased .61% in 2021 following a decrease of .72% in 2020. This decrease is primarily due to decreases
in interest rates as well as changes in balance sheet structure including a decrease in loans held for investment, establishing
an investment portfolio, and substantial deposit growth which led to excess funds on hand. In 2020, the Federal Open
Market Committee elected to decrease the short-term rates target 150BP to 0% from 1.50%.
Net interest income is also affected by changes in the mix of funding that supports earning assets. For example, higher
levels of non-interest bearing demand deposits and leveraging earning assets by funding with stockholder’s equity would
result in greater levels of net interest income than if most of the earning assets were funded with higher cost interest-
bearing liabilities, such as certificates of deposit and borrowings.
Liquid assets, which include cash and cash equivalents, federal funds sold, interest bearing deposits and short-term
investments averaged $83,265 for 2021. The Bank historically has had a stable core deposit base and, therefore, does
not have to rely on volatile funding sources. Because of growth in the core deposit base, liquid assets have grown over
the prior year. The Company has increased efforts to raise deposits and depositors have changed their savings habits
during 2021 due to the COVID-19 pandemic. While this helps liquidity, the investment options and rate market in general
have hurt the net interest margin. The Company has lowered core deposit rates throughout 2021 to mitigate the decline
in net interest margin. The Bank's membership in the Federal Home Loan Bank has historically provided liquidity as the
Bank borrows money that is repaid over a five to ten-year period and uses the money to make fixed rate loans. With
excess funds provided by deposit growth, management anticipates no additional borrowings in 2022. The matching of
the long-term receivables and liabilities helps the Bank reduce its sensitivity to interest rate changes. The Company
reviews its interest rate gap periodically and makes adjustments as needed. Management is not aware of any off-balance
sheet items that will impair future liquidity.
34
PART II, Continued
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in
thousands), Continued
Market Risk Management, continued
The following table depicts the Company’s interest rate sensitivity, as measured by the repricing of its interest sensitive
assets and liabilities as of December 31, 2021. As the notes to the table indicate, the data was based in part on assumptions
as to when certain assets or liabilities would mature or reprice. The analysis indicates an asset sensitive one-year
cumulative GAP position of -1.96% of total earning assets, compared to 17.03% in 2020. Approximately 22.42% of rate
sensitive assets and 34.19% of rate sensitive liabilities are subject to repricing within one year. Short term assets (less
than one year) decreased $99,862 during the year, while total earning assets increased $256,998. The growth in earning
assets is primarily due to the utilization of excess funds created by deposit growth. Short term deposits, maturities less
than 365 days, increased $78,658 and short-term borrowings decreased $3,623. Short term borrowings decreased as
advances matured and were not renewed.
The following GAP analysis shows the time frames as of December 31, 2021, in which the Company’s assets and
liabilities are subject to repricing:
1-90
Days
91-365
Days
1-5
Years
Over 5
Years
Not
Classified
Total
Rate Sensitive Assets:
Loans held for investment
Loans held for sale
Federal funds sold
Investment securities
Interest bearing money market and bank
deposits in other banks
Total Earning Assets
$ 108,743 $ 60,772
-
-
4,018
4,887
76,667
125
$ 360,168 $ 133,015
-
-
-
-
253,176
146,688
$ - $ 662,698
4,887
76,667
404,007
-
-
-
2,938
193,360
-
64,790
-
506,856
-
386,191
-
-
2,938
1,151,197
Rate Sensitive Liabilities:
Interest bearing demand deposits
Savings deposits
Certificates of deposit
Total Deposits
Long-term debt
Total
Discrete Gap
Cumulative Gap
As a % of Earning Assets
-
-
12,622
12,622
-
12,622
38,394
198,946
30,790
268,130
-
268,130
115,181
256,003
80,445
451,629
-
451,629
38,394
28,527
-
66,921
21,772
88,693
-
-
-
-
-
-
191,969
483,476
123,857
799,302
21,772
821,074
180,738
180,738
15.70%
(203,340)
(22,602)
-1.96%
55,227
32,625
2.83%
297,498
330,123
28.68%
-
330,123
28.68%
330,123
In preparing the above table, no assumptions are made with respect to loan prepayments or deposit run off. Loan
principal payments are included in the earliest period in which the loan matures or can be repriced. Principal
payments on installment loans scheduled prior to maturity are included in the period of maturity or repricing.
Proceeds from the redemption of investments and deposits are included in the period of maturity. Estimated
maturities on deposits which have no stated maturity dates were derived from regulatory guidance.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Note Applicable
35
Item 8. Financial Statements and Supplementary Data
F & M Bank Corp. and Subsidiaries
Consolidated Balance Sheets (dollars in thousands, except per share data)
As of December 31, 2021 and 2020
Assets
Cash and due from banks
Money market funds and interest-bearing deposits in other banks
Federal funds sold
Cash and cash equivalents
Securities:
Held to maturity, at amortized cost - fair value of $125 in 2021 and 2020
Available for sale, at fair value
Other investments
Loans held for sale, at fair value
Loans held for sale, participations
Loans held for investment, net of deferred fees and costs
Less: allowance for loan losses
Net loans held for investment
Bank premises and equipment, net
Bank premises held for sale
Interest receivable
Goodwill
Bank owned life insurance
Other assets
Total Assets
Liabilities
Deposits:
Noninterest bearing
Interest bearing
Total deposits
Long-term debt
Other liabilities
Total Liabilities
Commitments and contingencies
2021
2020
$ 8,516 $ 11,181
2,938
76,667
88,121
1,244
65,983
78,408
125
403,882
9,210
4,887
-
662,421
(7,748)
654,673
125
106,899
10,874
14,307
44,372
661,329
(10,475)
650,854
17,063
300
3,117
3,082
22,878
12,004
$ 1,219,342 $ 966,930
17,909
520
2,727
2,884
22,647
14,404
$ 280,993 $ 236,915
799,302
1,080,295
581,667
818,582
21,772
16,819
1,118,886
33,202
19,517
871,301
Stockholders’ Equity
Series A Preferred Stock, $25 liquidation preference, 400,000 shares authorized, 0 shares
issued and outstanding at December 31, 2021 and 205,327 shares issued and
outstanding at December 31, 2020
Common stock $5 par value, 6,000,000 shares authorized, 200,000 designated, 3,414,306
and 3,203,372 shares issued and outstanding at December 31, 2021 and 2020,
respectively
Additional paid in capital – common stock
Retained earnings
Accumulated other comprehensive loss
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
-
4,558
17,071
10,127
78,350
(5,092)
100,456
$ 1,219,342 $ 966,930
16,017
6,866
71,205
(3,017)
95,629
See accompanying Notes to the Consolidated Financial Statements.
36
F & M Bank Corp. and Subsidiaries
Consolidated Statements of Income (dollars in thousands, except per share data)
For the years ended 2021 and 2020
Interest and Dividend Income
Interest and fees on loans held for investment
Interest from loans held for sale
Interest from money market funds and federal funds sold
Interest from debt securities
Total interest and dividend income
Interest Expense
Total interest on deposits
Interest from short-term debt
Interest from long-term debt
Total interest expense
Net Interest Income
(Recovery of) Provision for Loan Losses
Net Interest Income After (Recovery of) Provision for Loan Losses
Noninterest Income
Service charges on deposit accounts
Investment services and insurance income, net
Mortgage banking income, net
Title insurance income
Income on bank owned life insurance
Low income housing partnership losses
ATM and check card fees
Net investment securities gains (losses)
Other operating income
Total noninterest income
Noninterest Expenses
Salaries
Employee benefits
Occupancy expense
Equipment expense
FDIC insurance assessment
Other real estate owned, net
Marketing expense
Legal and professional expense
ATM and check card fees
Telecommunication and data processing expense
Directors fees
Bank Franchise tax
Impairment of long-lived assets
Other operating expenses
Total noninterest expenses
Income before income taxes
Income Tax Expense
Net Income
Net Income attributable to noncontrolling interest
Net Income attributable to F & M Bank Corp.
Dividends paid/accumulated on preferred stock
Net income available to common stockholders
Per Common Share Data
Net income - basic
Net income - diluted
Cash dividends on common stock
Weighted average common shares outstanding – basic
Weighted average common shares outstanding – diluted
See accompanying Notes to the Consolidated Financial Statements.
37
2021
2020
$ 32,374 $ 34,113
186
142
2,874
35,576
1,298
349
1,032
36,792
3,336
-
966
4,302
31,274
4,615
41
1,072
5,728
31,064
(2,821)
34,095
3,300
27,764
1,133
944
4,646
2,074
671
(861)
2,311
(525)
1,191
669
6,154
1,978
614
(893)
1,900
-
913
11,306
597
12,210
14,102
4,385
1,262
1,200
414
-
748
1,068
1,113
2,672
493
711
171
5,001
33,340
12,738
3,746
1,167
1,180
378
346
604
662
1,047
2,266
428
733
19
4,625
29,939
12,061
1,323
10,738
-
10,738
(196)
$ 10,542 $ 8,525
10,035
1,142
8,893
(105)
8,788
(263)
$ 3.25 $ 2.66
$ 3.12 $ 2.56
$ 1.04 $ 1.04
3,245,086
3,442,173
3,199,883
3,428,765
F & M Bank Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income (dollars in thousands)
For the years ended 2021 and 2020
Net Income attributable to F & M Bank Corp.
$ 10,738 $ 8,788
Years Ended December 31,
2021
2020
Other comprehensive income (loss):
Pension plan adjustment
Tax effect
Pension plan adjustment, net of tax
Unrealized holding (losses) gains on available-for-sale securities
Tax effect
Unrealized holding (losses) gains, net of tax
Less:
Reclassifications adjustment for losses included in net income
Tax effect
Realized losses on sale of available-for-sale securities, net
Total other comprehensive (loss) income
671
141
530
(781)
164
(617)
(3,823)
803
(3,020)
1,027
(216)
811
525
110
415
-
-
-
(2,075)
194
Comprehensive income attributable to F&M Bank Corp.
$ 8,663 $ 8,982
Comprehensive income attributable to noncontrolling interests
$ - $ 105
Total comprehensive income
$ 8,663 $ 9,087
See accompanying Notes to the Consolidated Financial Statements.
38
F & M Bank Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (dollars in thousands, except share
and per share data)
For the years ended December 31, 2021 and 2020
Preferred
Common
Stock
Stock
Additional
Paid in
Capital
Retained
Noncontrolling Comprehensive
Earnings
Interest
Loss
Total
Accumulated
Other
Balance, December 31, 2019
$ 4,592
$ 16,042
$ 7,510
$ 66,008
$ 634
$ (3,211)
$ 91,575
Net income
Other comprehensive income
Distributions to noncontrolling interest
Dividends on preferred stock ($1.27 per share)
Dividends on common stock ($1.04 per share)
Common stock repurchased (18,472 shares)
Common stock issued (11,866 shares)
-
-
-
-
-
-
-
Preferred stock converted to common (1,333 shares)
(34)
-
-
-
-
-
(92)
59
8
-
-
-
-
-
(381)
199
26
8,788
-
-
(263)
(3,328)
-
-
-
105
-
(177)
-
-
-
-
-
-
194
-
-
-
-
-
-
8,893
194
(177)
(263)
(3,328)
(473)
258
-
Purchase of Minority Interest
-
-
(488)
-
-
-
(1,050)
Balance, December 31, 2020
$ 4,558
$ 16,017
$ 6,866
$ 71,205
$ -
$ (3,017)
$ 95,629
Net Income
Other comprehensive (loss)
Dividends on preferred stock ($0.96 per share)
Dividends on common stock ($1.04 per share)
Common stock issued (9,332 shares)
Preferred stock converted to common (180,261
shares)
Preferred stock redeemed (25,066 shares)
Common stock issued for Stock-based Compensation
(1,332 shares)
-
-
-
-
-
(3,931)
(627)
-
-
-
-
-
47
1,001
-
6
-
-
-
-
216
2,930
-
29
10,738
-
(196)
(3,397)
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,075)
-
-
-
-
-
-
10,738
(2,075)
(196)
(3,397)
263
-
(627)
35
Stock-based compensation expense
-
-
86
-
-
-
86
Balance, December 31, 2021
$ - $ 17,071
$ 10,127 $ 78,350 $ - $ (5,092) $ 100,456
See accompanying Notes to the Consolidated Financial Statements.
39
F & M Bank Corp. and Subsidiaries
Consolidated Statements of Cash Flows (dollars in thousands)
For the years ended December 31, 2021 and 2020
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of intangibles
Amortization of securities
Proceeds from sale of loans held for sale originated
Gain on sale of loans held for sale originated
Loans held for sale originated
(Recovery of) Provision for loan losses
Deferred tax expense (benefit)
(Increase) in interest receivable
Decrease (increase) in other assets
(Decrease) increase in accrued liabilities
Loss on sale of investments
Amortization of limited partnership investments
Loss (gain) on sale of fixed assets, net
Loss on sale and valuation adjustments of other real estate owned
Income from life insurance investment
Share based compensation expense
Loss on sale of assets held for sale
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale
Proceeds from sales of securities available for sale
Purchases of securities available for sale and other investments
Proceeds from the redemption of restricted stock, net
Proceeds from maturities of securities held to maturity
Purchases of securities held to maturity
Net (increase) in loans held for investment
Net decrease in loans held for sale participations
Net purchase of property and equipment
Purchase of bank owned life insurance
Purchase of minority interest
Proceeds from sale of other real estate owned
Proceeds from life insurance benefits
Proceeds from the sale of property and equipment
Cash received in branch acquisition (net of cash paid)
Net Cash (Used in) Investing Activities
Cash Flows from Financing Activities
Net change in deposits
Net change in short-term debt
Dividends paid in cash
Proceeds from long-term debt
Distributions to non-controlling interest
Proceeds from sale of common stock
Proceeds from issuance of common stock
Repurchase of preferred stock
Repurchase of common stock
Repayments of long-term debt
Net Cash Provided by Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
See accompanying Notes to the Consolidated Financial Statements.
40
2021
2020
$ 10,738 $ 8,893
1,164
71
1,004
203,681
(4,679)
(189,582)
(2,821)
476
(390)
2,560
(2,076)
525
861
114
-
(671)
86
220
21,281
19,130
25,917
(346,857)
790
-
-
(998)
44,372
(563)
-
-
-
421
142
13,946
(243,700)
247,484
-
(3,593)
-
-
263
35
(627)
-
(11,430)
232,132
1,241
59
284
212,180
(5,576)
(217,937)
3,300
(670)
(683)
(670)
836
-
893
(14)
326
(614)
-
-
1,848
24,513
-
(126,304)
1,758
125
(125)
(59,119)
19,452
(742)
(2,000)
(856)
1,163
-
-
-
(142,135)
176,873
(10,000)
(3,591)
71,903
(177)
-
258
-
(473)
(91,902)
142,891
9,713
2,604
78,408
$ 88,121 $ 78,408
75,804
Supplemental Cash Flow information:
Cash paid for:
Interest
Income taxes
Supplemental non-cash disclosures:
Change in unrealized (loss) gain on securities available for sale, net
Minimum pension liability adjustment, net
Conversion of preferred stock to common stock
Assets held for sale:
Bank premises and equipment transferred to held for sale
Donation of assets held for sale
Write down of assets held for sale
Branch purchase:
Tangible assets acquired (net of cash received)
Identifiable intangible assets acquired
Liabilities assumed
$ 4,071 $ 5,816
$ 2,012 $ 595
$ (3,298) $ 811
$ (617)
$ 530
$ (3,931) $ 34
$ - $ 537
$ 161 $ -
$ 59 $ -
$ 61 $ -
$ 73 $ -
$ 14,044 $ -
See accompanying Notes to the Consolidated Financial Statements.
41
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 1
NATURE OF OPERATIONS:
F & M Bank Corp. (the “Company”), through its subsidiary Farmers & Merchants Bank (the “Bank”), operates under a
charter issued by the Commonwealth of Virginia and provides commercial banking services. As a state-chartered bank,
the Bank is subject to regulation by the Virginia Bureau of Financial Institutions and the Federal Reserve Bank. The
Bank provides services to customers located primarily in the counties of Rockingham, Shenandoah, and Augusta, and
the cities of Harrisonburg, Staunton, Waynesboro and Winchester in Virginia. Services are provided at thirteen branch
offices and a Dealer Finance Division loan production office. The Company offers insurance, mortgage lending, title
insurance and financial services through its subsidiaries, TEB Life Insurance Company, Farmers & Merchants Financial
Services, Inc, (“FMFS”) VBS Mortgage, LLC (dba F&M Mortgage) and VSTitle, LLC (“VST”).
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of the Company and its subsidiaries conform to generally accepted accounting
principles and to accepted practice within the banking industry. The following is a summary of the more significant
policies:
Principles of Consolidation
The consolidated financial statements include the accounts of Farmers & Merchants Bank, TEB Life Insurance Company,
Farmers & Merchants Financial Services, Inc., F&M Mortgage, and VSTitle, LLC. Significant inter-company accounts
and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses, fair value, and pension accounting.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market funds whose initial maturity is ninety days or less and
Federal funds sold.
Securities
At the time of purchase, debt securities are classified into the following categories: held to maturity, available for sale or
trading. Debt securities that the Company has both the positive intent and ability to hold to maturity are classified as held
to maturity. Held to maturity securities are stated at amortized cost adjusted for amortization of premiums and accretion
of discounts on purchase using a method that approximates the effective interest method. Investments classified as
trading or available for sale are stated at fair value. Changes in fair value of trading investments are included in current
earnings while changes in fair value of available for sale investments are excluded from current earnings and reported,
net of taxes, as a separate component of other comprehensive income. Presently, the Company does not maintain a
portfolio of trading securities.
The fair value of investment securities available for sale is estimated based on quoted prices for similar assets determined
by bid quotations received from independent pricing services. Declines in the fair value of securities below their
amortized cost that are other than temporary are reflected in earnings or other comprehensive income, as appropriate. For
those debt securities whose fair value is less than their amortized cost basis, we consider our intent to sell the security,
whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to
recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider
whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies
have occurred and the results of reviews of the issuer’s financial condition.
42
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Securities, continued
Interest income is recognized when earned. Realized gains and losses for securities classified as available-for-sale are
included in earnings and are derived using the specific identification method for determining the cost of securities sold.
For held-to-maturity debt securities, the amount of other-than-temporary impairment recorded in other comprehensive
income for the noncredit portion of a previous other-than-temporary impairment is amortized prospectively over the
remaining life of the security on the basis of the timing of future estimated cash flows of the security.
For available-for-sale securities, when the Company has decided to sell an impaired available-for-sale security and the
Company does not expect the fair value of the security to fully recover before the expected time of sale, the security is
deemed other-than-temporarily impaired in the period in which the decision to sell is made. The Company recognizes an
impairment loss when the impairment is deemed other than temporary even if a decision to sell has not been made. The
Company had no other than temporary impairment in 2021 or 2020.
Other Investments
The Company periodically invests in low-income housing partnerships whose primary benefit is the distribution of
federal income tax credits to partners. The Company recognizes these benefits and the cost of the investments over the
life of the partnership. In addition, state and federal historic rehabilitation credits are generated from some of the
partnerships. Amortization of these investments is prorated based on the amount of benefits received in each year to the
total estimated benefits over the life of the projects.
Due to the nature and restrictions placed on the Company's investment in common stock of the Federal Home Loan Bank
of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond, these securities are considered restricted and carried
at cost.
Income Taxes
Income tax accounting guidance results in two components of income tax expense: current and deferred. Current income
tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law
to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the
liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of
the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are
recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax
assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or
sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms
examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position
that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of
tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has
full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-
than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is
subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of
evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company recognizes interest and penalties, if any, on income taxes as a component of income tax expense.
43
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Loans Held for Investment
The Company, through its banking subsidiary, provides mortgage, commercial, and consumer loans to customers. A
substantial portion of the loan portfolio is represented by mortgage loans, particularly commercial and residential
mortgages. The ability of the Company’s debtors to honor their contracts is largely dependent upon the real estate and
general economic conditions in the Company’s market area.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off,
generally are reported at their outstanding unpaid principal balance adjusted for the allowance for loan losses, and any
unearned income. Interest income is accrued on the unpaid principal balance. The accrual of interest on loans is
generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of
collection. Loans are typically charged off when the loan is 120 days past due, unless secured and in process of
collection. Loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest
is considered doubtful.
The Company’s loans are grouped into eleven segments: construction/land development, farmland, real estate, multi-
family, commercial real estate, home equity – closed end, home equity – open end, commercial & industrial – non-
real estate, consumer, credit cards and dealer finance. Each segment is subject to certain risks that influence the
establishment of pricing, loan structures, approval requirements, reserves, and ongoing credit management. The
Company does not segregate the portfolio further.
Construction and land development loans are subject to general risks from changing commercial building and housing
market trends and economic conditions that may impact demand for completed properties and the costs of completion.
Completed properties that do not sell or become leased within originally expected timeframes may impact the
borrower’s ability to service the debt. These risks are measured by market-area unemployment rates, bankruptcy rates,
housing and commercial building market trends, and interest rates. Risks specific to the borrower are also evaluated,
including previous repayment history, debt service ability, and current and projected loan-to value ratios for the
collateral.
Farmland loans are loans secured by agricultural property. These loans are subject to risks associated with the value
of the underlying farmland and the cash flows of the borrower’s farming operations.
Multifamily loans are loans secured by multi-unit residential property. These loans are subject to risks associated with
the value of the underlying property as well as the successful operation and management of the property.
Real estate loans are for consumer residential real estate where the credit quality is subject to risks associated with the
borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and
bankruptcy trends, and local housing market trends and interest rates. Risks specific to a borrower are determined by
previous repayment history, loan-to-value ratios, and debt-to-income ratios.
The commercial real estate segment includes loans secured by commercial real estate occupied by the owner/borrower,
and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by
economic risks from changing commercial real estate markets, rental markets for commercial buildings, business
bankruptcy rates, local unemployment rates and interest rate trends that would impact the businesses housed by the
commercial real estate.
The Company’s home-equity loan portfolios (closed end and open end) carry risks associated with the creditworthiness
of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and
procedures such as limiting loan-to-value at origination, experienced underwriting, and requiring standards for
appraisers.
44
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Loans Held for Investment, continued
Commercial and industrial non-real estate loans are secured by collateral other than real estate or are unsecured.
During 2020 and 2021, the bank participated in the Payroll Protection Program (“PPP”) sponsored by the SBA. These
loans are unsecured at a fixed interest rate of 1% and 100% guaranteed by the SBA. Credit risk for commercial non-
real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, interest
rates, and borrower repayment ability and collateral value (if secured).
Consumer non-real estate includes non-dealer financed automobile loans and other consumer loans. Certain consumer
loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems
primarily from the borrower’s ability to repay. If the loan is secured, the Company analyzes loan-to-value ratios. All
consumer non-real estate loans are analyzed for debt-to-income ratios and previous credit history, as well as for general
risks for the portfolio, including local unemployment rates, personal bankruptcy rates and interest rates.
Credit card loan portfolios carry risks associated with the creditworthiness of the borrower and changes in the
economic environment. The Company manages these risks through policies and procedures such as experienced
underwriting, maximum debt to income ratios, and minimum borrower credit scores.
Dealer finance lending generally carries certain risks associated with the values of the collateral and borrower’s ability
to repay the loan. The Company focuses its dealer finance lending on used vehicles where substantial depreciation
has already occurred thereby minimizing the risk of significant loss of collateral values in the future.
Interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against
interest income. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying
for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.
A loan is considered past due when a payment of principal or interest or both is due but not paid. Management closely
monitors past due loans in timeframes of 30-59 days, 60-89 days, and 90 or more days past due.
These policies apply to all loan portfolio segments.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be
unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the
loan agreement. Factors considered by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest
owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present
value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price,
or the fair value of the collateral if the loan is collateral dependent. Troubled debt restructurings, regardless of type,
are considered impaired loans.
Loans Held for Sale
These loans consist of fixed rate loans made through the Company’s subsidiary, F&M Mortgage, and loans held for sale
participations with Northpointe Bank, Grand Rapids, Michigan.
F&M Mortgage originates conforming mortgage loans for sale in the secondary market. These loans consist primarily of
fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of the investors. F&M
Mortgage enters into mortgage loan commitments whereby the interest rate on the loan is determined prior to funding
(rate lock commitments).
45
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Loans Held for Sale, continued
The period of time between issuance of a loan commitment and sale of the loan generally ranges from two to three
weeks. F&M Mortgage protects itself from changes in interest rates through the use of best efforts forward delivery
contracts, by committing to sell a loan at the time the borrower commits to an interest rate with the intent that the
buyer has assumed the interest rate risk on the loan. As a result, the Company is not generally exposed to significant
losses nor will it realize significant gains related to its rate lock commitments due to changes in interest rates. The
correlation between the rate lock commitments and the best efforts contracts is very high due to their similarity. F&M
Mortgage determines the fair value of rate lock commitments and best efforts contracts by measuring the change in
the estimated value of the underlying assets while taking into consideration the probability that the loan will be funded.
These loans are pre-sold with servicing released and no interest is retained after the loans are sold. The Company uses
fair value accounting for its portfolio of loans held for sale (LHFS) originated by F&M Mortgage in accordance with
ASC 820 – Fair Value Measurement and Disclosures. Fair value is based on observable market prices for the identical
instruments traded in the secondary mortgage loan markets in which the Company conducts business total $4,887 as of
December 31, 2021 of which $4,920 is related to unpaid principal. The Company’s portfolio of LHFS is classified as
Level 2.
The Bank participates in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking
corporation. Pursuant to the terms of a participation agreement, the Bank purchases participation interests in loans
made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened
mortgage loan originators located throughout the United States. A takeout commitment is in place at the time the loans
are purchased. The Bank has participated in similar arrangements since 2003 as a higher yielding alternative to federal
funds sold or investment securities. These loans are short-term, residential real estate loans that have an average life
in our portfolio of approximately two weeks. The Bank holds these loans during the period of time between loan
closing and when the loan is paid off by the ultimate secondary market purchaser. As of December 31, 2021, and
2020, there were $0 and $44,372 of these loans included in loans held for sale on the Company’s consolidated balance
sheet.
Troubled Debt Restructuring
In situations where, for economic or legal reasons related to a borrower's financial condition, management may grant
a concession to the borrower that it would not otherwise consider, the related loan is classified as a troubled debt
restructuring ("TDR"). Management strives to identify borrowers in financial difficulty early and work with them to
modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may
include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the
economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new
terms that provide for a reduction of either interest or principal, management measures any impairment on the
restructuring as noted above for impaired loans. The Company has $4,999 and $5,748 in loans classified as TDRs
that are current and performing as of December 31, 2021 and December 31, 2020.
Allowance for Loan and Losses
The allowance for loan losses represents management’s estimate of probable losses inherent in the Company’s loan
portfolio. A provision for estimated losses is charged to earnings to establish and maintain the allowance for loan
losses at a level reflective of the estimated credit risk. When management determines that a loan balance or portion of
a loan balance is not collectible, the loss is charged against the allowance. Subsequent recoveries, if any, are credited
to the allowance.
Management’s determination of the adequacy of the allowance is based on an evaluation of the composition of the
loan portfolio, the value and adequacy of collateral, current economic conditions, historical loan loss experience, and
other risk factors. Management evaluates the allowance each quarter through a methodology that estimates losses on
individual impaired loans and evaluates the effect of numerous factors on the credit risk of each segment of loans.
46
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Allowance for Loan and Losses, continued
The Company’s allowance for loan losses has two basic components: the general allowance and the specific allowance.
Each of these components is determined based upon estimates and judgments. The general allowance uses historical loss
experience as an indicator of future losses, along with various qualitative factors, including levels and trends in
delinquencies, nonaccrual loans, charge-offs and recoveries, trends in volume and terms of loans, effects of changes in
underwriting standards, experience of lending staff, economic conditions, and portfolio concentrations.
Except for credit cards and dealer finance, all loans are assigned an internal risk rating based on certain credit quality
indicators. The period-end balances for each loan segment are multiplied by the adjusted loss factor. Specific allowances
are established for individually evaluated impaired loans 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.
On March 27, 2020, the CARES Act allowed banks to elect to suspend requirements under GAAP for loan modifications
related to the COVID-19 pandemic that would otherwise be categorized as a TDR. During the pandemic, the bank
executed modifications of principal and interest deferrals in connection with COVID-19 relief to our customers. Of those
modifications, one loan with a balance of $2,486 was in deferral as of December 31, 2021 and returned to active status
on January 18, 2022.
Management believes that the allowance for loan losses is adequate. While management uses available information to
recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions,
particularly those affecting real estate values. In addition, regulatory agencies, as an integral part of their examination
process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about information available to them at the time of their
examination.
Assets Held for Sale
Assets held for sale at December 31, 2021 included one branch building that was closed during 2020. The Company
periodically evaluates the value of assets held for sale and records an impairment charge for any subsequent declines in
fair value less selling costs.
Other Real Estate Owned (OREO)
OREO is held for sale and represents real estate acquired through or in lieu of foreclosure. OREO is initially recorded
at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real
estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of
foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed
in lieu of foreclosure or through a similar legal agreement. The Company’s policy is to carry OREO on its balance
sheet at the lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a
valuation allowance is recorded through expense. Operating costs after acquisition are expensed.
Bank Premises and Equipment
Land is carried at cost and bank premises and equipment are stated at cost less accumulated depreciation. Depreciation
is charged to income over the estimated useful lives of the assets on a combination of the straight-line and accelerated
methods. The ranges of the useful lives of the premises and equipment are as follows:
Premises and Improvements
Furniture and Equipment
10 - 40 years
5 - 20 years
Maintenance, repairs, and minor improvements are charged to operations as incurred. Gains and losses on dispositions
are reflected in other income or expense.
47
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Goodwill and Intangible Assets
The Company accounts for goodwill and intangible assets under ASC 805, “Business Combinations” and ASC 350,
“Intangibles”, respectively. Goodwill is subject to at least an annual assessment for impairment by applying a fair
value-based test. Additionally, acquired intangible assets are separately recognized if the benefit of the assets can be
sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. The Company recorded
goodwill and intangible assets in 2021 related to the Waynesboro branch acquisition; see Note 29. The Company
records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Impairment
testing is performed annually, as well as when an event triggering impairment may have occurred. The Company
performs its annual analysis as of December 31 each fiscal year. Accounting guidance states an entity should perform
its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying
amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to
that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the
carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company
performed an internal evaluation of goodwill for December 31, 2021. Based on the results of this review, no
impairment was deemed necessary.
Pension Plans
The Bank has a qualified noncontributory defined benefit pension plan which covers all full-time employees hired prior
to April 1, 2012. The benefits are primarily based on years of service and earnings. The Company complies with ASC
325-960 “Defined Benefit Pension Plans” which requires recognition of the over-funded or under-funded status of
pension and other postretirement benefit plans on the balance sheet. Under ASC 325-960, gains and losses, prior service
costs and credits, and any remaining transition amounts that have not yet been recognized through net periodic benefit
cost will be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a
component of net periodic cost.
Advertising Costs
The Company follows the policy of charging the cost of advertising to expense as incurred. Total advertising costs
included in other operating expenses for 2021 and 2020 were $748 and $604, respectively.
Bank Owned Life Insurance
The Company has purchased life insurance policies on certain employees. Bank owned life insurance is recorded at
the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender
value adjusted for other charges or other amounts due that are probable at settlement.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control
over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put
presumptively beyond reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the
transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets
through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return
specific assets.
48
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as
liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated.
Management does not believe there are any such matters that will have a material effect on the consolidated financial
statements.
Fair Value Measurements
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more
fully disclosed in a separate note. Fair value estimates involved uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets of
particular items. Changes in assumptions or in market conditions could significantly affect these estimates.
Risk and Uncertainties
The coronavirus (“COVID-19”) pandemic spread rapidly across the world in the first quarter of 2020 and was declared
a pandemic by the World Health Organization. The government and private sector responses to contain its spread
began to significantly affect our operating businesses in March 2020 with branch lobby closings, operations and
administrative staff working remotely and the use of virtual meetings. Branches reopened on April 12, 2021 for regular
business hours and staff returned to their normal office locations. Due to high transmission rates in our area, branches
reverted to drive-thru services with lobby hours by appointment from January 18, 2022 to March 7, 2022. COVID-19
continues to effect our operations, although the long-term extent and significance remain unknown. The duration and
extent of the effects over longer terms cannot be reasonably estimated at this time. The risks and uncertainties resulting
from the pandemic may adversely affect our future earnings, cash flows and financial condition, including among
others, credit losses resulting from financial stress on borrowers, decreased demand for products and operational
failures. In addition, significant assumptions, judgments, and estimates used in the preparation of our financial
statements, including those associated with evaluations of goodwill for impairment, and allowance for loan losses,
may be subject to adjustments in future periods due to the rapidly changing, uncertain and unprecedented nature of
the pandemic.
Reclassifications
Certain reclassifications have been made in prior years’ financial statements to conform to classifications used in the
current year. These reclassifications had no impact on net income or earnings per share.
Earnings per Share
Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share
(“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible
securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by
dividing net income available to common stockholders by the weighted average number of common shares
outstanding. Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to
include the number of additional common shares that would have been outstanding if the dilutive common shares had
been issued. The dilutive effect of conversion of preferred stock is reflected in the diluted earnings per common share
calculation. All of the Company’s outstanding preferred stock was redeemed by the Company for cash or converted
to common stock during the fourth quarter of 2021.
Net income available to common stockholders represents consolidated net income adjusted for preferred dividends
declared.
49
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Earnings per Share, continued
The following table provides a reconciliation of net income to net income available to common stockholders for the
periods presented:
Earnings Available to Common Stockholders:
Net Income
Non-controlling interest income
Preferred stock dividends
Net Income Available to Common Stockholders
For the year ended
December 31, 2021 December 31, 2020
$ 8,893
$ 10,738
105
-
196
263
$ 10,542 $ 8,525
The following table shows the effect of dilutive preferred stock conversion on the Company's earnings per share for
the periods indicated:
For the year ended
December 31, 2021
December 31, 2020
Net Income
Available to
Common
Stockholders
$ 10,542
Weighted
Average
Shares
3,245,086
Per
Share
Amounts
$ 3.25
Net Income
Available to
Common
Stockholders
$ 8,525
Weighted
Average
Shares
3,199,883
Per
Share
Amounts
$ 2.66
Basic EPS
Effect of Dilutive Securities:
Convertible Preferred Stock
196
197,087
(0.13)
263
228,882
(0.10)
Diluted EPS
$ 10,738
3,442,173
$ 3.12
$ 8,788
3,428,765
$ 2.56
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No.
2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses
for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. Financial institutions and other organizations will now use forward-looking information to
better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted,
although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the
ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with
credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU’s
2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASU’s have provided for various minor technical
corrections and improvements to the codification as well as other transition matters. Smaller reporting companies
who file with the U.S. Securities and Exchange Commission (SEC), such as the Company, and all other entities who
do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years,
beginning after December 15, 2022. The Company is currently assessing the impact that ASU 2016-13 will have on
its consolidated financial statements and is implementing a CECL model to begin running parallel in the first quarter
2022. Data has been archived under the current model.
Effective November 25, 2019, the SEC adopted Staff Accounting Bulletin (SAB) 119. SAB 119 updated portions of
SEC interpretative guidance to align with FASB ASC 326, “Financial Instruments – Credit Losses.” It covers topics
including (1) measuring current expected credit losses; (2) development, governance, and documentation of a
systematic methodology; (3) documenting the results of a systematic methodology; and (4) validating a systematic
methodology.
50
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Recent Accounting Pronouncements, continued
In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease
the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions
for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to
meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to
help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all
entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 2021, the FASB issued ASU No.
2021-01 “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that certain optional expedients and
exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the
discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental
consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the
discounting transition. An entity may elect to apply ASU No. 2021-01 on contract modifications that change the
interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the
beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date
within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are
available to be issued. An entity may elect to apply ASU No. 2021-01 to eligible hedging relationships existing as of
the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered
into after the beginning of the interim period that includes March 12, 2020. The Company is preparing to have all loan
agreements, other than SWAP loans, transitioned from LIBOR by the end of second quarter 2022. The SWAP loans
have amended Rate Protection Agreements executed by the borrower in preparation of transition away from LIBOR
by the swap holder.
In August 2020, the FASB issued ASU No. 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-
20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by
removing major separation models required under current U.S. GAAP. Consequently, more convertible debt
instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity
instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement
conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more
equity contracts to qualify for it.
The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. In addition, the amendment
updates the disclosure requirements for convertible instruments to increase the information transparency. For public
business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years
beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the standard
will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-06 to have a material
impact on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and
Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges
of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).”
The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options
classified as equity that is not within the scope of another Topic. For both public and private companies, the ASU is
effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
Transition is prospective. Early adoption is permitted. The Company does not expect the adoption of ASU 2021-04 to
have a material impact on its consolidated financial statements.
51
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Recent Accounting Pronouncements, continued
In August 2021, the FASB issued ASU 2021-06, “'Presentation of Financial Statements (Topic 205), Financial
Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946):
Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial
Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank
and Savings and Loan Registrants. This ASU incorporates recent SEC rule changes into the FASB Codification,
including SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and
Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan
Registrants”. The ASU is effective upon addition to the FASB Codification. The Company does not expect the
adoption of ASU 2018-14 to have a material impact on its consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers”. The ASU requires entities to apply Topic 606 to
recognize and measure contract assets and contract liabilities in a business combination. The amendments improve
comparability after the business combination by providing consistent recognition and measurement guidance for
revenue contracts with customers acquired in a business combination and revenue contracts with customers not
acquired in a business combination. The ASU is effective for fiscal years, including interim periods within those fiscal
years, beginning after December 15, 2022. Entities should apply the amendments prospectively and early adoption is
permitted. The Company does not expect the adoption of ASU 2021-08 to have a material impact on its consolidated
financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the
Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment
for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test.
Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an
impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated
to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using
Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill
with its carrying amount. ASU 2017-04 was effective for the Company on January 1, 2021. The adoption of ASU
2017-04 did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for
Income Taxes.” The ASU is expected to reduce cost and complexity related to the accounting for income taxes by
removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze
whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain
income tax-related guidance. This ASU is part of the FASB’s simplification initiative to make narrow-scope
simplifications and improvements to accounting standards through a series of short-term projects. ASU 2019-12 was
effective for the Company on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the
Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments – Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions
between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force
and is expected to increase comparability in accounting for these transactions. ASU 2020-01 made targeted
improvements to accounting for financial instruments, including providing an entity the ability to measure certain
equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Among other topics, the amendments clarify that an entity should consider observable transactions that require it to
either apply or discontinue the equity method of accounting. ASU 2020-01 was effective for the Company on January
1, 2021. The adoption of ASU 2020-01 did not have a material impact on the Company’s consolidated financial
statements.
52
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Recent Accounting Pronouncements, continued
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables –
Nonrefundable fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt
security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. ASU 2020-08 was effective
for the Company on January 1, 2021. The adoption of ASU 2020-08 did not have a material impact on the Company’s
consolidated financial statements.
In December 2020, the Consolidated Appropriates Act of 2021 (“CAA”) was passed. Under Section 541 of the CAA,
Congress extended or modified many of the relief programs first created by the CARES Act, including the PPP loan
program and treatment of certain loan modifications related to the COVID-19 pandemic. The COVID-19 discussion
following the Critical Accounting Policies at the beginning of the Management’s Discussion and Analysis and note 5
provide more details on what the Company is doing to prepare for the impact.
NOTE 3
CASH AND DUE FROM BANKS:
The Bank may be required to maintain average reserve balances based on a percentage of deposits. Due to the deposit
reclassification procedures implemented by the Bank, there is no Federal Reserve Bank reserve requirement for the years
ended December 31, 2021 and 2020.
NOTE 4
SECURITIES:
The amortized cost and fair value, with unrealized gains and losses, of securities held to maturity were as follows:
December 31, 2021
U. S. Treasuries
December 31, 2020
U. S. Treasuries
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 125
$ - $ -
$ 125
$ 125
$ - $ -
$ 125
The amortized cost and fair value of securities available for sale are as follows:
December 31, 2021
U. S. Treasuries
U. S. Government sponsored enterprises
Securities issued by States and political subdivisions of the U.S.
Mortgage-backed obligations of federal agencies
Corporate debt securities
Total Securities Available for Sale
December 31, 2020
U. S. Government sponsored enterprises
Securities issued by States and political subdivisions of the U.S.
Mortgage-backed obligations of federal agencies
Corporate debt securities
Total Securities Available for Sale
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 29,847
134,466
34,078
185,216
22,555
$ 406,162
$ -
-
406
522
372
$ 29,482
$ 365
133,714
752
34,337
147
183,647
2,091
22,702
225
$ 1,300 $ 3,580 $ 403,882
$ 6,000
17,177
73,422
9,282
$ 105,881
$ 47 $ -
-
515
153
502
14
121
$ 1,185 $ 167
$ 6,047
17,692
73,771
9,389
$ 106,899
The amortized cost and fair value of securities at December 31, 2021, by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
53
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 4
SECURITIES (CONTINUED):
Securities Held to Maturity
Securities Available for Sale
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Amortized
Cost
Amortized
Cost
Fair
Value
$ 125 $ 125 $ 4,011
147,321
-
-
88,489
-
-
-
166,341
-
$ 125 $ 125 $ 406,162
Fair Value
$ 4,018
146,688
87,585
165,591
$ 403,882
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the
years ended December 31, 2021 and 2020:
Realized gains (losses):
Gross realized gains
Gross realized losses
Net realized (losses)
Proceeds from sales of securities
2021
2020
$ -
(525)
$ (525)
$ 25,917
$ -
-
$ -
$ -
There were no pledged securities at December 31, 2021 or 2020.
As of December 31, 2021, other investments consist of investments in twelve low-income housing and historic equity
partnerships (carrying basis of $6,762), stock in the Federal Home Loan Bank (carrying basis of $859), and various other
investments (carrying basis of $1,589). The interests in the low-income housing and historic equity partnerships have
limited transferability and the interests in the other stocks are restricted as to sales. The market values of these securities
are estimated to approximate their carrying values as of December 31, 2021. At December 31, 2021, the Company was
committed to invest an additional $961 in four low-income housing limited partnerships. These funds will be paid as
requested by the general partner to complete the projects. This additional investment has been reflected in the above
carrying basis and in accrued liabilities on the consolidated balance sheet.
The primary purpose of the investment portfolio is to generate income and meet liquidity needs of the Company through
readily saleable financial instruments. The portfolio includes fixed rate bonds, whose prices move inversely with rates
and variable rate bonds. At the end of any accounting period, the investment portfolio has unrealized gains and losses.
The Company monitors the portfolio, which is subject to liquidity needs, market rate changes and credit risk changes for
other than temporary impairment. The primary concern in a loss situation is the credit quality of the issuer behind the
instrument. Bonds deteriorate in value due to credit quality of the individual issuer and changes in market conditions.
A summary of unrealized losses and the length of time in a continuous loss position, by security type of December 31,
2021 and 2020 were as follows:
December 31, 2021
U. S. Government treasuries
U. S. Government sponsored enterprises
Securities issued by State and political
subdivisions in the U.S.
Mortgage-backed obligations of federal agencies
Corporate debt securities
Total
Less than 12 Months
More than 12 Months
Fair
Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Total
Unrealized
Losses
Fair Value
$ 29,481
93,714
$ 365
752
$ -
-
$ -
-
$ 29,481
93,714
$ 365
752
-
13,308
220 136,575
8,825
$ 220 $ 281,903
-
147
2,091
225
$ 3,580
13,308
126,501
8,825
$271,829
147
1,871
225
$ 3,360
-
10,074
-
$ 10,074
54
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 4
SECURITIES (CONTINUED):
December 31, 2020
Mortgage-backed obligations of federal agencies
Corporate debt securities
Total
Less than 12 Months
More than 12 Months
Fair
Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Total
Unrealized
Losses
Fair Value
$73,771
9,389
$83,160
$ 153
14
$ 167
$ -
-
$ -
$ - $ 73,771
9,389
-
$ - $ 83,160
$ 153
14
$ 167
At December 31, 2021 there were $10.0 million or 4 instances of individual available for sale securities that had been in
a continuous loss position for more than 12 months and had an aggregate unrealized loss of $220 thousand. At December
31, 2020 there were no securities in a loss position for more than 12 months.
The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at December 31,
2021 and 2020 and concluded no impairment existed based on several factors which included: (1) the majority of these
securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility, (3) the contractual
terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each
investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to
sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to
be required to sell any of the investments before recovery of its amortized cost basis.
Additionally, the majority of the Company’s mortgage-backed securities are issued by FNMA, FHLMC, and GNMA
and do not have credit risk given the implicit and explicit government guarantees associated with these agencies.
NOTE 5
LOANS:
During the pandemic, modifications allowing principal and interest deferrals were granted in connection with COVID-
19 relief. These modifications and deferrals were not considered troubled debt restructurings pursuant to interagency
guidance issued in March 2020 and the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. As of December
31, 2021, one loan with a balance of $2,486 was in deferral; it returned to active status on January 18, 2022.
Loans held for investment as of December 31, 2021, and 2020 were as follows:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Gross loans
Less: Deferred loan fees, net of costs
Total
2021
2020
$ 75,236 $ 71,467
53,728
66,344
163,018
139,552
5,918
4,887
142,516
163,564
8,476
6,262
46,613
44,247
65,470
44,224
9,405
8,036
91,861
107,346
2,857
3,000
661,329
662,698
(277)
-
$ 662,421 $ 661,329
The Company has pledged loans held for investment as collateral for borrowings with the Federal Home Loan Bank of
Atlanta totaling $163,326 and $173,029 as of December 31, 2021 and 2020, respectively. The Company maintains a
blanket lien on its entire residential real estate portfolio and certain commercial and home equity loans.
55
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 5
LOANS (CONTINUED):
Loans held for sale consists of loans originated by F&M Mortgage for sale in the secondary market, and the Bank’s
commitment to purchase residential mortgage loan participations from Northpointe Bank. The volume of loans
purchased from Northpointe fluctuates due to a number of factors including changes in secondary market rates, which
affects demand for mortgage loans; the number of participating banks involved in the program; the number of mortgage
loan originators selling loans to the lead bank and the funding capabilities of the lead bank. Loans held for sale as of
December 31, 2021 and 2020 were $4,887 and $58,679, respectively.
The following is a summary of information pertaining to impaired loans:
Impaired loans without a valuation allowance:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Credit cards
Dealer Finance
Impaired loans with a valuation allowance
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Credit cards
Recorded
Investment
$ 645
2,286
2,748
-
8,494
147
-
-
5
-
12
14,337
-
-
1,172
-
6,004
-
-
-
-
-
December 31, 2021
Unpaid
Principal
Balance
Related
Allowance
December 31, 2020
Unpaid
Principal
Balance
Recorded
Investment
$ 645
2,286
2,748
-
8,494
147
-
-
5
-
12
14,337
$ - $ 1,693 $ 1,693
-
6,648
-
8,656
687
151
8
-
-
8
17,851
-
6,648
-
8,592
687
151
8
-
-
8
17,787
-
-
-
-
-
-
-
-
-
-
-
Related
Allowance
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
1,172
-
6,004
-
-
-
-
-
-
-
119
-
603
-
-
-
-
-
-
1,737
7,143
-
7,464
-
-
-
1
-
-
1,737
7,143
-
7,464
-
-
-
1
-
-
370
365
-
1,833
-
-
-
1
-
Dealer Finance
Total impaired loans
95
7,271
$ 21,608
95
7,271
$ 21,608
14
736
$ 736
147
147
16,492
16,492
$ 34,279 $ 34,343
15
2,584
$ 2,584
The Recorded Investment is defined as the principal balance less principal payments and charge-offs.
56
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 5
LOANS (CONTINUED):
The following is a summary of the average investment and interest income recognized for impaired loans:
Impaired loans without a valuation allowance:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Credit cards
Dealer Finance
Impaired loans with a valuation allowance
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Credit cards
Dealer Finance
Total impaired loans
December 31, 2021
December 31, 2020
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
$ 984
1,760
4,575
-
9,225
414
-
2
1
-
14
16,975
-
420
1,399
-
6,201
-
-
-
-
-
112
8,132
$ 25,107
$ 29
126
155
-
253
18
-
-
-
-
1
582
-
-
45
-
172
-
-
-
-
-
9
226
$ 808
$ 1,598
-
5,520
-
3,296
522
38
55
-
-
24
11,053
243
1,797
8,956
-
4,108
177
113
17
2
-
146
15,559
$ 26,612
$ 103
-
356
-
229
34
7
1
-
-
1
731
-
233
413
-
237
-
-
-
-
-
13
896
$ 1,627
57
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 5
LOANS (CONTINUED):
The following table presents the aging of the recorded investment of past due loans as of December 31, 2021 and 2020:
30-59
Days
Past due
60-89
Days
Past Due
Greater
than 90
Days
Total Past
Due
Current
Total Loan
Receivable
Non-
Accrual
Loans
Recorded
Investment
>90 days
& accruing
$ 360
$ 41
$ 38
$ 439 $ 74,797 $ 75,236 $ 302 $ -
-
1,254
-
-
53
471
35
-
89
-
-
-
216
1
-
395
-
108
-
-
43
-
1,738
-
108
53
687
79
66,344
137,814
4,887
163,456
6,209
43,560
44,145
66,344
139,552
4,887
163,564
6,262
44,247
44,224
1,320
827
-
2,975
-
-
-
-
-
-
-
-
-
43
9
694
16
67
91
-
-
16
-
76
801
16
7,960
106,545
2,984
8,036
107,346
3,000
1
40
-
-
-
-
-
$ 2,892
-
$ 505
-
$ 600
-
$ 3,997
(277)
$ 658,424
(277)
-
$ 662,421 $ 5,465
-
$ 43
December 31, 2021
Construction/Land
Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed
end
Home Equity – open end
Commercial & Industrial
– Non- Real Estate
Consumer
Dealer Finance
Credit Cards
Less: Deferred loan fees,
net of costs
Total
60-89
Days
Past
Due
Greater
than 90
Days
Total Past
Due
Current
Total Loan
Receivable
Recorded
Investment
>90 days
&
accruing
Non-
Accrual
Loans
$
-
-
512
-
-
30
-
44
$ -
$ 2,557 $ 68,910
$ 71,467
$ 251
$ -
-
304
-
920
-
212
-
-
2,540
-
1,474
33
928
139
53,728
160,478
5,918
141,042
8,443
45,685
65,331
53,728
163,018
5,918
142,516
8,476
46,613
65,470
1,737
368
-
3,820
-
212
3
-
102
-
-
-
-
-
30-59
Days Past
due
$ 2,557
-
1,724
-
554
3
716
95
39
694
45
$ 6,427
-
157
-
$ 743
-
-
-
$ 1,436
39
851
45
$ 8,606
9,366
91,010
2,812
$ 652,723
9,405
91,861
2,857
$ 661,329
-
44
-
$ 6,435
-
-
-
$ 102
December 31, 2020
Construction/Land
Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed
end
Home Equity – open end
Commercial & Industrial
– Non- Real Estate
Consumer
Dealer Finance
Credit Cards
Total
58
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 6
ALLOWANCE FOR LOAN LOSSES:
A summary of changes in the allowance for loan losses for the years ended December 31, 2021 and 2020 is as follows:
December 31, 2021
Allowance for loan losses:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-
Real Estate
Consumer
Dealer Finance
Credit Cards
Total
December 31, 2020
Allowance for loan losses:
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-
Real Estate
Consumer
Dealer Finance
Credit Cards
Total
Beginning
Balance
Charge-
offs
Recoveries
Provision
for Loan
Losses
Ending
Balance
Individually
Evaluated
for
Impairment
Collectively
Evaluated
for
Impairment
$ 1,249 $ - $ 307 $ (579)
(283)
(538)
(25)
(1,476)
(14)
(69)
731
1,624
54
3,662
55
463
-
76
-
19
-
13
-
-
-
-
-
-
363
521
1,674
79
(72)
8
211
16
$ 10,475 $ 1,165 $ 1,259 $ (2,821)
37
24
754
29
40
33
1,038
54
$ 977 $ -
-
119
-
603
-
-
448
1,162
29
2,205
41
407
$ 977
448
1,043
29
1,602
41
407
288
520
1,601
70
$ 7,748
288
-
520
-
1,587
14
-
70
$ 736 $ 7,012
Beginning
Balance
Charge-
offs
Recoveries
Provision
for Loan
Losses
Ending
Balance
Individually
Evaluated
for
Impairment
Collectively
Evaluated
for
Impairment
$ 1,190 $ 7 $ -
-
7
-
11
-
3
668
1,573
20
1,815
42
457
-
158
-
64
-
34
$ 66 $ 1,249 $ -
370
365
-
1,833
-
-
731
1,624
54
3,662
55
463
63
202
34
1,900
13
37
$ 1,249
361
1,259
54
1,829
55
463
138
585
89
186
1,551
1,786
123
68
$ 8,390 $ 2,164
19
50
784
75
$ 949
(103)
374
655
59
$ 3,300
363
521
1,674
79
$ 10,475
363
-
520
1
1,659
15
-
79
$ 2,584 $ 7,891
59
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 6
ALLOWANCE FOR LOAN LOSSES (CONTINUED):
The following table presents the recorded investment in loans based on impairment method as of December 31, 2021
and 2020:
December 31, 2021
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity –open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Gross Loans
Less: Deferred loan fees, net of costs
Total
December 31, 2020
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity –open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Total
Loan Receivable
$ 75,236
66,344
139,552
4,887
163,564
6,262
44,247
44,224
8,036
107,346
3,000
662,698
(277)
$ 662,421
Loan Receivable
$ 71,467
53,728
163,018
5,918
142,516
8,476
46,613
65,470
9,405
91,861
2,857
$ 661,329
Individually
Evaluated for
Impairment
Collectively
Evaluated for
Impairment
$ 645
2,286
3,920
-
14,498
147
-
-
5
107
-
21,608
-
$ 21,608
Individually
Evaluated for
Impairment
$ 1,693
1,737
13,791
-
16,056
687
151
8
1
155
-
$ 34,279
$ 74,591
64,058
135,632
4,887
149,066
6,115
44,247
44,224
8,031
107,239
3,000
641,090
(277)
$ 640,813
Collectively
Evaluated for
Impairment
$ 69,774
51,991
149,227
5,918
126,460
7,789
46,462
65,462
9,404
91,706
2,857
$ 627,050
During the third quarter of 2021, Management changed the historical net charge off lookback period from two years to
three years for all segments given recent asset quality trends and the impact of government programs in response to the
COVID-19 pandemic on charge off experience. Management believes the three-year lookback period is more indicative
of the risk remaining in the loan portfolio.
This change and the effect on provision expense for the twelve months ended December 31, 2021 and the allowance for
loan losses at December 31, 2021 was as follows:
60
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 6
ALLOWANCE FOR LOAN LOSSES (CONTINUED):
Construction/Land Development
Farmland
Real Estate
Multi-Family
Commercial Real Estate
Home Equity – closed end
Home Equity – open end
Commercial & Industrial – Non-Real Estate
Consumer
Dealer Finance
Credit Cards
Calculated Provision
Based on Current
Methodology
$ (579)
(283)
(538)
(25)
(1,476)
(14)
(69)
(72)
8
211
16
$ (2,821)
Current Provision
Based on Prior
Methodology
$ (1,099)
(283)
(532)
(25)
(1,701)
(14)
(105)
(75)
(368)
52
1
$ (4,149)
Difference
$ 520
-
(6)
-
225
-
36
3
376
159
15
$ 1,328
The following table shows the Company’s loan portfolio broken down by internal loan grade as of December 31, 2021
and 2020:
December 31, 2021
Construction/Land
Development
Farmland
Real Estate
Multi-Family
Commercial Real
Estate
Home Equity –
closed end
Home Equity – open
end
Commercial &
Industrial - Non-Real
Estate
Consumer (excluding
dealer)
Gross loans
Less: Deferred loan
fees, net of costs
Total
Performing
Nonperforming
Total
Grade 1
Minimal
Risk
Grade 2
Modest
Risk
Grade 3
Average
Risk
Grade 4
Acceptable
Risk
Grade 5
Marginally
Acceptable
Grade 6
Watch
Grade 7
Substandard
Grade 8
Doubtful
Total
$ -
56
-
-
$ 6 $ 9,952
6,804
30,268
1,021
291
1,128
-
$ 43,861
42,615
61,940
2,586
$ 19,457
13,620
28,895
1,154
$ 1,658
1,638
12,462
126
$ 302 $ -
-
-
-
1,320
4,859
-
$ 75,236
66,344
139,552
4,887
-
-
-
-
2,124
36,308
72,414
35,444
4,428
12,846
61
1,268
3,103
762
1,068
1,293
17,333
21,296
2,477
1,632
1,001
7,562
21,527
13,538
533
-
216
63
-
-
-
-
163,564
6,262
44,247
44,224
10
2,919
522
$ 66 $ 6,426 $113,435
3,526
$ 272,868
980
$ 116,327
79
$23,624
-
-
$ 19,606 $ -
8,036
$ 552,352
(277)
$ 552,075
Dealer
Finance
$ 107,330
16
$ 107,346
Credit Cards
$ 3,000
-
$ 3,000
61
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 6
ALLOWANCE FOR LOAN LOSSES (CONTINUED):
December 31, 2020
Construction/Land
Development
Farmland
Real Estate
Multi-Family
Commercial Real
Estate
Home Equity –
closed end
Home Equity – open
end
Commercial &
Industrial - Non-Real
Estate
Consumer (excluding
dealer)
Total
Performing
Nonperforming
Total
Grade 1
Minimal
Risk
Grade 2
Modest
Risk
Grade 3
Average
Risk
Grade 4
Acceptable
Risk
Grade 5
Marginally
Acceptable
Grade 6
Watch
Grade 7
Substandard
Grade 8
Doubtful
$ - $ 142 $ 8,448
11,707
39,223
1,075
459
2,283
-
58
-
-
$ 40,126
26,899
66,698
3,509
$ 18,226
11,846
32,302
1,334
$ 4,274
1,022
6,977
-
$ 251 $ -
-
-
-
1,737
15,535
-
-
-
-
4,114
31,205
47,477
26,677
18,637
14,406
124
2,479
3,289
759
1,795
1,705
17,716
22,014
3,171
1,477
Total
$ 71,467
53,728
163,018
5,918
142,516
8,476
46,613
65,470
-
-
-
-
30
530
2
90
1,524
7,601
17,050
38,290
913
-
3,461
173
$ 148 $10,524 $122,915
3,975
$ 231,037
1,790
$ 134,395
6
$35,101
-
-
$ 32,491 $ -
9,405
$566,611
Credit Cards
$ 2,857
-
$ 2,857
Dealer
Finance
$ 91,817
44
$ 91,861
Description of internal loan grades:
Grade 1 – Minimal Risk: Excellent credit, superior asset quality, excellent debt capacity and coverage, and
recognized management capabilities.
Grade 2 – Modest Risk: Borrower consistently generates sufficient cash flow to fund debt service, excellent
credit, above average asset quality and liquidity.
Grade 3 – Average Risk: Borrower generates sufficient cash flow to fund debt service. Employment (or
business) is stable with good future trends. Credit is very good.
Grade 4 – Acceptable Risk: Borrower’s cash flow is adequate to cover debt service; however, unusual
expenses or capital expenses must by covered through additional long-term debt. Employment (or business)
stability is reasonable, but future trends may exhibit slight weakness. Credit history is good. No unpaid
judgments or collection items appearing on credit report.
Grade 5 – Marginally acceptable: Credit to borrowers who may exhibit declining earnings, may have
leverage that is materially above industry averages, liquidity may be marginally acceptable. Employment or
business stability may be weak or deteriorating. May be currently performing as agreed, but would be
adversely affected by developing factors such as layoffs, illness, reduced hours or declining business
prospects. Credit history shows weaknesses, past dues, paid or disputed collections and judgments, but does
not include borrowers that are currently past due on obligations or with unpaid, undisputed judgments.
62
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 6
ALLOWANCE FOR LOAN LOSSES (CONTINUED):
Grade 6 – Watch: Loans are currently protected but are weak due to negative balance sheet or income
statement trends. There may be a lack of effective control over collateral or the existence of documentation
deficiencies. These loans have potential weaknesses that deserve management’s close attention. Other
reasons supporting this classification include adverse economic or market conditions, pending litigation or
any other material weakness. Existing loans that become 60 or more days past due are placed in this category
pending a return to current status.
Grade 7 – Substandard: Loans having well-defined weaknesses where a payment default and or loss is
possible, but not yet probable. Cash flow is inadequate to service the debt under the current payment, or
terms, with prospects that the condition is permanent. Loans classified as substandard are inadequately
protected by the current net worth and paying capacity of the borrower and there is the likelihood that
collateral will have to be liquidated and/or guarantor(s) called upon to repay the debt. Generally, the loan is
considered collectible as to both principal and interest, primarily because of collateral coverage, however, if
the deficiencies are not corrected quickly; there is a probability of loss.
Grade 8 – Doubtful: Loans having all the characteristics of a substandard credit, but available information
indicates it is unlikely the loan will be repaid in its entirety. Cash flow is insufficient to service the debt. It
may be difficult to project the exact amount of loss, but the probability of some loss is great. Loans are to be
placed on non-accrual status when any portion is classified doubtful.
Credit card and dealer finance loans are classified as performing or nonperforming. A loan is nonperforming
when payments of principal and interest are past due 90 days or more.
NOTE 7
TROUBLED DEBT RESTRUCTURING:
In the determination of the allowance for loan losses, management considers troubled debt restructurings and
subsequent defaults in these restructurings by adjusting the loan grades of such loans, which are considered in the
qualitative factors within the allowance for loan loss methodology. Defaults resulting in charge-offs affect the
historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves
may be established on troubled debt restructured loans which are evaluated individually for impairment. Loans
modified under the regulatory guidance and CARES Act due to the pandemic were not considered troubled debt
restructurings.
During the twelve months ended December 31, 2021, the Bank modified 3 loans that were considered to be troubled
debt restructurings. These modifications included rate adjustments, revisions to amortization schedules, suspension
of principal payments for a temporary period, re-advancing funds to be applied as payments to bring the loan(s)
current, or any combination thereof.
December 31, 2021
Pre-Modification
Outstanding
Recorded Investment
Post-Modification
Outstanding
Recorded Investment
$ 966
109
$ 966
109
5
$ 1,080 $ 1,080
5
Troubled Debt Restructurings
Number of Contracts
Farmland
Real Estate
Consumer
Total
1
1
1
3
63
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 7
TROUBLED DEBT RESTRUCTURING (CONTINUED):
As of December 31, 2021, there were no loans restructured in the previous twelve months, in default. A restructured
loan is considered in default when it becomes 90 days past due.
During the twelve months ended December 31, 2020, the Bank modified 6 loans that were considered to be troubled
debt restructurings. These modifications included rate adjustments, revisions to amortization schedules, suspension
of principal payments for a temporary period, re-advancing funds to be applied as payments to bring the loan(s)
current, or any combination thereof.
Troubled Debt Restructurings
Number of Contracts
December 31, 2020
Pre-Modification
Outstanding
Recorded Investment
Post-Modification
Outstanding
Recorded Investment
Real Estate
Consumer
Total
1
5
6
$ 186 $ 186
37 37
$ 222 $ 222
As of December 31, 2020, there were no loans restructured in the previous twelve months, in default. A restructured
loan is considered in default when it becomes 90 days past due.
NOTE 8
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment as of December 31 are summarized as follows:
Land
Buildings and improvements
Furniture and equipment
Less - accumulated depreciation
Net
2021
$ 4,115
15,956
10,052
30,123
(13,060)
$ 17,063
2020
$ 4,369
16,192
10,086
30,647
(12,738)
$ 17,909
Depreciation of $1,169 in 2021 and $1,232 in 2020 were charged to operations.
64
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 9
OTHER REAL ESTATE OWNED:
The table below reflects other real estate owned (OREO) activity for 2021 and 2020:
Balance as of January 1
Loans transferred to OREO
Sale of OREO
Write down of OREO and losses on sale
Balance as of December 31
Activity in the valuation allowance was as follows:
Balance as of January 1
Provision charged to expense
Reductions from sales of real estate owned
Balance as of December 31
(Income) expenses related to foreclosed assets include:
Net loss on sales
Gain on foreclosure
Provision for unrealized losses
Operating expenses, net of rental income
(Income) expenses related to foreclosed assets
2021
$ -
-
-
-
$ -
2020
$ 1,489
-
(1,163)
(326)
$ -
2021
$ -
-
-
$ -
2020
$ 1,181
116
(1,297)
$ -
2021
$ -
-
-
-
$ -
2020
$ 205
-
116
25
$ 346
There were no real estate owned properties at December 31, 2021 and 2020. At December 31, 2021, the recorded
investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure
procedures are in process is $589.
NOTE 10
DEPOSITS:
Time deposits that meet or exceed the FDIC insurance limit of $250 at year end 2021 and 2020 were $12,373 and $12,283.
At December 31, 2021, the scheduled maturities of all time deposits are as follows:
2022
2023
2024
2025
2026
Thereafter
Total
$ 43,411
44,720
20,347
9,580
5,799
-
$ 123,857
65
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 11
SHORT-TERM DEBT:
Short-term debt, all maturing within 12 months, as of December 31, 2021 and 2020 is summarized as follows:
2021
Federal funds purchased
FHLB short term
Totals
2020
Federal funds purchased
FHLB short term
Totals
Maximum Outstanding
at any Month End
Outstanding
at Year End
Average
Balance
Outstanding
Yield
$ -
-
$ -
$ -
-
-
$ - $ -
-%
-%
-%
$ -
10,000
$ -
-
$ -
$ -
1,776
$ 1,776
-%
2.31%
2.31%
The Company utilizes short-term debt such as Federal funds purchased and FHLB short term borrowings to support the
loans held for sale participation program and provide liquidity. Federal funds purchased are unsecured overnight
borrowings from other financial institutions. FHLB short term debt, which is secured by the loan portfolio, can be a daily
rate variable loan that acts as a line of credit or a fixed rate advance, depending on the needs of the Company. With the
growth in deposits, excess liquidity, and decrease in loans held for sale participation program, the Company did not utilize
the short-term debt facilities after the first quarter of 2020.
As of December 31, 2021, the Company had unsecured lines of credit with correspondent banks totaling $50,000 which
may be used in the management of short-term liquidity, on which none was outstanding.
NOTE 12
LONG-TERM DEBT:
The Company utilizes the FHLB advance program to fund loan growth and provide liquidity. The interest rates on long-
term debt are fixed at the time of the advance; the weighted average interest rate was 0.81% and 1.47% at December 31,
2021 and December 31, 2020, respectively. The balance of these obligations at December 31, 2021 and 2020 were
$10,000 and $21,268 respectively. FHLB advances include a $10,000 letter of credit at FHLB that is pledged to the
Commonwealth of Virginia to secure public funds.
The maturities of long-term Federal Home Loan Bank long term debt as of December 31, 2021, were as follows:
2022
2023
2024
2025
2026
Thereafter
Total
$ -
-
-
-
-
10,000
$ 10,000
66
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 12
LONG-TERM DEBT (CONTINUED):
On July 29, 2020, the Company sold and issued to certain institutional accredited investors $5,000 in aggregate
principal amount of 5.75% fixed rated subordinated notes due July 31, 2027 (the “2027 Notes”) and $7,000 in
aggregate principal amount of 6.00% fixed to floating rate subordinated notes due July 31, 2030 (the “2030 Notes”).
The 2027 Notes bear interest at 5.75% per annum, payable semi-annually in arrears. Beginning on July 31, 2022
through maturity, the 2027 Notes may be redeemed, at the Company’s option, on any scheduled interest payment date.
The 2027 Notes will mature on July 31, 2027. The 2030 Notes will initially accrue interest at 6.00% per annum,
beginning July 29, 2020 to but excluding July 31, 2025, payable semi-annually in arrears. From and including July
31, 2025 through July 30, 2030, or up to an early redemption date, the interest rate shall reset quarterly to an interest
rate per annum equal to the then current three-month SOFR plus 593 basis points, payable quarterly in arrears.
Beginning on July 31, 2025 through maturity, the 2030 Notes may be redeemed, at the Company’s option, on any
scheduled interest payment date. The 2030 Notes will mature on July 31, 2030. The subordinated notes, net of issuance
costs totaled $11,772 and $11,740 at December 31, 2021 and December 31, 2020, respectively.
NOTE 13
INCOME TAX EXPENSE:
The components of income tax expense were as follows:
Current expense
Deferred expense (benefit)
Total Income Tax Expense
The components of deferred taxes as of December 31, were as follows:
Deferred Tax Assets:
Allowance for loan losses
Split Dollar Life Insurance
Nonqualified deferred compensation
Low-income housing partnerships losses
Core deposit amortization
SBA fees
Lease Liability
Unfunded pension benefit obligation
VSTitle income
Assets available for sale
Net unrealized loss on securities available for sale
Total Assets
Deferred Tax Liabilities:
Unearned low-income housing credits
Depreciation
Prepaid pension
Goodwill tax amortization
Right of Use Asset
Net unrealized gain on securities available for sale
Total Liabilities
Net Deferred Tax Asset (included in Other Assets on Balance Sheet)
67
2021
$ 847
476
$ 1,323
2020
$ 1,812
(670)
$ 1,142
2021
2020
$ 2,195
$ 1,627
3
3
847
757
293
326
24
29
198
47
140
172
1,016
875
-
2
-
32
-
479
$ 4,349 $ 4,716
2021
2020
$ 63 $ 93
584
567
294
114
571
576
156
149
-
214
1,469
1,912
$ 2,880 $ 2,804
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 13
INCOME TAX EXPENSE (CONTINUED):
The following table summarizes the differences between the actual income tax expense and the amounts computed using
the federal statutory tax rates:
Tax expense at federal statutory rates
Increases (decreases) in taxes resulting from:
Partially tax-exempt income
Tax-exempt income
LIH and historic credits
Other
Total Income Tax Expense
2021
$ 2,533
2020
$ 2,107
(38)
(172)
(913)
(87)
$ 1,323
(36)
(176)
(892)
139
$ 1,142
The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no
liability related to uncertain tax positions in accordance with accounting guidance related to income taxes.
The Company and its subsidiaries file federal income tax returns and state income tax returns. With few exceptions,
the Company is no longer subject to federal or state income tax examinations by tax authorities for years before 2018.
NOTE 14
EMPLOYEE BENEFITS:
Defined Benefit Pension Plan
The Company has a qualified noncontributory defined benefit pension plan which covers substantially all of its
employees hired before April 1, 2012. The benefits are primarily based on years of service and earnings. The
Company uses December 31st as the measurement date for the defined benefit pension plan.
The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets for
2021 and 2020:
Change in Benefit Obligation
Benefit obligation, beginning
Service cost
Interest cost
Actuarial loss
Benefits paid
Benefit obligation, ending
Change in Plan Assets
Fair value of plan assets, beginning
Actual return on plan assets
Benefits paid
Fair value of plan assets, ending
Funded status at the end of the year
2021
2020
$ 15,456
862
379
-
(1,140)
$ 15,557
$ 13,313
808
419
1,554
(638)
$ 15,456
$ 11,201 $ 10,543
1,296
1,174
(1,140)
(638)
$ 11,235
$ 11,201
$ (4,322) $ (4,255)
The fair value of plan assets is measured based on the fair value hierarchy as discussed in Note 20, “Fair Value
Measurements” to the Consolidated Financial Statements. The valuations are based on third party data received as of
the balance sheet date. All plan assets are considered Level 1 assets, as quoted prices exist in active markets for
identical assets.
68
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 14
EMPLOYEE BENEFITS (CONTINUED):
Defined Benefit Pension Plan, continued
Amount recognized in the Consolidated Balance Sheet
(Accrued) prepaid benefit cost
Unfunded pension benefit obligation under ASC 325-960
Deferred taxes
Amount recognized in accumulated other
comprehensive income (loss)
Net loss
Prior service cost
Amount recognized
Deferred taxes
Amount recognized in accumulated comprehensive (loss)
(Accrued)/Prepaid benefit detail
Benefit obligation
Fair value of assets
Unrecognized net actuarial loss
(Accrued) Prepaid benefits
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss
Net periodic benefit cost
2021
2020
$ (156) $ 583
(4,837)
1,016
(4,166)
875
$ (4,166)
-
(4,166)
875
$ (3,291)
$ (4,837)
-
(4,837)
1,016
$ (3,821)
$ (15,455)
$ (15,557)
11,201
11,235
4,166
4,837
$ (156) $ 583
$ 862 $ 808
419
379
(734)
(791)
(11)
-
289
221
$ 739 $ 703
Other changes in plan assets and benefit obligations
recognized in other comprehensive (income) loss
Net (gain) loss
Amortization of prior service cost
Total recognized in other comprehensive (income) loss
$ (671) $ 770
11
$ (671) $ 781
-
Total recognized in net periodic benefit cost and other
comprehensive income
$ 67 $ 1,484
Additional disclosure information
Accumulated benefit obligation
Vested benefit obligation
Discount rate used for net pension cost
Discount rate used for disclosure
Expected return on plan assets
Rate of compensation increase
Average remaining service (years)
$ 11,473 $ 11,784
$ 11,473 $ 11,784
3.25%
2.50%
7.25%
3.00%
11.40
2.50%
2.75%
7.25%
3.00%
11.26
69
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 14
EMPLOYEE BENEFITS (CONTINUED):
Funding Policy
Due to the current funding status of the plan, the Company did not make a contribution in 2021 or 2020. The net periodic
pension cost of the plan for 2022 will be approximately $624. The Company was not subject to settlement accounting
in 2021 and does not anticipate being subject to settlement accounting in 2022.
Long-Term Rate of Return
The Company, as plan sponsor, selects the expected long-term rate of return on assets assumption in consultation with
investment advisors and the plan actuary. This rate is intended to reflect the average rate of earnings expected to be
earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially
with respect to real rates of return (net of inflation) for the major asset classes held or anticipated to be held by the trust.
Undue weight is not given to recent experience, which may not continue over the measurement period, with higher
significance placed on current forecasts of future long-term economic conditions.
Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, and solely for this
purpose, the plan is assumed to continue in force and not terminate during the period during which the assets are invested.
However, consideration is given to the potential impact of current and future investment policy, cash flow into and out
of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such
expenses are not explicitly estimated within periodic cost).
Asset Allocation
The trust fund is sufficiently diversified to maintain a reasonable level of risk without imprudently sacrificing return,
with a targeted asset allocation of 39% fixed income and 61% equity. The Investment Manager selects investment fund
managers with demonstrated experience and expertise, and funds with demonstrated historical performance, for the
implementation of the Plan’s investment strategy. The Investment Manager will consider both actively and passively
managed investment strategies and will allocate funds across the asset classes to develop an efficient investment structure.
The pension plan’s allocations as of December 31, 2021 and 2020 were 62% equity and 38% fixed and 63% equity and
37% fixed, respectively.
Estimated Future Benefit Payments, which reflect expected future service, as appropriate, as of December 31, 2021, are
as follows:
2022
2023
2024
2025
2023
2026-2031
$ 938
833
84
853
1,533
5,530
$ 9,771
Employee Stock Ownership Plan (ESOP)
The Company sponsors an ESOP which provides stock ownership to substantially all employees of the Company. The
Plan provides total vesting upon the attainment of five years of service. Contributions to the plan are made at the
discretion of the Board of Directors and are allocated based on the compensation of each employee relative to total
compensation paid by the Company. All shares issued and held by the Plan are considered outstanding in the computation
of earnings per share. Dividends on Company stock are allocated and paid to participants at least annually. Shares of
Company stock, when distributed, have restrictions on transferability. The Company contributed $472 in 2021 and $447
in 2020 to the Plan and charged this expense to operations. The shares held by the ESOP totaled 158,905 and 183,659
at December 31, 2021 and 2020, respectively.
70
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 14
EMPLOYEE BENEFITS (CONTINUED):
401(k) Plan
The Company sponsors a 401(k) savings plan under which eligible employees may choose to save up to 20 percent of
their salary on a pretax basis, subject to certain IRS limits. Under the Federal Safe Harbor rules employees are
automatically enrolled at 3% (this increases by 1% per year up to 6%) of their salary unless elected otherwise. The
Company matches one hundred percent of the first 1% contributed by the employee and fifty percent from 2% to 6% of
employee contributions. Vesting in the contributions made by the Company is 100% after two years of service.
Contributions under the plan amounted to $444 and $295 in 2021 and 2020, respectively.
Deferred Compensation Plan
The Company has a nonqualified deferred compensation plan for several of its key employees and directors. The
Company may make annual contributions to the plan, and the employee or director has the option to defer a portion of
their salary or bonus based on qualifying annual elections. Contributions to the plan totaled $125 in 2021 and $125 in
2020. A liability is accrued for the obligation under the plan and totaled $3,928 and $3,683 at December 31, 2021 and
2020, respectively.
Investments in Life Insurance Contracts
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. To help offset escalating benefit costs and
to attract and retain qualified employees, the Bank purchased Bank Owned Life Insurance (BOLI) contracts that will
provide benefits to employees during their lifetime. Dividends received on these policies are tax-deferred and the death
benefits under the policies are tax exempt. Rates of return on a tax-equivalent basis are very favorable when compared
to other long-term investments which the Bank might make. The accrued liability related to the BOLI contracts was
$669 and $488 for December 31, 2021 and 2020, respectively.
Stock Incentive Plan
The Company maintains the F & M Bank Corp. 2020 Stock Incentive Plan, which was designed to further the long-term
stability and financial success of the Company by attracting and retaining personnel, including employees, directors,
and consultants, through the use of stock and stock-based incentives. It was adopted by the Company’s Board,
effective upon shareholder approval on May 2, 2020 and will expire on March 18, 2030. The plan provides for the
granting of an option, restricted stock, restricted stock unit, stock appreciation right, or stock award to employees,
directors, and consultants. It authorizes the issuance of up to 200,000 shares of the Company’s common stock.
The Company’s Stock Plan Committee administers the plan, identifies which participants will be granted awards, and
determines the terms and conditions applicable to the awards. No shares were awarded during 2020. On March 5, 2021
the Company’s Stock Plan Committee awarded 16,140 shares with a fair value of $431,745 from this plan to selected
employees. These shares vest 25% over each of the next four years. The Committee also awarded 1,332 shares with a
fair value of $35,631 to directors. These shares vested upon issuance. On August 17, 2021, 200 shares were awarded
with a fair value of $5,750 from this plan to select employees that will vest 25% over the next four years. As of December
31, 2021 the total unrecognized compensation cost related to the nonvested restricted stock awards was $338.
The following table summarizes the status of the Company’s nonvested awards for the year ended December 31, 2021:
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Shares
-
17,672
(1,332)
(471)
15,869
Weighted-Average Grant Date Fair
Value Per Share
$ -
26.77
26.75
26.75
26.78
71
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 15
CONCENTRATIONS OF CREDIT:
The Company had cash deposits in other commercial banks in excess of FDIC insurance limits totaling $3,880 and $4,714
at December 31, 2021 and 2020, respectively.
The Company grants commercial, residential real estate and consumer loans to customers located primarily in the
northwestern portion of the State of Virginia. There were no loan concentration areas greater than 25% of capital.
Collateral required by the Company is determined on an individual basis depending on the purpose of the loan and the
financial condition of the borrower. As of December 31, 2021, approximately 75% of the loan portfolio was secured by
real estate.
NOTE 16
COMMITMENTS:
The Company makes commitments to extend credit in the normal course of business and issues standby letters of credit
to meet the financing needs of its customers. The amount of the commitments represents the Company's exposure to
credit loss that is not included in the consolidated balance sheet. As of the December 31, 2021 and 2020, the Company
had the following commitments outstanding:
Commitments to extend credit
Standby letters of credit
2021
2020
$ 257,229 $ 233,182
1,689
2,818
The Company uses the same credit policies in making commitments to extend credit and issue standby letters of credit
as it does for the loans reflected in the consolidated balance sheet.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. Collateral required, if any, upon extension of credit is based on management's
credit evaluation of the borrower’s ability to pay. Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment.
NOTE 17 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
Mortgage Banking Derivatives
Loans Held for Sale
The Company, through the Bank’s mortgage banking subsidiary, F&M Mortgage Company, originates residential
mortgage loans for sale in the secondary market. Residential mortgage loans held for sale are sold to the permanent
investor with the mortgage servicing rights released. During the second quarter of 2020, the Company elected to begin
using fair value accounting for its entire portfolio of loans held for sale (LHFS) in accordance with ASC 820 – Fair Value
Measurement and Disclosures. Fair value of the Company’s LHFS is based on observable market prices for the identical
instruments traded in the secondary mortgage loan markets in which the Company conducts business total $4,887 as of
December 30, 2021 of which $4,920 is related to unpaid principal. The Company’s portfolio of LHFS is classified as
Level 2.
72
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 17 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED):
Interest Rate Lock Commitments and Forward Sales Commitments
The Company, through F&M Mortgage Company, enters into commitments to originate residential mortgage loans in
which the interest rate on the loan is determined prior to funding, termed interest rate lock commitments (IRLCs). Such
rate lock commitments on mortgage loans to be sold in the secondary market are considered to be derivatives. Upon
entering into a commitment to originate a loan, the Company protects itself from changes in interest rates during the
period prior to sale by requiring a firm purchase agreement from a permanent investor before a loan can be closed
(forward sales commitment).
The Company locks in the loan and rate with an investor and commits to deliver the loan if settlement occurs on a best
efforts basis, thus limiting interest rate risk. Certain additional risks exist if the investor fails to meet its purchase
obligation; however, based on historical performance and the size and nature of the investors the Company does not
expect them to fail to meet their obligation. The Company determines the fair value of the IRLCs based on the price of
the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into
consideration the probability that the rate loan commitments will close.
The fair value of these derivative instruments is reported in “Other Assets” in the Consolidated Balance Sheet at
December 31, 2021, and totaled $258, with a notional amount of $18,801 and total positions of 70. The fair value of the
IRLCs at December 31, 2020 totaled $816, with a notional amount of $31,000 and total positions of 134. Changes in fair
value are recorded as a component of “Mortgage banking income, net” in the Consolidated Income Statement for the
period ended December 31, 2021. The Company’s IRLCs are classified as Level 2. At December 31, 2021 and 2020,
each IRLC and all LHFS were subject to a forward sales commitment on a best efforts basis.
The Company uses fair value accounting for its forward sales commitments related to IRLCs and LHFS under ASC 825-
10-15-4(b). The fair value of forward sales commitments was reported in “Other Assets” in the Consolidated Balance
Sheet at December 31, 2021 totaled $112, with a notional amount of $23,721 and total positions of 91. The fair value of
forward sales commitments is reported in “Other Liabilities” in the Consolidated Balance Sheet at December 31, 2020,
and totaled $60, with a notional amount of $46,000 and total positions of 205.
Derivative Financial Instruments
The Company has stand-alone derivative financial instruments in the form of forward option contracts. These
transactions involve both credit and market risk. The notional amounts are amounts on which calculations, payments,
and the value of the derivative are based. Notional amounts do not represent direct credit exposures. Direct credit
exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Such difference,
which represents the fair value of the derivative instruments, is reflected on the Company’s consolidated balance sheet
as derivative assets and derivative liabilities.
The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to these
agreements. The Company controls the credit risk of its financial contracts through credit approvals, limits and
monitoring procedures, and does not expect any counterparties to fail their obligations. The Company deals only with
primary dealers.
Derivative instruments are generally either negotiated Over-the-Counter (OTC) contracts or standardized contracts
executed on a recognized exchange. Negotiated OTC derivative contracts are generally entered into between two
counterparties that negotiate specific agreement terms, including the underlying instrument, amount, exercise prices and
maturity.
73
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 17 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED):
The Company issues to customer’s certificates of deposit with an interest rate that is derived from the rate of return on
the stock of the companies that comprise The Dow Jones Industrial Average. In order to manage the interest rate risk
associated with this deposit product, the Company has purchased a series of forward option contracts. These contracts
provide the Company with a rate of return commensurate with the return of The Dow Jones Industrial Average from the
time of the contract until maturity of the related certificates of deposit. These contracts are accounted for as fair value
hedges. Because the certificates of deposit can be redeemed by the customer at any time and the related forward options
contracts cannot be cancelled by the Company, the hedge is not considered effective. The ineffective portion of the gain
or loss on the derivative instrument, if any, is recognized currently in earnings. There was no ineffective portion included
in the consolidated income statement for the years ended December 31, 2021 and 2020.
At December 31, the information pertaining to the forward option contracts, included in other assets and other liabilities
on the balance sheet, is as follows:
Notional amount
Fair value of contracts, included in other assets
NOTE 18
TRANSACTIONS WITH RELATED PARTIES:
2021
2020
$ 7 $ 7
2
3
During the year, executive officers and directors (and companies controlled by them) were customers of and had
transactions with the Company in the normal course of business. Management believes these transactions were made on
substantially the same terms as those prevailing for other customers and did not involve any abnormal risk.
Loan transactions with related parties are shown in the following schedule:
Total loans, beginning of year
New loans
Relationship change
Repayments
Total loans, end of year
2021
2020
$ 21,722
$ 22,685
5,634
6,506
(3)
(98)
(4,668)
(5,714)
$ 23,379 $ 22,685
Deposits of executive officers and directors and their affiliates were $8,799 and $6,033 on December 31, 2021 and
2020, respectively. Management believes these deposits were made under the same terms available to other customers
of the bank.
NOTE 19
DIVIDEND LIMITATIONS ON SUBSIDIARY BANK:
The principal source of funds of F & M Bank Corp. is dividends paid by the Farmers & Merchants Bank. The Federal
Reserve Act restricts the amount of dividends the Bank may pay. Approval by the Board of Governors of the Federal
Reserve System is required if the dividends declared by a state member bank, in any year, exceed the sum of (1) net
income of the current year and (2) income net of dividends for the preceding two years. As of January 1, 2022,
approximately $14,492 was available for dividend distribution without permission of the Board of Governors. Dividends
paid by the Bank to the Company totaled $2,232 in 2021 and $1,500 in 2020.
NOTE 20
FAIR VALUE MEASUREMENTS:
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. There are three levels of inputs that may be used to measure fair values:
74
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 20 FAIR VALUE MEASUREMENTS (CONTINUED):
Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 – Valuation is based on observable inputs including quoted prices in active markets for similar assets and
liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-
based valuation techniques for which significant assumptions can be derived primarily from or
corroborated by observable data in the market.
Level 3 – Valuation is based on model-based techniques that use one or more significant inputs or assumptions that
are unobservable in the market.
The following describes the valuation techniques used by the Company to measure certain financial assets and
liabilities recorded at fair value on a recurring basis in the financial statements:
Securities
Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation
hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded
equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted
prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency
securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate,
asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to
the valuation, securities are classified within Level 3 of the valuation hierarchy.
The carrying value of restricted Federal Reserve Bank and Federal Home Loan Bank stock approximates fair value
based upon the redemption provisions of each entity and is therefore excluded from the following table.
Loans Held for Sale
The Company uses the fair value accounting for its entire portfolio of originated loans held for sale in accordance with
ASC 820 – Fair Value Measurement and Disclosures. Fair value of the Company’s originated loans held for sale
through F&M Mortgage is based on observable market prices for similar instruments traded in the secondary mortgage
loan markets in which the Company conducts business. The Company’s portfolio of loans held for sale through F&M
Mortgage is classified as Level 2. Gains and losses on the sale of loans are recorded within mortgage banking income,
net on the Consolidated Statements of Income.
Derivative assets – IRLCs
The Company recognizes IRLCs at fair value based on the price of the underlying loans obtained from an investor for
loans that will be delivered on a best-efforts basis while taking into consideration the probability that the rate lock
commitments will close. All of the Company’s IRLCs are classified as Level 2.
Derivative Asset/Liability – Forward Sale Commitments
The Company uses the fair value accounting for its forward sales commitments related to IRLCs and LHFS. Best
efforts sales commitments are entered into for loans intended for sale in the secondary market at the time the borrower
commitment is made. The best efforts commitments are valued using the committed price to the counter-party against
the current market price of the interest rate lock commitment or mortgage loan held for sale. All the Company’s
forward sale commitments are classified Level 2.
75
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 20 FAIR VALUE MEASUREMENTS (CONTINUED):
Derivative Asset/Liability – Indexed Certificate of Deposit
The Company’s derivatives, which are associated with the Indexed Certificate of Deposit (ICD) product once offered,
are recorded at fair value based on third party vendor supplied information using discounted cash flow analysis from
observable-market based inputs, which are considered Level 2 inputs. This product is no longer offered, however
there are a few certificates of deposits that have not matured.
The following tables present the balances of financial assets measured at fair value on a recurring basis as of December
31, 2021, and 2020:
December 31, 2021
Total
Level 1
Level 2
Level 3
Assets:
Loans held for sale, F&M Mortgage
IRLC
U. S. Treasury securities
U.S. Government sponsored enterprises
Securities issued by States and political subdivisions of the US
Mortgage-backed obligations of federal agencies
Corporate debt securities
Forward sales commitments
Assets at Fair Value
$ 4,887 $ -
-
-
-
-
-
-
-
$ 4,887 $ -
-
258
-
29,482
-
133,714
-
34,337
-
183,647
-
22,702
112
-
$ 409,139 $ - $ 409,139 $ -
258
29,482
133,714
34,337
183,647
22,702
112
Liabilities:
Derivatives – ICD
Liabilities at Fair Value
$ 3 $ - $ 3 $ -
$ 3 $ - $ 3 $ -
December 31, 2020
Total
Level 1
Level 2
Level 3
Loans held for sale, F&M Mortgage
IRLC
U.S. Government sponsored enterprises
Securities issued by States and political subdivisions of the US
Mortgage-backed obligations of federal agencies
Corporate debt securities
Assets at Fair Value
Liabilities:
Derivatives – ICD
Forward Sales Commitments
Liabilities at Fair Value
816
6,047
17,692
73,771
$ 14,307 $ - $ 14,307 $ -
-
-
-
-
-
-
-
-
9,389 -
-
$ 122,022 $ - $ 122,022 $ -
816
6,047
17,692
73,771
9,389
$ 2 $ - $ 2 $ -
60
-
$ 62 $ - $ 62 $ -
-
60
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to
the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs
of individual assets.
The following describes the valuation techniques used by the Company to measure certain financial assets recorded
at fair value on a nonrecurring basis in the financial statements:
76
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 20 FAIR VALUE MEASUREMENTS (CONTINUED):
Assets Held for Sale
Assets held for sale were transferred from bank premises at the lower of cost less accumulated depreciation or fair
value at the date of transfer. The Company periodically evaluates the value of assets held for sale and records an
impairment charge for any subsequent declines in fair value less selling costs. Fair value is based upon independent
market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the
fair value of the collateral is based on an observable market price or a current appraised value, the Company records
the assets held for sale as nonrecurring Level 2.
When an appraised value is not available or management determines the fair value of the collateral is further impaired
below the appraised value and there is no observable market price, the Company records the asset held for sale as
nonrecurring Level 3.
Impaired Loans
Loans are designated as impaired when, in the judgment of management based on current information and events, it
is probable that all amounts due will not be collected according to the contractual terms of the loan agreement.
Troubled debt restructurings are impaired loans. Impaired loans are measured at fair value on a nonrecurring basis. If
an individually-evaluated impaired loan’s balance exceeds fair value, the amount is allocated to the allowance for loan
losses. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated
Statements of Income.
The fair value of an impaired loan and measurement of associated loss is based on one of three methods: the observable
market price of the loan, the present value of projected cash flows, or the fair value of the collateral. The observable
market price of a loan is categorized as a Level 1 input. The present value of projected cash flows method results in a
Level 3 categorization because the calculation relies on the Company’s judgment to determine projected cash flows,
which are then discounted at the current rate of the loan, or the rate prior to modification if the loan is a troubled debt
restructure.
Loans measured using the fair value of collateral method are categorized in Level 3. Collateral may be in the form of
real estate or business assets including equipment, inventory, and accounts receivable. Most collateral is real estate.
The Company bases collateral method fair valuation upon the “as-is” value of independent appraisals or evaluations.
The value of real estate collateral is determined by an independent appraisal utilizing an income or market valuation
approach. The Company discounts appraised value by estimated selling costs to arrive at net fair value. Appraisals
conducted by an independent, licensed appraiser outside of the Company using observable market data is categorized
as Level 3. The value of business equipment is based upon an outside appraisal (Level 3) if deemed significant, or the
net book value on the applicable business’ financial statements (Level 3) if not considered significant. Likewise, values
for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3).
As of December 31, 2021 and 2020, the fair value measurements for impaired loans with specific allocations were
primarily based upon the fair value of the collateral.
77
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 20 FAIR VALUE MEASUREMENTS (CONTINUED):
The following table summarizes the Company’s financial assets that were measured at fair value on a nonrecurring
basis during the period:
December 31, 2021
Real Estate
Commercial Real Estate
Dealer Finance
Impaired loans
Bank premises held for sale
December 31, 2020
Farmland
Real Estate
Commercial Real Estate
Dealer Finance
Impaired loans
Bank premises held for sale
Total
$ 1,053
5,401
81
$ 6,535
$ 300
Level 3
Level 2
Level 1
$ -
$ -
$ 1,053
-
5,401
-
-
-
81
$ - $ - $ 6,535
$ - $ - $ 300
Total
$ 1,367
6,778
5,631
132
$ 13,908
$ 520
Level 3
Level 2
Level 1
$ -
$ -
$ 1,367
-
-
6,778
-
-
5,631
-
-
132
$ - $ - $ 13,908
$ - $ - $ 520
The following table presents information about Level 3 Fair Value Measurements for December 31, 2021 and 2020:
Fair Value at
December 31, 2021
Valuation Technique
Significant Unobservable Inputs
Range
Impaired Loans $ 6,535 Discounted appraised value Discount for selling costs and
marketability
11.76%-28.00%
(Average 17.31%)
Fair Value at
December 31, 2020
Valuation Technique
Significant Unobservable Inputs
Range
Impaired Loans $ 13,908 Discounted appraised value Discount for selling costs and
marketability
9.25%-62.00%
(Average 24.39%)
Other Real Estate Owned
Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. Valuation of other
real estate owned is determined using current appraisals from independent parties, a level three input. If current
appraisals cannot be obtained prior to reporting dates, or if declines in value are identified after a recent appraisal is
received, appraisal values are discounted, resulting in Level 3 estimates. If the Company markets the property with a
realtor, estimated selling costs reduce the fair value, resulting in a valuation based on Level 3 inputs.
The Company markets other real estate owned both independently and with local realtors. Properties marketed by
realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by
selling costs.
The Company did not have any OREO at December 31, 2021 and 2020.
The following presents the carrying amount, fair value and placement in the fair value hierarchy of the Company’s
financial instruments as of December 31, 2021 and 2020. Fair values for December 31, 2021 and 2020 are estimated
under the exit price notion in accordance with the adoption of ASU 2016-01, “Recognition and Measurement of
Financial Assets and Financial Liabilities.
78
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 20 FAIR VALUE MEASUREMENTS (CONTINUED):
The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:
Assets:
Cash and cash equivalents
Securities
Loans held for sale
IRLC
Loans held for investment, net
Interest receivable
Bank owned life insurance
Forward sales commitments
Total
Liabilities:
Deposits
Long-term debt
Interest payable
Total
Assets:
Cash and cash equivalents
Securities
Loans held for sale
IRLC
Loans held for investment, net
Interest receivable
Bank owned life insurance
Total
Liabilities:
Deposits
Forward sales commitments
Long-term debt
Interest payable
Total
Fair Value Measurements at December 31, 2021 Using
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Carrying
Amount
Fair Value at
December 31, 2021
$ 88,121 $ 88,121 $ - $ - $ 88,121
404,007
404,007
404,007
4,887
4,887
4,887
258
258
258
652,096
-
662,421
3,117
3,117
3,117
22,878
22,878
22,878
112
112
112
$ 1,185,801 $ 88,121 $ 435,259 $ 652,096 $ 1,175,476
-
-
-
-
-
-
-
-
-
-
652,096
-
-
-
$1,080,295 $ - $ 968,604 $ 123,718 $ 1,092,322
22,443
-
491
491
$ 969,095 $ 146,161 $ 1,115,256
-
-
$ -
21,772
491
$1,102,558
22,443
-
Fair Value Measurements at December 31, 2020 Using
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Carrying
Amount
Fair Value at
December 31, 2020
$ 78,408 $ - $ - $ 78,408
$ 78,408
107,024
107,024
107,024
58,679
58,679
58,679
816
816
816
639,472
-
650,854
2,727
2,727
2,727
22,647
22,647
22,647
$ 921,155 $ 78,408 $ 191,896 $ 639,472 $ 909,773
-
-
-
-
-
-
-
-
-
639,472
-
-
$ 818,582 $ -
-
-
-
$ -
60
33,202
261
$ 852,105
$702,940 $ 131,917 $ 834,857
60
60
33,834
-
261
261
$ 703,261 $ 165,751 $ 869,012
-
33,834
-
79
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 21
REGULATORY MATTERS:
The Company meets the eligibility criteria of a small bank holding company in accordance with the Federal Reserve’s
Small Bank Holding Company Policy Statement issued in February 2015 and is not obligated to report consolidated
regulatory capital. The Bank is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off balance-
sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-
based capital ratios. The capital conservation buffer requirement is 2.50%. The Company’s capital conservation buffer
for 2021 was 7.00% and for 2020 was 6.81%. The net unrealized gain on securities available for sale and the unfunded
pension liability are not included in computing regulatory capital.
Quantitative measures established by regulation, to ensure capital adequacy, require the Bank to maintain minimum
amounts and ratios. These ratios are defined in the regulations and the amounts are set forth in the table below.
Management believes, as of December 31, 2021 and 2020, that the Bank meets all capital adequacy requirements to
which they are subject.
The actual capital ratios for the Bank are presented in the following table:
Actual
Minimum Capital
Requirement
Minimum to be Well Capitalized
Under Prompt Corrective Action
Provisions
December 31, 2021
Total risk-based ratio
Tier 1 risk-based ratio
Common equity tier 1
Tier 1 leverage ratio
Amount
$111,389
103,641
103,641
103,641
Ratio
Amount
Ratio
15.00% $ 59,425
44,569
13.95%
33,427
13.95%
48,100
8.62%
8.00%
6.00%
4.50%
4.00%
Amount
$ 74,282
59,425
48,283
60,125
Ratio
10.00%
8.00%
6.50%
5.00%
Actual
Minimum Capital
Requirement
Minimum to be Well Capitalized
Under Prompt Corrective Action
Provisions
December 31, 2020
Total risk-based ratio
Tier 1 risk-based ratio
Common equity tier 1
Tier 1 leverage ratio
Amount
$103,838
95,051
95,051
95,051
Ratio
Amount
Ratio
14.81% $ 56,104
42,078
13.55%
31,559
13.55%
38,275
9.93%
8.00%
6.00%
4.50%
4.00%
Amount
$ 70,131
56,104
45,585
47,844
Ratio
10.00%
8.00%
6.50%
5.00%
80
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 22
BUSINESS SEGMENTS:
December 31, 2021
Revenues:
Interest Income
F&M Bank
F&M
Mortgage
TEB
Life/FMFS
VSTitle
Parent
Only
Eliminations
F&M Bank Corp.
Consolidated
$ 35,414
$ 198
$ 107
$ -
$ 1
$ (144)
$ 35,576
Service charges on deposits
1,133
Investment services and insurance
income
Mortgage banking income, net
Title insurance income
-
-
-
-
-
4,646
-
-
953
-
-
-
-
-
2,074
-
-
-
-
-
(9)
-
-
1,133
944
4,646
2,074
Other operating income
2,499
134
-
-
(124)
-
2,509
Total income
Expenses:
Interest Expense
(Recovery of) Provision for loan losses
Salaries and benefits
39,046
4,978
1,060
2,074
(123)
(153)
46,882
3,591
(2,800)
14,392
123
-
2,501
-
(21)
369
-
-
1,225
732
-
-
(144)
-
-
4,302
(2,821)
18,487
Other operating expenses
13,510
893
51
327
81
(9)
14,853
Total expense
28,693
3,517
399
1,552
813
(153)
34,821
Income before income taxes
10,353
1,461
661
522
(936)
-
12,061
Income tax expense (benefit)
1,266
-
134
-
(77)
-
1,323
Net Income attributable to F & M Bank
Corp.
Total Assets
$ 9,087
$ 1,461
$ 527
$ 522
$ (859)
$ -
$ 10,738
$ 1,227,059
$ 10,334
$ 8,803
$ 3,135
$ 112,586
$ (142,575)
$ 1,219,342
Goodwill
$ 2,868
$ 47
$ -
$ 3
$ 164
$ -
$ 3,082
81
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 22
BUSINESS SEGMENTS (CONTINUED):
December 31, 2020
F&M Bank
F&M
Mortgage
TEB
Life/FMFS
VSTitle
Parent
Only
Eliminations
F&M Bank Corp.
Consolidated
Revenues:
Interest Income
Service charges on deposits
Investment services and insurance income
Mortgage banking income, net
Title insurance income
$ 36,702
$ 332
$ 146
$ -
$ -
$ (388)
$ 36,792
1,191
1
-
-
-
-
6,154
-
-
709
-
-
-
-
-
1,978
-
-
-
-
-
(41)
-
-
1,191
669
6,154
1,978
Other operating income
2,189
182
-
-
(153)
-
2,218
Total income
Expenses:
Interest Expense
Provision for loan losses
Salaries and benefits
40,083
6,668
855
1,978
(153)
(429)
49,002
5,483
3,300
357
-
-
-
-
-
12,923
2,236
298
1,027
276
-
-
(388)
-
-
5,728
3,300
16,484
Other operating expenses
12,182
920
73
270
51
(41)
13,455
Total expense
33,888
3,513
371
1,297
327
(429)
38,967
Income before income taxes
6,195
3,155
484
681
(480)
-
10,035
Income tax expense (benefit)
925
-
98
-
119
-
1,142
Net income
$ 5,270
$ 3,155
$ 386
$ 681
$ (599)
$ -
$ 8,893
Net income attributable to noncontrolling
interest
Net Income attributable to F & M Bank
Corp.
Total Assets
-
105
-
-
-
-
105
$ 5,270
$ 3,050
$ 386
$ 681
$ (599)
$ -
$ 8,788
$ 972,129
$ 20,157
$ 8,023
$ 2,992
$ 107,726
$ (144,108)
$ 966,930
Goodwill
$ 2,670
$ 47
$ -
$ 3
$ 164
$ -
$ 2,884
82
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 23
PARENT COMPANY ONLY FINANCIAL STATEMENTS:
Balance Sheets
December 31, 2021 and 2020
Assets
Cash and cash equivalents
Investment in subsidiaries
Other investments
Income tax receivable (including due from subsidiary)
Goodwill and intangibles
Receivable from subsidiary bank
Total Assets
Liabilities
Deferred income taxes
Accrued expenses
Accrued interest
Long-term liability
Total Liabilities
Stockholders’ Equity
Series A Preferred stock, $25 liquidation preference, 400,000 shares
authorized, 0 shares issued and outstanding at December 31, 2021
and 205,327 issued and outstanding at December 31, 2020
Common stock par value $5 par value, 6,000,000 shares authorized,
200,000 designated, 3,414,306 and 3,203,372 shares issued and
outstanding at December 31, 2021 and 2020, respectively
Additional paid in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
2021
2020
$ 11,555
$ 8,824
95,643
102,808
135
135
156
463
237
190
149
-
$ 112,569 $ 107,726
47
-
294
11,772
$ 12,113
81
-
276
11,740
$ 12,097
$ - $ 4,558
17,071
16,017
6,866
10,127
71,205
78,350
(5,092)
(3,017)
100,456
95,629
$ 112,569 $ 107,726
Statements of Income
For the years ended December 31, 2021 and 2020
Income
Dividends from affiliate
Other income
Total Income
Expenses
Total Expenses
Net income before income tax expense and undistributed subsidiary net
income
2021
2020
$ 2,232 $ 1,500
11
1,511
1
2,233
812
328
1,421
1,183
Income Tax (Benefit) Expense
(77)
119
Income before undistributed subsidiary net income
Undistributed subsidiary net income
Net Income F&M Bank Corp.
1,064
1,498
9,240
7,724
$ 10,738 $ 8,788
83
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 23
PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED):
Statements of Cash Flows
For the years ended December 31, 2021 and 2020
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed (distributed) subsidiary income
Deferred tax (benefit) expense
(Increase) decrease in other assets
Increase in other liabilities
Share based compensation expense
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Purchase of minority interest
Net Cash Used in Investing Activities
Cash Flows from Financing Activities
Proceeds from long-term debt
Long-term debt fee amortization
Repurchase of preferred stock
Repurchase of common stock
Proceeds from the sale of common stock
Proceeds from issuance of common stock
Dividends paid in cash
Net Cash Provided by (Used in) Financing Activities
2021
2020
$ 10,738
$ 8,788
(9,240)
(35)
(409)
19
86
1,159
(7,724)
478
1,785
610
-
3,937
-
-
(856)
(856)
-
32
(627)
-
263
35
(3,593)
(3,890)
11,740
-
-
(473)
258
(3,591)
7,934
Net increase (decrease) in Cash and Cash Equivalents
(2,731)
11,015
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
11,555
$ 8,824
540
$ 11,555
NOTE 24
INVESTMENT IN F&M MORTGAGE, LLC
On November 3, 2008, the Bank acquired a 70% ownership interest in VBS Mortgage, LLC (DBA F&M Mortgage). On
April 30, 2020, the bank acquired the remaining 30% interest to have 100% ownership of F&M Mortgage. F&M
Mortgage originates both conventional and government sponsored mortgages for sale in the secondary market. The
Company consolidated the assets, liabilities, revenues and expenses of F&M Mortgage in its consolidated financial
statements as of December 31, 2021 and 2020.
NOTE 25
INVESTMENT IN VSTITLE, LLC:
On January 1, 2017, the Company acquired a 76% ownership interest in VSTitle, LLC (VST). VST provides title
insurance services to the customers in our market area, including F&M Mortgage and the Bank. F&M Mortgage is the
minority owner in VST and accordingly, the Company consolidated the assets, liabilities, revenues and expenses of VST
as of December 31, 2021 and 2020. On January 3, 2022, the Company purchased F&M Mortgage’s minority interest in
VST.
84
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 26
ACCUMULATED OTHER COMPREHENSIVE LOSS:
The balances in accumulated other comprehensive loss are shown in the following table:
Balance at December, 31, 2019
Change in unrealized securities gains
(losses), net of tax
Change in unfunded pension liability, net
Unrealized
Securities
Gains
(Losses)
$ (7)
Adjustments
Related to
Pension Plan
$ (3,204)
Losses Realized
in Net Income
$ -
Accumulated
Other
Comprehensive
Loss
$ (3,211)
811
-
-
811
of tax
-
(617)
-
(617)
Balance at December, 31, 2020
Change in unrealized securities gains
$ 804
$ (3,821)
$ -
$ (3,017)
(losses), net of tax
(2,190)
-
-
(2,190)
Change in unfunded pension liability, net
of tax
-
530
-
530
Losses realized in income, net of tax
-
-
(415)
(415)
Balance at December, 31, 2021
$ (1,386)
$ (3,291)
$ (415) $ (5,092)
There were no reclassification adjustments reported on the consolidated statements of income during 2020. During
2021 there were security losses of $525, net of tax of $110, that were reclassified out of unrealized gains on available
for sale securities and reclassified into net investment security losses on the consolidated statements of income.
NOTE 27
REVENUE RECOGNITION:
Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and
securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights,
financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Topic 606 is
applicable to noninterest revenue streams such as deposit related fees, interchange fees, merchant income, and annuity
and insurance commissions. Substantially all of the Company’s revenue is generated from contracts with customers.
Noninterest revenue streams in-scope of Topic 606 are discussed below.
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and
public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s
performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related
revenue recognized, over the period in which the service is provided. Check orders and other deposit account related
fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related
revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received
immediately or in the following month through a direct charge to customers’ accounts.
Investment Services and Insurance Income
Investment services and insurance income primarily consists of commissions received on mutual funds and other
investment sales. Commissions from the sale of mutual funds and other investments are recognized on trade date,
which is when the Company has satisfied its performance obligation.
Title Insurance Income
VSTitle provides title insurance and real estate settlement services. Revenue is recognized at the time the real estate
transaction is completed.
85
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 27
REVENUE RECOGNITION (CONTINUED):
ATM and Check Card Fees
ATM and Check Card Fees are primarily comprised of debit and credit card income, ATM fees, merchant services
income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned
whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM
fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder
uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit
and credit card transactions, in addition to account management fees.
Other
Other noninterest income consists of other recurring revenue streams such as safe deposit box rental fees, and other
service charges. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon
receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time,
revenue is recognized on a basis consistent with the duration of the performance obligation. Other service charges
include revenue from processing wire transfers, online payment fees, cashier’s checks, mobile banking fees and other
services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied,
and related revenue recognized, when the services are rendered or upon completion. Payment is typically received
immediately or in the following month.
Gains/Losses on sale of OREO
The Company records a gain or loss from the sale of OREO when the control of the property transfers to the buyer,
which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer,
the Company assesses whether the buyer is committed to perform their obligations under the contract and whether
collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and
the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. The Company recorded
no losses on the sales of OREO property in 2021 and $205 in 2020, which is presented on the consolidated income
statement as a noninterest expense and therefore not reflected in the table below.
The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606,
for December 31, 2021 and 2020.
Noninterest Income
In-scope of Topic 606:
Service Charges on Deposits
Investment Services and Insurance Income
Title Insurance Income
ATM and check card fees
Other
Noninterest Income (in-scope of Topic 606)
Noninterest Income (out-of-scope of Topic 606)
Total
Twelve Months Ended December 31,
2021
2020
$ 1,133 $ 1,191
669
1,978
1,900
547
6,285
5,925
944
2,074
2,311
807
7,269
4,037
$ 11,306 $ 12,210
86
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 27
REVENUE RECOGNITION (CONTINUED):
Contract Balances
A contract asset balance occurs when an entity performs a service for a customer before the customer pays
consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract
liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received
payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on
transactional activity. Consideration is often received immediately or shortly after the Company satisfies its
performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue
contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2021
and 2020, the Company did not have any significant contract balances.
Contract Acquisition Costs
In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into
expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered.
The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer
that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company
utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset
that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption
of Topic 606, the Company did not capitalize any contract acquisition cost.
NOTE 28
LEASES:
The Company adopted ASU No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842.
The Right-of-use assets and lease liabilities are included in other assets and other liabilities, respectively, in the
Consolidated Balance Sheets.
Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date
as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s
incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the
Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and
if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.
The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option
to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the
extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value
guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial
obligations.
The following tables present information about the Company’s leases:
Lease Liabilities (included in other liabilities)
Right-of-use assets (included in other assets)
Weighted average remaining lease term
Weighted average discount rate
Lease cost
Operating lease cost
Total lease cost
December 31, 2021
$ 957
$ 937
3.37 years
3.01%
2021
December 31, 2020
$ 859
$ 840
4.12 years
3.48%
2020
$ 121 $ 112
$ 121 $ 112
Cash paid for amounts included in the measurement
of lease liabilities
$ 145 $ 130
87
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 28
LEASES (CONTINUED):
A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating
lease liabilities is as follows:
Lease payments due
Twelve months ending December 31, 2022
Twelve months ending December 31, 2023
Twelve months ending December 31, 2024
Twelve months ending December 31, 2025
Twelve months ending December 31, 2026
Thereafter
Total undiscounted cash flows
Discount
Lease liabilities
As of
December 31,
2021
$
$
$
185
135
136
98
70
518
1,142
(185)
957
NOTE 29 WAYNESBORO BRANCH ACQUISITION
On April 23, 2021, the Bank acquired a branch from Carter Bank & Trust located in Waynesboro, VA. Pursuant to the
transaction, the Bank acquired $14,229 in deposits. In connection with its purchase of the branch, the Bank received a
cash payment from Carter Bank & Trust. of $13,758, which was net of a premium paid on deposits of $135 thousand.
This acquisition provides the Bank with the opportunity to enhance its footprint in Augusta County market.
The Company has accounted for the branch purchases under the acquisition method of accounting in accordance with
FASB ASC topic 805, “Business Combinations,” whereby the acquired assets and liabilities were recorded by the Bank
at their estimated fair values as of their acquisition date. The acquired assets and assumed liabilities of the Waynesboro
branch were measured at estimated fair value. Management made significant estimates and exercised significant
judgement in accounting for the acquisition of the Waynesboro branch. Deposits were valued based upon interest rates,
original and remaining terms and maturities, as well as current rates for similar funds in the same markets. Equipment
was acquired based on the remaining book value from Carter Bank & Trust, which approximated fair value.
The statement of net assets acquired and the resulting goodwill recorded is presented in the following tables (dollars in
thousands). As explained in the notes that accompany the following table, the purchased assets, assumed liabilities and
identifiable assets were recorded at the acquisition date fair value.
88
F & M Bank Corp. and Subsidiaries
Notes to the Consolidated Financial Statements (dollars in thousands)
December 31, 2021 and 2020
NOTE 29 WAYNESBORO BRANCH ACQUISITION (CONTINUED):
Acquired Balances as
Recorded by Carter
Bank & Trust
Cash and due from banks
$ 188
Fair Value Adjustments
$ -
Acquired Balances as
Recorded by Farmers &
Merchants Bank
$ 188
Premises and equipment, net
Right-of-use asset
Core deposit intangible
Total assets
11
50
-
$ 249
-
-
73
$ 73
11
50
73
$ 322
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Lease Liability
Total liabilities
$ 1,693
12,401
14,094
$ - $ 1,693
12,536
135
14,229
135
50
$ 14,144 $ 135 $ 14,279
50
-
Net assets acquired
$ (13,895)
$ (62)
$ (13,957)
The following table summarizes the acquired assets and assumed liabilities in the purchase as of the acquisition date, and
the resulting goodwill of $199 thousand resulting from the transaction (in thousands):
Assets acquired at fair value:
Cash and cash equivalents
Premises and equipment, net
Right-of-use asset
Core deposit intangible
Total fair value of assets acquired
Liabilities assumed at fair value:
Deposits
Lease liability
Total fair value of liabilities assumed
$ 188
11
50
73
$ 322
$ 14,229
50
$ 14,279
Net assets acquired at fair value
Transaction consideration received from Carter Bank & Trust
Amount of goodwill resulting from acquisition
$ (13,957)
$ (13,758)
$ 199
The total amount of goodwill arising from this transaction of $199 thousand is expected to be deductible for tax purposes,
pursuant to section 197 of the Internal Revenue Code.
NOTE 30 SUBSEQUENT EVENTS:
On January 3, 2022 the Company purchased the minority interest in VST from F&M Mortgage.
On February 2, 2022 the F&M Bank purchased property in the City of Winchester for a potential future branch
location.
89
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
F&M Bank Corp.
Timberville, Virginia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of F&M Bank Corp. and Subsidiaries (the Company)
as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes
in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial
statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
90
Allowance for Loan Losses – Loans Collectively Evaluated for Impairment - Qualitative Factors
Description of the Matter
As described in Note 2 (Summary of Significant Accounting Policies) and Note 6 (Allowance for Loan Losses) to the
consolidated financial statements, the Company maintains an allowance for loan losses that represents management’s
estimate of the probable losses inherent in the Company’s loan portfolio. The Company’s allowance for loan losses
has two basic components: the general allowance and the specific allowance. At December 31, 2021, the general
allowance represented $7,012,000 of the total allowance for loan losses of $7,748,000. The general allowance is
applied to non-impaired loans and uses historical loss experience along with qualitative factors, including changes in
lending policies and procedures, the nature and volume of the portfolio, experience of lending management, levels
and trends in delinquencies, nonaccrual loans, charge-offs and adversely rated loans, the loan review system, portfolio
concentrations, economic conditions, collateral values, and the competitive and legal environment. The qualitative
adjustments to the historical loss rates are established by applying an additional loss factor to the loan segments
identified by management based on their assessment of shared risk characteristics within similar groups of non-
impaired loans. Qualitative factors are determined based on management’s continuing evaluation of inputs and
assumptions underlying the quality of the loan portfolio and contribute significantly to the allowance for loan losses.
Management exercised significant judgment when assessing the qualitative factors in estimating the allowance for
loan losses. We identified the assessment of the qualitative factors as a critical audit matter as auditing the qualitative
factors involved especially complex and subjective auditor judgment in evaluating management’s assessment of the
inherently subjective estimates.
How We Addressed the Matter in Our Audit
The primary audit procedures we performed to address this critical audit matter included:
Substantively testing management’s process, including evaluating their judgments and assumptions for developing
the qualitative factors, which included:
Evaluating the completeness and accuracy of data inputs used as a basis for the qualitative factors.
Evaluating the reasonableness of management’s judgments related to the determination of qualitative
factors.
Evaluating the qualitative factors for directional consistency and for reasonableness.
Testing the mathematical accuracy of the allowance calculation, including the application of the qualitative
factors.
/s/ Yount, Hyde & Barbour, P.C.
We have served as the Company’s auditor since 2016.
Roanoke, Virginia
March 10, 2022
91
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. The Company, under the supervision and with the participation of management,
including the Company’s Chief Executive Officer and Chief Financial Officer, is responsible for maintaining
disclosure records and procedures that are designed to ensure that information required to be disclosed in reports filed
or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated
to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosures.
In connection with the preparation of this Annual Report on Form 10-K, management evaluated the Company’s
disclosure controls and procedures. The evaluation was performed under the direction of the Company’s Chief
Executive Officer and Chief Financial Officer to determine the effectiveness, as of December 31, 2021, of the design
and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, at December 31, 2021 the Company’s disclosure controls and
procedures were effective.
Management’s Report on Internal Control over Financial Reporting. Management is responsible for the preparation
and fair presentation of the financial statements included in the annual report. The financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America and reflect
management’s judgements and estimates concerning effects of events and transactions that are accounted for or
disclosed.
Management is also responsible for establishing and maintaining adequate internal control over financial reporting.
The Company's internal control over financial reporting includes those policies and procedures that pertain to the
Company's ability to record, process, summarize and report reliable financial data. Management recognizes that there
are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility
of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control
over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further,
because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time. In
order to ensure that the Company's internal control over financial reporting is effective, management regularly assesses
such controls and did so most recently for its financial reporting as of December 31, 2021.There were no changes in
internal controls over financial reporting during the last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, internal controls over financial reporting. This assessment was based on criteria for effective
internal control over financial reporting described in Internal Control Integrated Framework issued by the Committee
of Sponsoring Organizations (COSO, 2013) of the Treadway Commission. Based on this assessment, management
concluded the Company’s internal control over financial reporting was effective as of December 31, 2021.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
92
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding directors, executive officers and the audit committee financial expert is incorporated by
reference from the Company’s definitive proxy statement for the Company’s 2022 Annual Meeting of Shareholders
to be held on May 12, 2022 (“Proxy Statement”), under the captions “Election of Directors,” “Board of Directors and
Committees,” and “Executive Officers.”
Information on Section 16(a) beneficial ownership reporting compliance for the directors and executive officers of the
Company is incorporated by reference from the Proxy Statement under the caption “Section 16(a) Beneficial
Ownership Reporting Compliance.”
The Company has adopted a broad-based code of ethics for all employees and directors. The Company has also
adopted a code of ethics tailored to senior officers who have financial responsibilities. A copy of the codes may be
obtained without charge by request from the corporate secretary.
Item 11. Executive Compensation
This information is incorporated by reference from the Proxy Statement under the caption “Executive Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
This information is incorporated by reference from the Proxy Statement under the caption “Ownership of Company
Common Stock” and “Executive Compensation” and from Item 5 of this 10-K.
Item 13. Certain Relationships and Related Transactions, and Directors Independence
This information is incorporated by reference from the Proxy Statement under the caption “Interest of Directors and
Officers in Certain Transactions.”
Item 14. Principal Accountant Fees and Services
This information is incorporated by reference from the Proxy Statement under the caption “Principal Accounting
Fees.”
PART IV
Item 15. Exhibits and Financial Statement Schedules
The following financial statements are filed as a part of this report:
(a)(1) Financial Statements
The following consolidated financial statements and reports of independent auditors of the Company are in Part II,
Item 8 on pages 43 thru 97:
Consolidated Balance Sheets - December 31, 2021 and 2020 ..................................................................................... 36
Consolidated Statements of Income - Years ended December 31, 2021 and 2020 ...................................................... 37
Consolidated Statements of Comprehensive Income - Years ended December 31, 2021 and 2020 ............................ 38
Consolidated Statements of Changes in Stockholders’ Equity – Years ended December 31, 2021 and 2020….…....39
Consolidated Statements of Cash Flows - Years ended December 31, 2021 and 2020……………………………….40
Notes to the Consolidated Financial Statements .......................................................................................................... 42
Reports of Independent Registered Public Accounting Firms (PCAOB ID 613) ........................................................ 90
93
PART IV, continued
Item 15. Exhibits and Financial Statement Schedules
(a)(2) Financial Statement Schedules
All schedules are omitted since they are not required, are not applicable, or the required information is shown in the
consolidated financial statements or notes thereto.
(a)(3) Exhibits
The following exhibits are filed as a part of this form 10-K:
Exhibit No.
3.1
3.2
3.3
Restated Articles of Incorporation of F & M Bank Corp., incorporated herein by reference from F & M Bank
Corp.’s, Quarterly Report on Form 10-Q, filed November 14, 2013.
Articles of Amendment to the Articles of Incorporation of F&M Bank Corp. designating the Series A
Preferred Stock incorporated herein by reference from F&M Bank Corp,’s current report on Form 8-K filed
December 4, 2014.
Amended and Restated Bylaws of F & M Bank Corp., incorporated herein by reference from F & M Bank
Corp.’s, Current Report on Form 8-K, filed March 24, 2020.
4.1 Description of Securities, incorporated herein by reference from Exhibit 4.1 to F&M Bank Corp’s Annual
4.2
4.3
10.2
10.1
10.3
10.4
Report on Form 10-K, filed March 16, 2020.
Form of 2027 Subordinated Note (included as Exhibit 4.1 to the Current Report on Form 8-K filed July 31,
2020 and incorporated herein by reference).
Form of 2030 Subordinated Note (included as Exhibit 4.2 to the Current Report on Form 8-K filed July 31,
2020 and incorporated herein by reference).
Change in Control Severance Plan, incorporated herein by reference from Exhibit 10.1 to F&M Bank Corp.’s
Registration Statement on Form S-1, filed December 22, 2010.
VBA Executives Deferred Compensation Plan for Farmers & Merchants Bank, incorporated herein by
reference from F & M Bank Corp.’s Annual Report on Form 10-K, filed March 28, 2014.
VBA Directors Non-Qualified Deferred Compensation Plan for Farmers & Merchants Bank, incorporated
herein by reference from F & M Bank Corp.’s Annual Report on Form 10-K, filed March 28, 2014.
Employment Agreement, dated December 30, 2020, by and between F&M Bank Corp. and Mark C. Hanna,
incorporated herein by reference from Exhibit 10.1 to F&M Bank Corp.’s Current Report on Form 8-K,
filed January 6, 2021.
Employment Agreement, dated December 30, 2020, by and between F&M Bank Corp. and Barton E.
Black, incorporated herein by reference from Exhibit 10.2 to F&M Bank Corp.’s Current Report on Form
8-K, filed January 6, 2021.
F&M Bank Corp. 2020 Stock Incentive Plan, incorporated herein by reference from Exhibit 10.1 to F&M
Bank Corp.’s Quarterly Report on Form 10-Q, filed August 11, 2020.
Form of Restricted Stock Award Agreement, filed herewith.
Form of Subordinated Note Purchase Agreement (included as Exhibit 10.1 to the Current Report on Form
8-K filed July 31, 2020 and incorporated herein by reference).
Employment Agreement, dated December 30, 2020, by and between F&M Bank Corp. and F. Garth
Knight, filed herewith.
Subsidiaries of the Registrant
21.0
Consent of Yount, Hyde & Barbour, P.C.
23.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.1
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-
10.7
10.8
10.5
10.6
10.9
101
104
Oxley Act of 2002.
The following materials from F&M Bank Corp.’s Annual Report on Form 10-K for the year ended December
31, 2021, formatted in Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv)
Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows
and (vi) related notes (furnished herewith).
The cover page from F&M Bank Corp.’s Annual Report or Form 10-K for the year ended December 31,
2021, formatted in Inline XBRL (included with Exhibit 101)
94
Item 16. Form 10-K Summary
Not Required
Shareholders may obtain, free of charge, a copy of the exhibits to this Report on Form 10-K by writing Stephanie E.
Shillingburg, Corporate Secretary, at F & M Bank Corp., P.O. Box 1111, Timberville, VA 22853 or our website at
www.fmbankva.com.
95
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
F & M Bank Corp.
(Registrant)
By:
/s/ Mark C. Hanna
Mark C. Hanna
Director and Chief Executive Officer
By:
/s/ Carrie A. Comer
Carrie A. Comer
Executive Vice President and Chief Financial Officer
March 10, 2022
March 10, 2022
Date
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and as of the date indicated.
Signature
/s/ Larry A. Caplinger
Larry A. Caplinger
/s/ Dean W. Withers
Dean W. Withers
/s/ Daniel J. Harshman
Daniel J. Harshman
/s/ Michael W. Pugh
Michael W. Pugh
/s/ Christopher S. Runion
Christopher S. Runion
/s/ E. Ray Burkholder
E. Ray Burkholder
/s/ Peter H. Wray
Peter H. Wray
/s/ Anne Keeler
Anne Keeler
/s/ Daphyne Thomas
Daphyne Thomas
/s/ John Willingham
John Willingham
/s/ Hannah Hutman
Hannah Hutman
Title
Director
Director
Director
Date
March 10, 2022
March 10, 2022
March 10, 2022
Director, Chair
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
Director
Director
Director
Director
Director
Director
Director
96
Exhibit 21 List of Subsidiaries of the Registrant
Farmers & Merchants Bank (incorporated in Virginia)
VSTitle, LLC (a Virginia Limited Liability Company)
TEB Life Insurance Company (incorporated in Arizona), a subsidiary of Farmers & Merchants Bank
Farmers & Merchants Financial Services (incorporated in Virginia), a subsidiary of Farmers & Merchants Bank
VBS Mortgage, LLC, DBA F&M Mortgage (a Virginia Limited Liability Company), a subsidiary of Farmers &
Merchants Bank
97
F & M BANK CORP.
2020 STOCK INCENTIVE PLAN
Restricted Stock Award Agreement
Exhibit 10.7
THIS RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”) between F & M BANK
CORP., a Virginia corporation (the “Company”), and (“Participant”), is made pursuant and subject to the provisions
of the F & M Bank Corp. 2020 Stock Incentive Plan (___ “Plan”). All terms used herein that are defined in the Plan
have the same meaning given them in the Plan, unless otherwise defined herein.
1.
Grant of Restricted Stock Award. The Company hereby grants to Participant, effective as of
(the “Date of Grant”), an Award of (number) shares of Company Stock (the “Restricted Stock”). This Award of
Restricted Stock is subject to the terms and conditions of the Plan and subject further to the terms and conditions
set forth herein.
2.
Restrictions. Except as provided in this Award Agreement, the Restricted Stock
is
nontransferable and is subject to a substantial risk of forfeiture.
3.
Vesting. Except as provided in paragraph 4, Participant’s interest in the Restricted Stock shall be
transferable and nonforfeitable (“Vested”) to the extent provided in paragraphs (a), (b), and (c) below:
(a) Continued Service. Participant’s interest in ___% of the Restricted Stock shall become Vested on
each of the ____________ anniversaries of the Date of Grant (each, a “Vesting Date”), provided
that Participant has continued to provide services for the Company or an Affiliate from the Date of
Grant through the applicable Vesting Date.
(b) Death or Disability. Participant’s interest in the Restricted Stock (if not sooner Vested) shall become
Vested on the date that Participant dies or becomes Disabled while Participant is a service
provider of the Company or an Affiliate.
(c) Change in Control. Participant’s interest in the shares of Restricted Stock (if not sooner Vested) shall
become Vested on a Change in Control.
4.
5.
Forfeiture. Participant’s right to all or a portion of the shares of the Restricted Stock that are
not then Vested shall be forfeited if Participant ceases to provide services for the Company or an Affiliate prior
to the applicable Vesting Date. In addition, the Restricted Stock shall be subject to reduction, cancellation,
forfeiture or recoupment upon breach of non- competition, non-solicitation, confidentiality, or other restrictive
covenants or obligations that are applicable to Participant, or a termination of the Participant’s service for Cause.
Shareholder Rights. Participant will have all the rights of a shareholder of the Company with
respect to the Restricted Stock, including the right to receive dividends on and to vote the Restricted Stock;
provided, however, that (i) any cash dividends and stock dividends with respect to Restricted Stock shall be withheld
if, if any, as the underlying shares of Restricted Stock
by the Company for Participant’s account until such
becomes Vested, at which time such dividends will be distributed, net of Applicable Withholding Taxes, (ii)
Participant may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the Restricted Stock
before it is Vested, (iii) if the Restricted Stock is evidenced by a certificate, the Company shall retain custody of
the Company in
such certificate as provided in paragraph 6, and (iv) Participant shall deliver a stock power to
accordance with paragraph 7.
6.
Certificates. At the option of the Company, the Restricted Stock shall be evidenced by an
entry on the registry books of the Company or by a certificate issued by the Company. Any book entries and
certificates evidencing the Restricted Stock shall carry or be endorsed with a legend restricting the transferability
of shares as may be required by applicable securities or other laws, or by the terms of the Plan. Participant may not
receive or take possession of any shares of Restricted Stock through book-entry accounts held by, or in the
name of, Participant so long as the Restricted Stock is not Vested. If the Restricted Stock is evidenced by a
certificate, custody of such certificate evidencing the Restricted Stock shall be retained by the Company so long
as the Restricted Stock is not Vested. The Company shall release the restrictions on the book-entry evidencing the
Restricted Stock or deliver to Participant the stock certificates
evidencing the Company Stock as soon as
practicable after the Restricted Stock becomes Vested.
7.
Stock Power. Participant shall deliver to the Company a stock power, endorsed in blank, with
respect to the Restricted Stock. The Company shall use the stock power to cancel any shares of Restricted Stock
that do not become Vested. The Company shall return the stock power to Participant with respect to any shares of
Restricted Stock that become Vested.
Fractional Shares. Fractional shares of Company Stock shall not be issuable hereunder, and
when any provision hereof or the Plan may entitle Participant to a fractional share, such fraction shall be disregarded.
8.
98
9.
No Right to Continued Service. This Award Agreement does not confer upon Participant
any right to continue to provide services to the Company or an Affiliate, nor shall it interfere in any way with
the right of the Company or an Affiliate to terminate Participant’s services at any time.
10.
Investment Representation. Participant agrees that unless shares issuable under the Plan have
been registered with the Securities and Exchange Commission, all shares issuable to Participant hereunder shall be
acquired for investment and not with a view to distribution or resale. Participant further agrees that, until such
registration, certificates representing such shares may bear an appropriate legend to assure compliance with
applicable law and regulations.
11.
Change in Capital Structure. In the event of changes in the outstanding shares of Company
Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split,
reverse stock split, extraordinary corporate transaction such as any recapitalization, reorganization, merger,
spin-off of a subsidiary, or other relevant change in capitalization after the Date of Grant, the number and kind of
shares of stock or securities subject to this Award Agreement shall be equitably adjusted as determined by the
Committee in accordance with Plan section 14.
12.
of Virginia.
13.
Governing Law. This Award Agreement shall be governed by the laws of the Commonwealth
Conflicts. In the event of any conflict between the provisions of the Plan and the provisions of
this Award Agreement, the provisions of the Plan shall govern.
14.
Participant Bound by Plan. Participant hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
15.
Binding Effect. Subject to the limitations stated above and in the Plan, this Award Agreement
shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Participant
and the successors of the Company.
16.
Tax Withholding. Participant agrees, as a condition of receiving this Award, to pay, or make
arrangements acceptable to the Company for the satisfaction of, all Applicable Withholding Taxes with respect
to this Award.
17.
Counterparts. This Award Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which together will constitute one and the same
instrument. Counterpart
signature pages to this Award Agreement transmitted by facsimile transmission, electronic mail in portable
document format (.pdf), or by any other electronic means
intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of the paper document bearing an original
signature.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be signed by a duly authorized
officer, and Participant has accepted and acknowledged the grant of this Award by affixing Participant’s signature
hereto.
F&M BANK CORP.
By:_____________________
________________________
(Printed Name)
________________________
(Title)
PARTICIPANT
________________________
________________________
(Printed Name)
99
Exhibit 10.9
AMENDED & RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED & RESTATED EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of December 30, 2020 (the "Effective Date") by and between F&M Bank Corp., a Virginia corporation (the
"Corporation"), the Corporation's wholly-owned subsidiary, Farmers & Merchants Bank (the "Bank"), and F. Garth
Knight ("Employee").
RECITALS
WHEREAS, the Corporation is a bank holding company engaged in the operation of a bank;
WHEREAS, Employee possesses the experience, knowledge, skills and expertise of value to the Corporation;
and
WHEREAS, the Corporation wishes to retain Employee's valuable services, and Employee wishes to make
Employee's services available to the Corporation on the terms and subject to the conditions set forth herein; and
WHEREAS, the parties entered into that certain Employment Agreement made as of May 18, 2020 (the
"Original Agreement"), and, pursuant to Section 14 thereof, wish to amend and restate such Employment
Agreement as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and of the mutual promises and undertakings
of the parties as hereinafter set forth, the parties covenant and agree as follows:
Section 1. Employment
TERMS OF AGREEMENT
(a)
Employee shall be employed as Executive Vice President and Chief Lending Officer of the
Bank and shall discharge such duties and as may be assigned to him by the Corporation or the Bank from time
to time.
(b)
References in this Agreement to services rendered for the Corporation and compensation and
benefits payable or provided by the Corporation shall include services rendered for and compensation and
benefits payable or provided by any Affiliate. References in this Agreement to the "Corporation" also shall mean
and refer to each Affiliate for which Employee performs services. References in this Agreement to "Affiliate"
shall mean any business entity that, directly or indirectly, through one or more intermediaries, is controlled by
the Corporation.
Section 2. Term and Renewal The initial term of this Agreement shall begin on the Effective Date and end
on December 31, 2021 unless earlier terminated as provided herein. However, on December 31, 2020, and each
December 31 thereafter, the term of this Agreement shall be renewed and extended by one year, unless Employee
or the Corporation gives notice to the other in writing, at least 90 days prior to the applicable December 31, that
the term shall not be renewed and extended, such that, absent such notice of non-extension, the extended term of
this Agreement on December 31, 2020, or the applicable anniversary thereof, shall be two (2) years. References in
this Agreement to the "Term" shall mean the initial term of this Agreement and any renewal or extension thereof
Section 3. Exclusive Service Employee shall devote his best efforts and full business time to rendering
services on behalf of the Corporation in furtherance of its best interests. Employee shall comply with all policies,
standards and regulations of the Corporation now or hereafter promulgated and shall perform his duties under this
Agreement to the best of his abilities and in accordance with standards of conduct applicable to officers of banks.
Section 4. Compensation and Benefits
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(a)
As compensation while employed hereunder, Employee, during his faithful performance of
this Agreement, in whatever capacity rendered, shall receive an annual base salary of $250,000.00, payable in
accordance with the normal payroll procedures and schedule of the Corporation, but no less frequently than
monthly. The Board of Directors of the Corporation (or the appropriate committee thereof), in its discretion, may
increase (but not decrease, unless Employee provides written consent to such decrease) Employee's base salary
during the Term. The amount of such annual base salary from time to time is referred to herein as the "Base
Salary." Except as otherwise expressly set forth hereunder, no compensation shall be paid pursuant to this
Agreement in respect of any month or portion thereof subsequent to any termination of Employee's employment
by the Corporation.
(b)
Corporate Benefit Plans Employee shall be entitled to participate in or become a participant
in all cash and non-cash employee benefit plans maintained by the Corporation for its officers, subject to the terms
and conditions of any such plans and to the Corporation's right to amend or terminate such plans.
(c)
Bonuses Employee shall receive only such bonuses as the Board of Directors of the
Corporation, in its discretion, decides to pay to Employee. In addition, the Corporation will pay to Employee a
signing bonus in the gross amount of $15,000.00 (the "Signing Bonus"), payable on the first regular payroll date
that falls on or after his first day of employment with the Bank.
(d)
Expense Account The Corporation shall reimburse Employee for reasonable and customary
business expenses incurred in the conduct of the Corporation's business while he is employed hereunder. Such
expenses will include business meals, out-of-town lodging and travel expenses and other items identified in
written rules and policies of the Corporation. Employee agrees to timely submit records and receipts of
reimbursable items and agrees that the Corporation can adopt reasonable rules and policies regarding such
reimbursement. The Corporation agrees to make prompt payment to Employee following receipt and verification
of such reports. No reimbursement provided under this Section 4(d) during one calendar year shall affect the
expenses eligible for reimbursement during another calendar year.
(e)
Paid Time Off Employee shall be entitled to the same paid time off policies as the Board of
Directors of the Corporation may from time to time designate for all similarly situated full-time senior executive
officers of the Corporation.
(f)
Relocation Employee will receive relocation assistance in the gross amount of $20,000.00 (the
"Relocation Assistance") to assist Employee with the expenses of his relocation in connection with employment
with the Bank. The Relocation Assistance will be paid to Employee within thirty (30) days after Employee has
relocated his principal residency to the market area of the Bank, provided Employee is employed by the Bank
on the date of such relocation. Notwithstanding the foregoing or any other provision of this Agreement,
Employee shall have no right to receive payment under this Section 4(f) on or after the date of Employee's
resignation without Good Reason or Employee's termination for Cause (each event as defined herein).
(g)
Automobile; Cell Phone While he is employed hereunder, the Corporation shall provide
Employee with the use of a Bank-owned automobile and with a cell phone allowance, each in accordance with
policies of the Corporation as may be adopted or as in effect from time to time.
(h)
Country Club Membership While he is employed hereunder, the Corporation shall pay
Employee's reasonable initiation fee, if any, at a country club in the Corporation's market area and Employee's
annual membership fees at such club, and shall reimburse Employee for reasonable business-related expenses
incurred at such club.
(i)
Clawback If Employee's employment with the Corporation terminates for any reason other
than death or disability (as defined below) within 24 months of his first day of employment with the Corporation,
he will be responsible for repayment of 100% of the gross amount of the each of the Relocation Assistance and
the Signing Bonus.
Section 5. Termination
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(a)
Notwithstanding the termination of Employee's employment pursuant to any provision of this
Agreement, the parties shall be required to carry out any provisions of this Agreement which contemplate
performance by them subsequent to such termination. In addition, no termination shall affect any liability or other
obligation of any party which shall have accrued prior to such termination, including, but not limited to, any
liability, loss or damage on account of breach. No termination of employment shall terminate the obligation of
the Corporation to make payments of any vested benefits provided hereunder or the obligations of Employee
under Sections 6, 7 and 8.
(b)
Employee's employment hereunder may be terminated by Employee upon two weeks written
notice to the Corporation or at any time by mutual agreement in writing. Upon such termination of employment,
Employee shall have no right to receive compensation or other benefits under this Agreement for any period after
such termination. Upon notice of such termination of employment, the Corporation, at its option, may relieve
Employee of all duties.
(c)
This Agreement shall terminate upon death of Employee; provided, however, that in such
event the Corporation shall pay to the estate of Employee the compensation including salary and accrued bonus,
if any, which otherwise would be payable to Employee through the end of the month in which his death occurs.
(d)
(1) The Corporation may terminate Employee's employment other than for "Cause", as
defined in Section 5(e), at any time upon written notice to Employee, which termination shall be effective
immediately. Employee may resign thirty (30) days after notice to the Corporation for "Good Reason", as defined
in Section 5(d)(4), subject to the following. Employee must provide written notice to the Corporation of the
existence of the event or condition constituting such Good Reason within ninety (90) days of the initial
occurrence of the event or condition alleged to constitute Good Reason. Upon delivery of such notice, the
Corporation shall have a period of thirty (30) days during which it may remedy in good faith the event or
condition constituting Good Reason, and Employee's employment shall continue in effect during such time so
long as the Corporation is making diligent efforts to cure. In the event the Corporation shall remedy in good faith
the event or condition constituting Good Reason, as determined by the Employee's good faith and reasonable
judgment, then such notice of termination shall be null and void, and the Corporation shall not be required to
pay the amount due to Employee under this Section 5(d) (or under Section 5(i), if applicable.) In the event
Employee's employment terminates pursuant to this Section 5(d), provided the Employee signs a release and
waiver of claims in a form satisfactory to the Corporation, which the Corporation shall provide to Employee no
later than the date of termination (the "Release"), and the Release has become effective within thirty (30) days
of Employee's date of termination:
(i) Employee shall continue to receive his Base Salary at the rate in effect immediately
preceding such termination, for the number of months remaining in the Term or, if greater, 12 months (the
"Severance Period"), such payments to be made at the times such payments would have been made in accordance
with Section 4(a);
(ii) Employee shall receive any bonus or other short-term incentive compensation
earned, but not yet paid, for the calendar year prior to the calendar year in which his employment terminates which
shall be paid within thirty (30) days of Employee's date of termination; and
(iii) Employee shall receive a welfare continuance benefit in an amount equal to (x)
twelve (12) times (y) the excess of the premium that would apply as of Employee's date of termination for
continued health, dental and vision coverage for Employee and his "qualified beneficiaries" (as defined in
Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code")), if COBRA continuation were
elected for such coverage, over the amount that Employee paid for such coverage immediately before the
termination of his employment (the "Welfare Continuance Benefit"). Employee may use the Welfare
Continuance Benefit, as Employee wishes, including for payment of insurance premiums. The Welfare
Continuance Benefit will be paid in a lump sum cash payment within thirty (30) days of Employee's date of
termination.
(2) Notwithstanding anything in this Agreement to the contrary:
receive any further compensation or benefits pursuant to this Section S(d); and
(i)
If Employee breaches Section 6 or 7, Employee will not thereafter be entitled to
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(ii)
If, while he is receiving payments under this Section 5(d), Employee engages in
conduct described in Section 7 and in Section 1 of the Restrictive Agreement (as defined below), such payments
will cease and he will not thereafter be entitled to receive any compensation or benefits pursuant to this Section
S(d) even though such conduct occurs after the covenants contained in Section 7 and in Section 1 of the Restrictive
Agreement have expired.
(3) Except as set forth in Section 5(d)(2), upon the timely execution and non- revocation of
the Release, the Corporation's obligation to pay Employee the compensation provided in Section 5(d)(l) shall be
absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone
else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any
part of such payment from Employee or from whosoever may be entitled thereto, for any reason whatsoever.
Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise.
(4) For purposes of this Agreement, "Good Reason" shall mean:
in Section 1;
(i) A material diminution in Employee's authority, duties, or responsibilities as set forth
under Section 2 of this Agreement;
(ii) A notice of non-renewal/non-extension of this Agreement given by the Corporation
location of Employee's principal office as of the Effective Date;
(iii) Requiring Employee to maintain his principal office more than 30 miles from the
(iv) The failure of the Corporation to provide Employee with either substantially the
same fringe benefits as provided to him at the inception of this Agreement or with fringe benefits at least as
favorable, in the aggregate, as fringe benefits generally available to senior executive officers of the Corporation;
(v) The Corporation's failure to comply with any material term of this Agreement,
provided that Employee agrees it shall not constitute a failure to comply with a material term of this Agreement
if Employee's title as set forth in Section l(a) is changed by the Corporation or the Bank; or
perform this Agreement by any successor as contemplated in Section 9 hereof
(vi) The failure of the Corporation to obtain the assumption of and agreement to
(e)
The Corporation shall have the right to terminate Employee's employment under this
Agreement at any time for Cause, as defined herein, which termination shall be effective immediately.
Termination for "Cause" shall mean termination for Employee's personal dishonesty, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties of
Employee's position, willful violation of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, conviction of a felony or of a misdemeanor involving moral
turpitude, misappropriation of the Corporation's assets (determined on a reasonable basis) or those of its
Affiliates, material violation of the Corporation's work rules or policies, material breach of any other provision
of this Agreement, or the material omission or neglect in the performance of stated duties of Employee's
position that has caused or is reasonably likely to cause material :financial or reputational injury to the
Corporation, in each case which is not remedied by Employee (if reasonably capable of remedy) within
thirty (30) days after the date the Corporation provides written notice to Employee of a detailed basis for
such alleged event of Cause. In the event Employee's employment under this Agreement is terminated for
Cause, Employee shall thereafter have no right to receive compensation or other benefits under this Agreement.
(f)
The Corporation may terminate Employee's employment under this Agreement, by
reason of Employee's disability by giving to Employee written notice of its intention to terminate his
employment for disability and his employment shall terminate effective on the later to occur of the ninetieth
(90th) day thereafter or the date all accrued time off (sick, vacation, personal) has been expended (the
"Period") if within the Period Employee shall fail to return to the full-time performance of the essential
functions of his position (and if Employee's disability has been established pursuant to the definition of
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"disability" set forth below). For purposes of this Agreement, "disability" means either (i) disability which
after the expiration of more than thirteen (13) consecutive weeks after its commencement is determined to
be total and permanent by a physician selected and paid for by the Corporation or its insurers, and reasonably
acceptable to Employee or his legal representative or (ii) disability as defined in the policy of disability
insurance maintained by the Corporation or its Affiliates for the benefit of Employee, whichever shall be
more favorable to Employee. Notwithstanding any other provision of this Agreement, the Corporation shall
comply with all requirements of the Americans with Disabilities Act, 42
U.S.C. § 12101 et seq.
(g)
If Employee is suspended and/or temporarily prohibited from participating in the conduct
of the Corporation's affairs by a notice served pursuant to the Federal Reserve Act, the Bank Holding
Company Act of 1956 or the Federal Deposit Insurance Act or the Code of Virginia, each as amended, the
Corporation's obligations under this Agreement shall be suspended as of the date of service unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the Corporation may in its discretion
(i) pay Employee all or part of the compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended with any such
payment made by March 15 following the calendar year in which such charges are dismissed.
(h)
If Employee is removed and/or permanently prohibited from participating in the conduct of
the Corporation's affairs by an order issued under the Federal Reserve Act, the Bank Holding Company Act of
1956 or the Federal Deposit Insurance Act or the Code of Virginia, each as amended, all obligations of the
Corporation under this Agreement, and Employee's obligations under Section 1 of the Restrictive Agreement
(as defined below), shall terminate as of the effective date of the order, but vested rights of the parties shall not
be affected.
(i)
(1) If Employee's employment is terminated without Cause or if he resigns for Good Reason
within one year after a Change of Control shall have occurred, then, provided the Employee signs the Release,
and the Release has become effective within thirty (30) days of Employee's date of termination, then on or within
thirty (30) days following Employee's last day of employment with the Corporation, the Corporation shall pay
to Employee a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld)
equal to: (A) the Welfare Continuance Amount, but determined by substituting 24 months for 12 months: plus
(B) 2.99 times (x) Employee's Base Salary at the rate in effect (i) on the date of termination or, if greater, (ii)
immediately prior to the Change of Control, plus (y) Employee's target annual bonus, or, if greater, actual
annual bonus for the most recent fiscal year of the Corporation (i) that ends prior to Employee's termination
or, if greater, (ii) that ends prior to the Change of Control. The amount payable under this Section 5(i)(l) shall
be in lieu of any amount payable to Employee under Section 5(d)(i).
(2) For purposes of this Agreement, a Change of Control occurs if, after the date of this
Agreement, (i) any person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, becomes the owner or beneficial owner of F & M Bank Corp. (the "Holding Company") securities having
50% or more of the combined voting power of the then outstanding Holding Company securities that may be
cast for the election of the Holding Company's directors other than a result of an issuance of securities initiated
by the Holding Company, or open market purchases approved by the Holding Company's Board of Directors as
long as the majority of the Holding Company's Board of Directors approving the purchases is a majority at the
time the purchases are made; or (ii) as the direct or indirect result of, or in connection with, a tender or exchange
offer, a merger or other business combination, a sale of assets, a contested election of directors, or any
combination of these events, the persons who were directors of the Holding Company before such events cease
to constitute a majority of the Holding Company's Board of Directors, or any successor's board, within one year
of the last of such transactions. For purposes of this Agreement, a Change of Control occurs on the date on which
an event described in (i) or (ii) occurs. If a Change of Control occurs on account of a series of transactions or
events, the Change of Control occurs on the date of the last to occur of such transactions or events.
(3)
It is the intention of the parties that no payment be made or benefit provided to Employee
pursuant to this Agreement that would constitute an "excess parachute payment" within the meaning of Section
280G of the Code and any regulations thereunder, thereby resulting in a loss of an income tax deduction by
the Corporation or the imposition of an excise tax on Employee under Section 4999 of the Code. If the
independent accountants serving as auditors for the Corporation immediately prior to the date of a Change of
Control (or any other accounting firm designated by the Corporation prior to the Change of Control) determine
that some or all of the payments or benefits scheduled under this Agreement, together with any other
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payments or benefits to which Employee is entitled under this Agreement or otherwise, would be
nondeductible by the Corporation under Section 280G of the Code or result in an excise tax under Section 4999
of the Code, then the payments scheduled under this Agreement will be reduced to one dollar less than the
maximum amount which may be paid without causing any such payment or benefit to be nondeductible or
subject to such excise tax. The determination made as to the reduction of benefits or payments required
hereunder by the independent accountants shall be binding on the parties.
(j)
Effective upon Employee's termination of employment for any reason, Employee shall be
deemed to have resigned from all positions that Employee holds as an officer, employee, or member of the Board
of Directors (or committee thereof) of the Corporation or any of its Affiliates.
Section 6. Confidentiality/Nondisclosure and Return of Property
(a)
For and in consideration of the promises set forth herein, including without limitation Section
5(d) and Section S(i), Employee has executed as of the date hereof, and affirms and agrees to the covenants and
agreements set forth in, that certain Non-Competition and Confidentiality Agreement by and between Employee
and the Bank, the form of which is attached hereto as Exhibit A and which is incorporated herein by reference
(the "Restrictive Agreement"), including without limitation Section 3 thereof. Upon termination of employment
for any reason, Employee shall deliver to the Corporation all originals and copies of documents, forms, records
or other information, in whatever form it may exist, concerning the Corporation, its Affiliates, or the business,
customers, products or services of the Corporation or any Affiliate.
(b)
The following notice is provided pursuant to 18 U.S.C. § 1833: The U.S. Defense of Trade
Secrets Act provides civil and criminal immunity to certain whistleblowers for the confidential disclosure of
trade secrets (i) to relevant federal government officials or an engaged attorney, when such disclosure is made
solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a document filed under
seal in a lawsuit or other proceeding.
Section 7. Non-Competition and Non-Solicitation Employee affirms and agrees to the covenants and
agreements set forth in the Restrictive Agreement, including without limitation Sections 1 and 2 thereof.
Section 8. Injunctive Relief, Damages, Etc Employee affirms and agrees to the covenants and agreements set
forth in the Restrictive Agreement, including without limitation Sections 1 and 4 thereof.
Section 9. Binding Effect/Assignability This Agreement shall be binding upon and inure to the benefit of the
Corporation and Employee and their respective heirs, legal representatives, executors, administrators, successors
and assigns, but neither this Agreement, nor any of the rights hereunder, shall be assignable by Employee or any
beneficiary or beneficiaries designated by Employee. The Corporation will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business, stock or
assets of the Corporation, by agreement in form and substance reasonably satisfactory to Employee, to expressly
assume and agree to perform this Agreement in its entirety. Failure of the Corporation to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement,
"Corporation" shall include any successor to its business, stock or assets as aforesaid which executes and delivers
the agreement provided for in this Section 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
Section 10. Governing Law: Exclusive Forum This Agreement shall be subject to and construed in
accordance with the laws of the Commonwealth of Virginia. The sole and exclusive forum for any legal action
arising out of, or relating in any way to, this Agreement will be the Circuit Court for the County of Rockingham,
Virginia.
Section 11. Invalid Provisions The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the validity or enforceability of any other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provisions were omitted.
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Section 12. Notices Any and all notices, designations, consents, offers, acceptance or any other
communications provided for herein shall be given in writing and shall be deemed properly delivered if delivered
in person or by registered or certified mail, return receipt requested, addressed in the case of the Corporation to its
registered office or in the case of Employee to his last known address.
Section 13. Entire Agreement
(a)
This Agreement, as amended and restated hereby, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in
writing, among the parties hereto with respect to the subject matter hereof, including the Original Agreement;
provided that the Restrictive Agreement is affirmed, and not superseded, as set forth herein.
(b)
This Agreement may be executed in one or more counterparts, each of which shall be
considered an original copy of this Agreement, but all of which together shall evidence only one agreement.
Section 14. Amendment and Waiver This Agreement may not be amended except by an instrument in writing
signed by or on behalf of each of the parties hereto. No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the person or party to be charged.
Section 15. Case and Gender Wherever required by the context of this Agreement, the singular or plural case
and the masculine, feminine and neuter genders shall be interchangeable.
Section 16. Captions The captions used in this Agreement are intended for descriptive and reference purposes
only and are not intended to affect the meaning of any Section hereunder.
Section 17. Section 409A This Agreement is intended to comply with Section 409A of the Code or an
exemption thereunder and each term hereof shall be construed and administered accordingly. Notwithstanding any
other provision of this Agreement, payments provided under this Agreement may only be made upon an event and
in a manner that complies with Section 409A of the Code or an applicable exemption. Any payments under this
Agreement that may be excluded from Section 409A of the Code either as separation pay due to an involuntary
separation from service or as a short-term deferral shall be excluded from Section 409A of the Code to the
maximum extent possible. For purposes of Section 409A of the Code, each payment under this Agreement,
including each installment payment under this Agreement, shall be treated as a separate payment. Any payments
to be made under this Agreement upon a termination of employment shall only be made upon a "separation from
service" under Section 409A of the Code. Notwithstanding the foregoing, the Corporation makes no representations
that the payments and benefits provided under this Agreement comply with Section 409A of the Code and in no
event shall the Corporation be liable for all or any portion of any taxes, penalties, interest or other expenses that
may be incurred by Employee on account of non-compliance with Section 409A of the Code.
Notwithstanding any other provision of this Agreement, if any payment or benefit provided to
Employee in connection with Employee's termination of employment is determined to constitute ''nonqualified
deferred compensation" within the meaning of Section 409A of the Code and Employee is determined to be a
"specified employee" as defined in Section 409A(a)(2)(b)(i) of the Code, then such payment or benefit shall not be
paid until the first payroll date to occur following the six-month anniversary of the date of termination or, if sooner,
the date of Employee's death (the "Specified Employee Payment Date"). The aggregate of any payments that would
otherwise have been paid before the Specified Employee Payment Date shall be paid to Employee in a lump sum
on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in
accordance with their original schedule.
Any payment under Section 5 of this Agreement that is determined to constitute "nonqualified
deferred compensation" within the meaning of Section 409A of the Code, and that is subject to a release's becoming
effective, and that would otherwise be paid in the first 30 days after your termination date shall be paid, if at all, on
such 30th day (subject to any required delay under the preceding paragraph) and any remaining payments shall be
made in accordance with their original schedule.
Payments with respect to reimbursements of expenses or in-kind benefits shall be paid or
provided in accordance with the Corporation's applicable policy or benefit plan, but in all events reimbursements
shall be paid no later than the 15th day of the third month of the calendar year following the calendar year in which
106
the relevant expense is incurred. To the extent required for compliance with Section 409A of the Code because the
right to reimbursement constitutes a deferral of compensation thereunder, the amount of expenses or benefits
eligible for reimbursement, payment or provision during a calendar year shall not affect the expenses or benefits
eligible for reimbursement or provision in any other calendar year.
Section 18. Withholding The Corporation shall withhold from any payments under this Agreement amounts
for state and federal income taxes, employment taxes, and such other payroll deductions as may from time to time
be required by law.
Section 19. Regulatory Prohibition Notwithstanding anything in this Agreement to the contrary, it is
understood and agreed that neither the Corporation nor the Bank (nor any of their respective successors in interest)
shall be required to make any payment or take any action under this Agreement if: (i) such payment or action is
prohibited by any governmental agency having jurisdiction over the Corporation or any of its subsidiaries (a
"Regulatory Authority") because the Corporation or any of its subsidiaries is determined by such Regulatory
Authority to be troubled, insolvent, in default or operating in an unsafe or unsound manner; or (ii) such payment or
action (A) would be prohibited by or would violate any provision of state or federal law applicable to the
Corporation or any of its subsidiaries, including, without limitation, the Federal Deposit Insurance Act and the
regulations thereunder presently found at 12 C.F.R. Part 359, as now in effect or hereafter amended, (B) would be
prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now
existing or hereafter promulgated, or any Regulatory Authority or (C) otherwise would be prohibited by any
Regulatory Authority. If any payment hereunder is found by any Regulatory Authority, after a full and fair
opportunity to be heard, to be in violation of the foregoing, any payment found to have been made in violation of
the foregoing shall be immediately returned by Employee to the Corporation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above
written.
F&M BANK CORP.
By:_____________________________
Name: Mark C. Hanna
Title: President and Chief Executive Officer
FARMERS & MERCHANTS BANK
By:_____________________________
Name: Mark C. Hanna
Title: President and Chief Executive Officer
EMPLOYEE
_______________________________
F. Garth Knight
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statements No. 333-16075 on Form S-3 and No. 333-
244322 and No. 333-159074 on Form S-8 of F&M Bank Corp. and Subsidiaries of our report dated March 10, 2022,
relating to the consolidated financial statements, appearing in the Annual Report on Form 10-K of F&M Bank Corp. and
Subsidiaries for the year ended December 31, 2021.
/s/ Yount, Hyde & Barbour, P.C.
Roanoke, Virginia
March 10, 2022
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Exhibit 31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 USC Section 1350 (A) and (B)
I, Mark C. Hanna, certify that:
1.
I have reviewed this annual report on Form 10-K of F & M Bank Corp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and as of a date within 90 days prior to the
filing date of this quarterly report (the “Evaluation Date”); and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal controls over financial reporting.
Date: March 10, 2022
/s/ Mark C. Hanna
Mark C. Hanna
Chief Executive Officer
A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been
provided to F & M Bank Corp. and will be retained by F & M Bank Corp. and furnished to the Securities and Exchange
Commission or its staff upon request.
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Exhibit 31.2
CERTIFICATION
CHIEF FINANCIAL OFFICER
Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 USC Section 1350 (A) and (B)
I, Carrie A. Comer, certify that:
1.
I have reviewed this annual report on Form 10-K of F & M Bank Corp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and as of a date within 90 days prior to the
filing date of this quarterly report (the “Evaluation Date”); and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal controls over financial reporting.
Date: March 10, 2022
/s/ Carrie A. Comer
Carrie A. Comer
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been
provided to F & M Bank Corp. and will be retained by F & M Bank Corp. and furnished to the Securities and Exchange
Commission or its staff upon request.
110
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the Annual Report of F & M Bank Corp. (the “Company”) on Form 10-K for the period ending
December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 that based on their knowledge and belief: 1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company as of and for the periods covered in the Report.
/s/ Mark C. Hanna
Mark C. Hanna
Chief Executive Officer
/s/ Carrie A. Comer
Carrie A. Comer
Executive Vice President & Chief Financial Officer
March 10, 2022
111