F & M Bank Corp. Announces Earnings

TIMBERVILLE, VA / ACCESSWIRE / January 31, 2020 / F & M Bank Corp. (OTCQX:FMBM), parent company of Farmers & Merchants Bank, announces its financial results for the fourth quarter and year ended December 31, 2019.

Selected highlights for the quarter and year to date include:

  • Net income of $1.9 million and $4.6 million, respectively;
  • Non-performing assets decreased $2.43 million during the fourth quarter and $5.43 million year to date;
  • Net interest margin 3.81% and 4.33%. respectively;
  • Total deposits increased $23.3 million and $50.4 million, respectively for the quarter and year to date.

Mark Hanna, President, commented, “We are pleased to announce fourth quarter and year-to-date earnings of $1.9 million and $4.6 million, respectively. Although these results are lower than prior year, we made great progress in positioning F&M Bank for continued success by substantially reducing our Non-performing assets and growing Core deposit relationships. It is important to note that Fourth Quarter earnings were reduced by several non-recurring items related to dealer deferred cost amortization, pension costs and severance benefits. Our margin decreased as a result of lower loan balances due primarily to sales of indirect dealer loans which occurred during the second half of the year and unrecognized dealer loan costs. Our provision for loan losses increased in 2019 due to higher levels of substandard loans and identification of problem credits. We feel the allowance for loan losses reflects the current risk in our loan portfolio. As we push into 2020, we feel that we are well positioned to leverage our surplus liquidity with organic loan growth and continued improvement in reducing our funding costs.

Hanna continued, “During the fourth quarter we made significant progress in addressing our problem assets. Previously we had announced that two large loans were placed on non-accrual during the second quarter, resulting in our significant allowance for loan loss funding in the first half of the year. During the fourth quarter we were successful in collecting on one of these loans and we recognized a partial write-down on the other based on the appraised value and continued payment delinquency. As a result of these and other collection efforts our problem assets decreased from $17.3 million to $12.6 million.” Highlights of our financial performance are included below.

Restatement of 2018 Financial Statements: In November 2019, as a result of the sale of a portion of the Bank’s indirect dealer loan accounts, management discovered a system input error that prevented the deferred costs associated with dealer loans originated after a certain date from amortizing properly. This error in accounting resulted in a restatement of calendar year 2018 earnings of $261,728, net of tax and a correction of $248,090, net of tax for years prior to 2018 which is reflected as a reduction to retained earnings in the restated 2018 consolidated financial statements. The 2019 earnings properly reflect the amortization, which resulted in reduction of earnings of $184,890, net of tax.

F & M Bank Corp. is an independent, locally-owned, financial holding company, offering a full range of financial services, through its subsidiary, Farmers & Merchants Bank’s fourteen banking offices in Rockingham, Shenandoah, Page and Augusta Counties, Virginia. The Bank also provides additional services through a loan production office located in Penn Laird, VA and through its subsidiaries, VBS Mortgage, LLC (DBA F&M Mortgage) and VSTitle, LLC located in Harrisonburg, VA. Additional information may be found by contacting us on the internet at www.fmbankva.com or by calling (540) 896-8941.

This press release may contain “forward-looking statements” as defined by federal securities laws, which may involve significant risks and uncertainties. These statements address issues that involve risks, uncertainties, estimates and assumptions made by management, and actual results could differ materially from the results contemplated by these forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: interest rates, general economic conditions, legislative and regulatory policies, and a variety of other matters. Other risk factors are detailed from time to time in our Securities and Exchange Commission filings. Readers should consider these risks and uncertainties in evaluating forward-looking statements and should not place undue reliance on such statements. We undertake no obligation to update these statements following the date of this press release.

F&M Bank Corp.
Key Statistics

 
        2019     2018 (restated)  
 
    Q4       Q3       Q2       Q1     YTD     YTD  
Net Income (000’s)
  $ 1,879     $ (186 )   $ 1,634     $ 1,287     $ 4,614     $ 8,823  
Net Income available to Common
  $ 1,800     $ (265 )   $ 1,556     $ 1,208     $ 4,299     $ 8,410  
Earnings per common share – basic
  $ 0.57     $ (0.08 )   $ 0.48     $ 0.38     $ 1.35     $ 2.60  
Earnings per common share – diluted
                                    1.33       2.45  
                                                 
Return on Average Assets
    0.92 %     -0.09 %     0.83 %     0.67 %     0.58 %     1.15 %
Return on Average Equity
    8.18 %     -0.81 %     7.12 %     5.68 %     5.04 %     9.67 %
Dividend Payout Ratio excluding Special Dividend
    45.61 %     -325.00 %     52.08 %     65.79 %     75.56 %     38.46 %
Dividend Payout Ratio with Special Dividend
                                            46.15 %
 
                                               
Net Interest Margin
    3.81 %     4.39 %     4.47 %     4.67 %     4.33 %     4.65 %
Yield on Average Earning Assets
    4.77 %     5.35 %     5.42 %     5.54 %     5.27 %     5.35 %
Yield on Average Interest Bearing Liabilities
    1.33 %     1.34 %     1.33 %     1.21 %     1.30 %     1.02 %
Net Interest Spread
    3.44 %     4.01 %     4.09 %     4.33 %     3.97 %     4.33 %
 
                                               
Provision for Loan Losses (000’s)
  $ 605     $ 3,750     $ 1,600     $ 1,450     $ 7,405     $ 2,930  
Net Charge-offs
  $ 1,198     $ 817     $ 483     $ 1,757     $ 4,255     $ 3,735  
Net Charge-offs as a % of Loans
    0.79 %     0.52 %     0.30 %     1.09 %     0.71 %     0.58 %
Non-Performing Loans (000’s)
  $ 5,728     $ 7,978     $ 11,688     $ 10,587     $ 5,728     $ 10,205  
Non-Performing Loans to Total Assets
    0.70 %     0.98 %     1.45 %     1.36 %     0.70 %     1.31 %
Non-Performing Assets (000’s)
  $ 7,217     $ 9,649     $ 13,657     $ 12,761     $ 7,217     $ 12,648  
Non-Performing Assets to Assets
    0.89 %     1.19 %     1.69 %     1.64 %     0.89 %     1.62 %
 
                                               
Efficiency Ratio
    74.97 %     67.63 %     65.32 %     67.15 %     68.73 %     66.04 %
  1. The net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent interest income is calculated by grossing up interest income for the amounts that are nontaxable (i.e. municipal securities and loan income) then subtracting interest expense. The tax rate utilized is 21%. The Company’s net interest margin is a common measure used by the financial service industry to determine how profitable earning assets are funded. Because the Company earns nontaxable interest income from municipal loans and securities, net interest income for the ratio is calculated on a tax equivalent basis as described above.
  2. The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. The efficiency ratio is a common measure used by the financial services industry to determine operating efficiency. It is calculated by dividing non-interest expense by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio. The Company calculates this ratio in order to evaluate how efficiently it utilizes its operating structure to create income. An increase in the ratio from period to period indicates the Company is losing a greater percentage of its income to expenses.

F & M Bank Corp.
Financial Highlights

 
 
For Twelve Months
Ended December 31,
 
INCOME STATEMENT
 
Unaudited
2019
   
2018*
(restated)
 
Interest and Dividend Income
  38,210,304     36,376,657  
Interest Expense
    6,818,488       4,832,063  
Net Interest Income
    31,391,816       31,544,594  
Non-Interest Income
    9,919,954       8,003,003  
Provision for Loan Losses
    7,405,000       2,930,000  
Other Non-Interest Expenses
    29,392,237       26,743,762  
Income Before Income Taxes
    4,514,533       9,873,835  
(Benefit of) provision for Income Taxes
    (229,340 )     1,040,596  
Less Minority Interest income
    130,276       10,050  
Net Income
  4,613,597     8,823,189  
Dividend on preferred stock
    314,589       413,191  
Net Income available to common shareholders
  4,299,008     8,409,998  
Average Common Shares Outstanding
    3,189,288       3,238,177  
Net Income Per Common Share – Basic
    1.35       2.60  
Net Income Per Common Share – Diluted
    1.33       2.45  
Dividends Declared
    1.02       1.20  
 
               
BALANCE SHEET
 
Unaudited
December 31, 2019
   
Audited
December 31, 2018
(restated)
 
Cash and Due from Banks
  8,118,889     9,521,741  
Interest Bearing Bank Deposits
    1,125,616       1,390,181  
Federal Funds Sold
    66,559,096        
Loans Held for Sale
    66,798,436       55,909,812  
Loans Held for Investment
    603,425,471       638,798,885  
Less Allowance for Loan Losses
    (8,389,846 )     (5,239,699 )
Net Loans Held for Investment
    595,035,625       633,559,186  
Securities
    18,015,488       21,843,918  
Other Assets
    58,324,549       57,518,624  
Total Assets
  813,977,699     779,743,462  
 
               
Deposits
  641,709,480     591,325,319  
Short Term Debt
    10,000,000       40,116,000  
Long Term Debt
    53,200,675       40,218,073  
Other Liabilities
    17,387,561       16,682,537  
Total Liabilities
    722,297,716       688,341,929  
Stockholders’ Equity
    91,679,983       91,401,533  
Total Liabilities and Stockholders’ Equity
  813,977,699     779,743,462  
Book Value Per Common Share
  27.14     26.68  
Tangible Book Value Per Common Share
  26.98     26.75  

*Derived from audited consolidated financial statements, as restated

CONTACT: Carrie Comer, EVP/Chief Financial Officer

540-896-8941 or ccomer@FMBankVA.com

SOURCE: F & M Bank Corp.

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