F & M Bank Corp. Announces Second Quarter 2022 Earnings And Dividend

TIMBERVILLE, VA / ACCESSWIRE / July 28, 2022 / F & M Bank Corp. (OTCQX:FMBM), parent company (the Company) of Farmers & Merchants Bank today reported earnings for quarter ending June 30, 2022.

Mark Hanna, President, commented “ F&M Bank had earnings of $1.8 million in the second quarter of 2022 which were driven by strong loan demand within our Shenandoah Valley Communities. Loans outstanding grew $32 million in the past quarter as we continue to build a solid pipeline of future opportunities. Given challenging economic and market conditions, we strive to maintain our disciplined approach to growth, pricing and underwriting. Our investment portfolio continues to contribute meaningfully to earnings and our deposits growth has leveled off with a slight decline during the quarter. While we did add $600 thousand to our provision for loan losses this quarter due to the loan growth and economic uncertainty, our core operating earnings are strong and growing. The strategic focus of developing our team, improving our infrastructure, and maintaining our asset quality while developing lasting relationships in our community continues to position F&M for future success.”

Selected financial highlights include:

  • Net income of $1.8 million for the quarter ended June 30, 2022.
  • Total deposit decreases of $12 million (1.09%), increases of $20.0 million (1.84%) and increases of $144.9 million (15.16%), respectively for the quarter, year to date and for the trailing twelve months.
  • Loans held for investment increase of $32.3 million (4.92%), $35.3 million (5.40%) and $51.6 million (8.08%), respectively for the quarter, year to date and for the trailing twelve months (excluding PPP loans).
  • Nonperforming loans as a percent of total assets decreased to .15% from .45% at year end and .50% on June 30, 2021.
  • Provision for loan losses of $600 thousand for the quarter and $150 thousand year to date.
  • Allowance for loan losses of 1.12% of loans held for investment, excluding PPP.

BALANCE SHEET

Loans

Loans held for investment; net of PPP have grown 8.08% since June 30, 2021, and 9.97% since December 31, 2021. The Agriculture, C&I, CRE and dealer portfolios have experienced growth throughout the quarter and year to date, while the Company has seen a reduction in consumer loans specifically in the 1-4 family residential loan area.

(dollars in thousands)
6/30/2022 12/31/2021 Change 6/30/2021 Change
Commercial
$ 311,126 $ 286,500 $ 24,626 $ 277,475 $ 33,651
Agriculture
91,269 81,879 9,390 74,205 17,064
Dealer
119,758 107,346 12,412 101,435 18,323
Consumer
164,771 173,556 (8,785 ) 179,993 (15,222 )
Other
2,901 5,205 (2,304 ) 5,119 (2,218 )
Loans held for Investment, net of PPP
$ 689,825 $ 654,486 $ 35,339 $ 638,227 $ 51,598

Investments

The Company has continued to leverage excess funds into the available for sale (AFS) investment portfolio in the second quarter of 2022. Since the beginning of the year, the investment portfolio has gown $42.9 million to $447 million. The portfolio is a strong mix of U.S. Treasuries, Agencies, Mortgaged-backed securities, Municipals, and corporate bonds. The average tax equivalent yield on the portfolio is 1.67% which has equated to $2.0 million in income compared to $536 thousand in the same period last year.

AFS INVESTMENT PORTFOLIO

($000s)
6/30/22 12/31/21 Change 6/30/21 Change
US Treasury
$ 46,737 $ 29,482 $ 17,255 $ 29,406 $ 17,331
Agency
156,148 133,714 $ 22,434 24,735 $ 131,413
Mortgage Backed Securities
171,031 183,647 $ (12,616 ) 91,426 $ 79,605
Municipals
43,686 34,337 $ 9,349 29,332 $ 14,354
Corporates
29,221 22,702 $ 6,519 13,755 $ 15,466
Total Securities
$ 446,823 $ 403,882 $ 42,941 $ 188,654 $ 258,169
Securities Quarterly Income
$ 1,970 $ 1,102 $ 868 $ 536 $ 1,434

Deposits

During the second quarter of 2022, the Company experienced a slight decline in deposits. However, growth for the year is 1.84%. The Company continues to strategically focus on building primary banking relationships which is reflected in the $11 million growth in noninterest bearing accounts.

DEPOSIT PORFOLIO

(dollars in thousands)
6/30/22 12/31/21 Change 6/30/21 Change
Non Interest. Bearing
$ 291,728 $ 280,993 $ 10,735 $ 269,618 $ 22,110
NOW & Other Transactional
193,037 191,969 1,068 150,323 42,714
Money market and Savings
500,108 483,476 16,632 403,714 96,394
Certificates of deposit
115,337 123,857 (8,520 ) 131,689 (16,352 )
Total Deposits
$ 1,100,210 $ 1,080,295 $ 19,915 $ 955,344 $ 144,866
1.84 15.16

Asset Quality

Nonperforming loans as a percent of total assets (net of PPP) continue to decline from 0.50% on June 30, 2021, to 0.15% on June 30, 2022. Classified loans declined from the previous twelve months from 9.14% to 6.82%, respectively (net of PPP). The Company did experience a slight increase in delinquencies from 0.37% on June 30, 2021, to 0.59% at June 30, 2022 with the majority of the increase in the 30-59 days.

(000’s)
6/30/2022 12/31/2021 6/30/2021
Non-performing Loans
Non-accrual loans
$ 1,851 $ 5,465 $ 5,532
Over 90 & on Accrual
55 43
Total Non-performing Loans
$ 1,906 $ 5,508 $ 5,532
NPL As A % of Total Assets, net of PPP
0.15 % 0.45 % 0.50 %
Watch Total
$ 31,663 $ 24,140 $ 36,406
As A % Of Loans, net of PPP
4.56 % 3.67 % 5.65 %
Substandard Total
$ 15,738 $ 19,713 $ 22,423
As A % Of Loans, net of PPP
2.27 % 2.99 % 3.48 %
Total Watch List
$ 47,401 $ 43,853 $ 58,829
Total Classified As A % of Total Loans, net of PPP
6.82 % 6.66 % 9.14 %
Past Due Loans
30-59 Days Past Due
$ 3,304 $ 2,751 $ 1,640
60-89 Days Past Due
762 432 716
90+ Days Past Due
41 43
Total Past Due Loans
$ 4,107 $ 3,226 $ 2,356
Deliquency %, net of PPP
0.59 % 0.49 % 0.37 %
Performing TDRs
Real estate
1,914 1,930 2,547
Commercial
2,082 2,826 2,167
HE
148 669
Other
86 95 831

Allowance for Loan and Lease Losses

The allowance for loan losses as a percentage of loans held for investment, net of PPP has declined from 1.35% on June 30, 2021, to 1.12% on June 30, 2022. This decline has been driven by improved asset quality as evidenced by the decline in nonperforming assets and classified loans. Uncertainty in the economy related to the war in Ukraine, inflation, supply chain issues, increase in past due loans, growth in the portfolio over the trailing twelve months and the increase in interest rates were all factored in the allowance for loan loss calculation resulting in a provision for loan losses of $600 for the quarter and $150 for the year.

Three months ended Six months ended
6/30/2022 3/31/2022 6/30/2021 6/30/2022 6/30/2021
(000’s)
Provision for Loan Losses
$ 600 $ (450 ) $ (1,250 ) $ 150 $ (1,975 )
Allowance for Loan and Leases Losses
$ 7,798 $ 7,389 $ 8,705 $ 7,798 $ 8,705
ALLL as a % of Loans Held for Investment, net of PPP
1.12 % 1.12 % 1.35 % 1.12 % 1.35 %

INCOME STATEMENT

Net Interest Income

Quarterly net interest income reflects growth of $1 million over first quarter and $1.3 million over June 30, 2021. This growth is attributed to the income produced by the investment portfolio that has continued to grow in the second quarter of 2022, increases in variable rate loan rates, growth in the loan portfolio and the lower cost of funds.

Margin compression has reduced the net interest margin from 3.12% on June 30, 2021, to 2.97% on June 30, 2022, however for the second consecutive quarter net interest margin increased from the December 31, 2021, margin of 2.82%. We are seeing the results of the Company’s efforts to mitigate compression by continuing to invest excess funds into securities with better yields and growth in the loan portfolio. The Company has also slightly reduced cost of funds since June 30, 2021, to 36 basis points through maintaining deposit rates and growth in noninterest bearing deposits.

F&M Bank Corp, Wednesday, July 27, 2022, Press release picture

Noninterest Income

Noninterest income of $2.4 million for the quarter is slightly lower than first quarter ($2.5 million) and a decline from June 30, 2021, which was $3.0 million. Mortgage originations have declined as rates have increased. As a result, the Company is focused on expanding mortgage originators into our newer markets and offering variable rate products to our mortgage customers. The Company is also continuing to utilize our title company and growing our wealth management division.

Noninterest expense

Focusing on infrastructure enhancements, developing our team and expanding into our newer markets has resulted in growth in noninterest expense of 3.6% in the trailing twelve months.

Paycheck Protection Program

The Company processed 1,080 Paycheck Protection Program (“PPP”) & CARES Act loans during 2020 and 2021 totaling $87.1 million. Fees associated with these loans are amortized over the life of the loan or recognized fully when repaid or forgiven. The Company holds $671 thousand in PPP loans as of June 30, 2022, and recognized $54 thousand in PPP fee income in the second quarter.

Dividends Declaration

On July 21, 2022, our Board of Directors declared a second quarter dividend of $.26 per share to common shareholders. Based on our most recent trade price of $25.48 per share this constitutes a 4.08% yield on an annualized basis. The dividend will be paid on August 29, 2022, to shareholders of record as of August 14, 2022.”

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 thirteen banking offices in Rockingham, Shenandoah, and Augusta Counties, Virginia and the city of Winchester, VA. The Bank also provides additional services through a loan production office located in Penn Laird, VA, a loan production office in Winchester, VA and through its subsidiaries, F&M Mortgage and VSTitle, both of which are located in Harrisonburg, VA. Additional information may be found by contacting us on the internet at www.fmbankva.com or by calling (540) 896-1705.

F & M Bank Corp.
Key Statistics

2022 2021
Q2 Q1 YTD Q2 Q1 YTD
Net Income (000’s)
$ 1,789 $ 2,528 $ 4,317 $ 3,220 $ 3,801 $ 7,021
Net Income available to Common
$ 1,789 $ 2,528 $ 4,317 $ 3,154 $ 3,736 $ 6,890
Earnings per common share – basic
$ 0.51 $ 0.74 $ 1.25 $ 0.98 $ 1.17 $ 2.15
Earnings per common share – diluted
$ $ $ $ 0.93 $ 1.11 $ 2.04
Return on Average Assets
0.58 % 0.83 % 0.76 % 1.22 % 1.56 % 1.39 %
Return on Average Equity
8.97 % 10.88 % 8.92 % 13.06 % 15.96 % 14.78 %
Dividend Payout Ratio
50.98 % 35.14 % 41.60 % 26.53 % 22.22 % 24.19 %
Net Interest Margin
3.15 % 2.82 % 2.97 % 3.13 % 3.44 % 3.27 %
Yield on Average Earning Assets
3.50 % 3.17 % 3.32 % 3.56 % 3.92 % 3.72 %
Yield on Average Interest Bearing Liabilities
0.48 % 0.49 % 0.49 % 0.62 % 0.70 % 0.66 %
Net Interest Spread
3.02 % 2.68 % 2.83 % 2.94 % 3.22 % 3.06 %
Provision for Loan Losses (000’s)
$ 600 $ (450 ) $ 150 $ (1,250 ) $ (725 ) $ (1,975 )
Net Charge-offs
$ 192 $ (92 ) $ 100 $ (272 ) $ 45 $ (227 )
Net Charge-offs as a % of Loans
0.03 % -0.01 % 0.02 % -0.16 % 0.03 % -0.03 %
Non-Performing Loans (000’s)
$ 1,906 $ 4,799 $ 1,906 $ 5,532 $ 5,783 $ 5,532
Non-Performing Loans to Total Assets
0.15 % 0.39 % 0.15 % 0.50 % 0.57 % 0.50 %
Non-Performing Assets (000’s)
$ 2,103 $ 4,799 $ 2,103 $ 5,532 $ 5,783 $ 5,532
Non-Performing Assets to Assets
0.17 % 0.39 % 0.17 % 0.50 % 0.57 % 0.50 %
Efficiency Ratio
75.73 % 78.68 % 77.14 % 76.07 % 68.00 % 72.00 %
  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 service 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 investments portfolio and Other Real Estate Owned. 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.

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.

Income Statement

Three months ended Six months ended
6/30/2022 Unaudited 3/31/2022 Audited 6/30/2021 Audited 6/30/2022 Unaudited 6/30/2021 Unaudited
(dollars in thousands)
Interest and Dividend Income
$ 10,009 $ 9,061 $ 8,819 $ 19,070 $ 17,566
Interest Expense
1,008 1,004 1,069 2,012 2,137
Net Interest Income
9,001 8,057 7,750 17,058 15,429
Non-Interest Income
2,368 2,483 3,086 4,851 6,441
Provision for Loan Losses
600 (450 ) (1,250 ) 150 (1,975 )
Loss on sale of securities
97 97
Impairment of long-lived assets
Other Non-Interest Expenses
8,752 8,550 8,444 17,302 16,130
Income Before Income Taxes
1,920 2,440 3,642 4,360 7,715
Provision for Income Taxes
131 (88 ) 422 43 693
Net Income
$ 1,789 $ 2,528 $ 3,220 $ 4,317 $ 7,022
Dividend on preferred stock
66 66
Net Income available to common shareholders
$ 1,789 $ 2,528 $ 3,154 $ 4,317 $ 6,956
Average Common Shares Outstanding
3,452,711 3,434,892 3,207,978 3,443,850 3,206,534
Net Income Per Common Share
$ 0.51 $ 0.74 0.98 $ 1.25 $ 2.15
Dividends Declared
$ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26

Balance Sheet

6/30/2022 Unaudited 12/31/2021 Audited Change 6/30/2021 Unaudited Change
(dollars in thousands)
Cash and Due from Banks
$ 13,636 $ 8,579 $ 5,057 $ 15,415 $ (1,779 )
Interest Bearing Bank Deposits
187 2,875 $ (2,688 ) 3,901 $ (3,714 )
Federal Funds Sold
3,430 76,667 $ (73,237 ) 166,698 $ (163,268 )
Loans Held for Sale
5,448 4,887 $ 561 8,855 $ (3,407 )
Loans Held for Investment
690,497 662,422 $ 28,075 660,956 $ 29,541
Less Allowance for Loan Losses
(7,798 ) (7,748 ) $ (50 ) (8,727 ) $ 929
Net Loans Held for Investment
682,699 654,674 $ 28,025 652,229 $ 30,470
Securities
456,635 413,217 $ 43,418 198,814 $ 257,821
Other Assets
59,517 58,443 $ 1,074 59,063 $ 454
Total Assets
$ 1,221,552 $ 1,219,342 $ 2,210 $ 1,104,975 $ 116,577
Deposits
1,100,210 1,080,295 $ 19,915 955,344 $ 144,866
Long Term Debt
11,788 21,772 $ (9,984 ) 31,310 $ (19,522 )
Other Liabilities
47,604 16,819 $ 30,785 18,109 $ 29,495
Total Liabilities
1,159,602 1,118,886 $ 40,716 1,004,763 $ 154,839
Preferred Stock
$ 4,558 $ (4,558 )
Common Equity
71,950 100,456 $ (28,506 ) 95,654 $ (23,704 )
Stockholders’ Equity
71,950 100,456 $ (28,506 ) 100,212 $ (28,262 )
Total Liabilities and Stockholders’ Equity
$ 1,231,552 $ 1,219,342 $ 12,210 $ 1,104,975 $ 126,577
Book Value Per Common Share
$ 21.01 $ 29.42 $ 29.80
Tangible Book Value Per Common Share
$ 20.06 $ 28.47 $ 29.98

CONTACT:
Carrie Comer EVP/Chief Financial Officer
540-896-1705 or ccomer@fmbankva.com

SOURCE: F & M Bank Corp.

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Bank With Us

Commercial Financing Best Practices for New Business in Shenandoah Valley

Launching a new business requires expert wrangling of multiple moving parts. Luckily F&M Bank is here to help you with the financial side of starting or growing your small business. Getting a small business loan in the Shenandoah Valley should not be complicated. F&M Bank’s friendly lending team is here to provide the information and insight that you need to obtain the best commercial financing for your sole proprietorship business in Virginia.

What is a business loan?

When a bank provides financing through a business loan, they are lending your business the money it needs in return for interest and fees. It is your responsibility as the business owner to make scheduled payments in order to return principle and interest to the bank over a set period of time. The business loan interest rate and length of the loan are typically determined based on the credit worthiness of the borrower and the type of loan.

 

Make sure your business name is available in Virginia

What is a sole proprietorship?

Sole proprietorships are the smallest of the small businesses. Any individual conducting business activities automatically falls into the role of sole proprietor. Jewelry makers, writers, graphic designers – anyone working for themselves and making money is operating a sole proprietorship business. There is no separation between the business and the owner in a sole proprietorship. You get all the profits but also all the debt and liability that come with running the business. There are distinct advantages and disadvantages to running a sole proprietorship business.

Benefits of a sole proprietorship

  • Licensing and permitting for a sole proprietor business is simple and inexpensive.
  • Profits from a sole proprietorship are written up as your personal income and do not require separate tax filing.
  • Business decisions are easy because there are no employees or board members to consult.

Disadvantages of a sole proprietorship

  • Obtaining funds to start and run a sole proprietorship can be difficult as there are limited opportunities for investors to take a share of the business.
  • Loan approval can be difficult for a sole proprietor with no business credit history and limited collateral.
  • Personal liability as a sole proprietor is unlimited since there is no legal distinction between the owner and the business.

 

Commercial loans are variable rate

 

Types of Business Loans

When you need money for your small business, there are many different types of commercial loans from which to choose. It can be confusing trying to decide which type of financing is best suited for your unique business needs. Here is a brief overview of some of the different business loan financing options available. The knowledgeable associates at F&M Bank can help you narrow down the best loan product for your small business.

Business Term Loan

A lump sum loan, business term loans have fixed interest rates and predetermined payback schedules. A business term loan will give your company an injection of cash to use for a large purchase. As soon as you receive the loan amount you will begin to accrue interest and start monthly payments.

Business Line of Credit

Similar to a credit card, a line of credit is a preapproved loan amount that can be accessed over time. Rather than receiving a lump sum payment, business owners can draw from their commercial line of credit as needed. With a business line of credit, you only pay interest on the actual money borrowed and the not the entire approval amount. One loan application gives you access to funds that you can take as needed during a set draw period.

 

Business credit scores are on a 1 to 100 scale

 

Government Assisted SBA Loans

SBA business loans in Virginia offer lower interest rates and more lenient conditions for loan approval through backing from the U.S. Small Business Association. This government funding allows banks to make riskier loans to small and fledgling businesses by guaranteeing to cover part of the losses should the small business default on the loan. There are fees and restrictions associated with SBA loans but, for those who qualify, SBA loans can provide the funding you need to stay afloat and grow.

Merchant Cash Advance

A business cash advance is appropriate for businesses that receive a high volume of credit card sales. As the business owner, you receive a cash advance that is recouped by the bank through merchant account services fees and interest. Each time a client pays with their credit card, a larger than normal fee is subtracted from your profit to pay back the cash advance over time.

Equipment Loans

When your business has a specific need for new equipment, whether it be furniture, computers, or heavy machinery, an equipment loan is the proper choice. The bank will consider the cost of the purchase, expected lifespan of the equipment, and your ability to repay the loan. Typically, the equipment itself will serve as collateral for the business term loan.

Business Credit Cards

Much like personal credit cards, business credit cards can provide the purchasing power you need to make it through an off season or cover a large expense. Business credit cards also build your business credit score which will help you qualify for future commercial loans. Using a business credit card instead of a personal account helps sole proprietors keep business expenses separate from their personal spending. This can help at tax time by making it easy to find and list your business deductions.

Commercial Mortgage Loans

When you need land for your business or a commercial building, a commercial mortgage is the first step. Warehouses, offices, and retail space can be purchased for your business even if you are a sole proprietorship. Owning the commercial property that your business relies on can add a sense of security as well as increase your business credit and equity over time.

Personal Loans

Because personal and business finances are intermingled as a sole proprietor, a personal loan is a suitable option when you need funding. The loan amount of a personal loan may not be as large as a commercial loan, but the approval process may be simpler than a business loan. Your personal credit history and debt to income ratio can help you secure the money you need to help your business succeed.

 

Tax returns are needed to apply for a business loan.

 

How do I get a business loan?

Applying for a business loan is similar to any car loan, mortgage, or personal loan you may have received in the past. Your personal credit history, cash flow, debts, and collateral will be taken into account by a local lending team. In addition to your personal finances, the bank may consider the type of business you own, your commercial profits and debts, and how long your business has been operating.

If you are thinking of getting a small business loan in the Shenandoah Valley, gather the following documents:

  • Business plan
  • Profit/loss forecast and growth plan
  • Business license and registration
  • Personal and business tax returns
  • Bank account statements
  • Invoices and sales records for your business
  • Current lease or mortgage for your business

Get the commercial funding you need from F&M Bank

F&M Bank proudly offers business lending in the Shenandoah Valley. Small businesses and sole proprietorships help our community thrive, and we are here to support your financial growth. Offering the best business loan interest rates in Harrisonburg & Augusta County, our knowledgeable associates use local insight to make sure you get the best commercial loan for your needs.

Commercial lending doesn’t have to be complicated. Contact F&M Bank and we will be glad to help answer your questions about getting started. Stop by one of our convenient locations to begin the small business loan process today.

Meet Your Lender: Erica Deluhery

Meet Your Lender: Erica Deluhery

 

Meet Erica Deluhery, the newest member of our commercial lending team; a history buff, a world traveler, and a champion for our local businesses.

 

“I consider myself an accidental banker. I was actually on my way to becoming a teacher. I come from a family of teachers and thought that was my career path. Took a job at the local community bank in Waynesboro, and fell in love with it. I have a passion for working with people and here I am today.

My favorite part of my role here at F&M is working with all types of people, learning about different businesses, figuring out how to help, whether it’s consultative or assisting, structuring a certain loan for a customer. The team here at F&M is phenomenal. Everyone works together and wants to pitch in and help. It’s not an “I”, it’s a “we”.

So if I could have lunch with anyone in history, it would be Winston Churchill. I am a history major with World War II being my favorite heir to study. My family is from Scotland, my dad was born there and we travel to the UK regularly.  I would love to just sit down and pick his brain and how he’s went through that difficult time. One song that I will always sing along with would be Elton John’s Candle in the Wind.”