F&M Bank Sets Record Earnings During 2015

Source: Daily News-Record, January 29, 2016, By Vic Bradshaw

HARRISONBURG – F&M Bank Corp. set an earnings record in 2014.

Last year, it shattered that record.

The Timberville-based parent company of Farmers & Merchants Bank announced Monday that a strong fourth quarter allowed it to finish 2015 with $8.4 million in net income, 45 percent greater than the $5.8 million it earned the previous year. Earnings per share were $2.40 for the year, 32 percent greater than the $1.82 per-share earnings posted in 2014.

“We are extremely pleased to announce record earnings for the second year in a row,” Dean Withers, the company's president and CEO, said in a press release. “The significant increase can be attributed to very strong net interest margin, growth in earning assets and a reduction in the provision for loan losses.”

The company's board of directors declared a fourth-quarter dividend of 19 cents a share. It will be paid on Feb. 18 to shareholders as of Feb. 4.

F&M Bank Corp. (OTCQX: FMBM) grew its interest and dividend income to $29.3 million in 2015 from $26.8 million the previous year, according to documents it filed with the U.S. Securities and Exchange Commission, while reducing its interest expense by $772,000. That produced a $3.4 million pre-tax increase in net interest income.

In the fourth quarter, the company netted $2.2 million, or 62 cents per share. That was significantly better than the $1.6 million, or 44 cents per share, it earned in the fourth quarter of 2014.

Loans Perform Well

Neil Hayslett, F&M's executive vice president and chief administrative officer, said Tuesday that the company's earnings growth was driven primarily by its strong net interest margin, a reduction in provisions for loan losses, and additional loan activity.

The company's net interest margin – the difference between its asset yields and the cost of its liabilities – was 4.39 percent. It slashed its provision for loan losses to $300,000 from $2.25 million year-over-year, which he said added about $1.3 million to the bottom line after taxes, and netted another $750,000 by increasing its loans held for investment by $25.9 million to $544.1 million.

F&M, Hayslett said, also took in about $1 million last year versus $200,000 in 2014 by temporarily taking on loans from a third party before selling them to other lenders. Those transactions netted about $500,000 over the year.

“That was taking some of our excess liquidity to take on a short-term asset to make more money,” he said.

In addition to cutting the amount of money set aside for loan losses, several key metrics pointed to how well F&M's loan portfolio is performing.

Charge-offs plunged to $243,000, the lowest total since 2006, according to the release. That figure was well below the $1.7 million written off in 2014.

Its nonperforming asset ratio has dropped to 1.3 percent, the lowest level since 2008. The ratio was 1.73 percent at the end of last year.

The company's end-of-year balance sheet included $48.2 million in long-term debt, up from $9.9 million at the end of 2014. He said the bank borrowed money for between five and 10 years “at very attractive rates” in anticipation of interest rate increases.

Farmers & Merchants has 11 branches in Harrisonburg and Rockingham, Shenandoah and Page counties. F&M also provides loans from offices in Penn Laird and Fishersville and through subsidiary VBS Mortgage in Harrisonburg.