ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS
The following is a summary of the major developments in F&M's business since January 1, 1999 (F&M National Corporation is referred to herein as "F&M" or the "Company"):
On February 1, 1999, F&M Bank-West Virginia opened a branch office at Wal- Mart, Foxcroft Avenue, Martinsburg, West Virginia.
On March 22, 1999, Security Bank Corporation ("Security"), Manassas, Virginia, merged with and into F&M Bank-Northern Virginia. Each share of common stock of Security outstanding immediately prior to consummation of the merger was exchanged, in a tax-free exchange, for 0.653 shares of F&M common stock with cash being paid in lieu of issuing fractional shares. The merger was accounted for as a pooling of interests. At December 31, 1998, Security had total assets of $61.2 million, total loans of $34.3 million, total deposits of $52.4 million and total shareholders' equity of $7.9 million.
On March 22, 1999, F&M Bank-Northern Virginia opened branch offices at the following locations: 13927 Jefferson Davis Highway, Woodbridge, Virginia; 7801 Sudley Road, Manassas, Virginia; and 8780 Centreville Road, Centreville, Virginia.
On April 1, 1999, F&M Bank-Northern Virginia closed a branch office at 7900 Sudley Road, Catharpin, Virginia and on April 5, 1999 opened a branch office at 4665 Sudley Road, Catharpin, Virginia.
On June 1, 1999, F&M Bank-Richmond opened a branch office at 600 East Main Street, Richmond, Virginia and closed a branch office at 209 West Franklin Street, Richmond, Virginia.
On July 1, 1999, F&M Bank-Richmond opened a branch office at 11900 Chester Village Drive, Chester, Virginia
On July 25, 1999, F&M Bank-Richmond closed a branch office at 4310 West Hundred Road, Chester, Virginia.
On August 10, 1999, F&M Bank-Winchester ("Winchester") acquired loans, deposits, property, plant and equipment that was formerly a bank branch of Wachovia Bank Corporation located at 126 Fairfax Pike, Stephens City, Virginia. The acquisition was accounted for as a purchase transaction. The new branch of Winchester opened on August 19, 1999.
On August 18, 1999, F&M Bank-Northern Virginia opened a branch office at 4736 Lee Highway, Arlington, Virginia.
On August 27, 1999, F&M Bank-Winchester relocated a branch office at 158 South Main Street, Woodstock, Virginia, to 115 West Spring Street, Woodstock, Virginia. F&M Bank-Winchester acquired loans, deposits, property and equipment that was formerly a branch bank of Wachovia Bank Corporation located at 115 West Spring Street, Woodstock, Virginia. The acquisition was accounted for as a purchase transaction. The relocated branch in Woodstock opened on August 27, 1999.
On August 31, 1999, the Company reinstated a Dividend Reinvestment Plan. All registered shareholders are eligible to reinvest up to 100% of their dividends. In addition, shareholders may purchase additional shares of F&M common stock by making optional cash payments at any time subject to a minimum of $25. The plan will be funded by shares of F&M purchased in open market transactions. Purchases will begin on the first business day of each month and continue until the necessary shares are acquired. The effective date of the plan will be January 25, 2000.
On October 31, 1999, F&M Bank-West Virginia closed a branch office located at Hilldale Shopping Center, Charles Town, West Virginia.
On December 20, 1999, F&M Bank-Winchester opened a branch bank located at 432 South Street, Front Royal, Virginia.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
F&M and its subsidiaries are engaged primarily in only one industry segment, banking, the making of commercial and personal loans and similar credit transactions, and other activities closely related to banking.
(c) NARRATIVE DESCRIPTION OF THE BUSINESS
THE COMPANY
GENERAL
F&M National Corporation is a multi-bank holding company headquartered in Winchester, Virginia. F&M provides financial, insurance, and trust services to individuals and commercial customers through 17 subsidiary corporations including 125 banking locations, 13 mortgage banking offices, 3 trust offices, and 6 insurance offices in Virginia, West Virginia and Maryland. F&M offers a full range of banking services principally to individuals and small and middle- market businesses in north, central and south Virginia including the Shenandoah Valley, the eastern panhandle of West Virginia, and the counties of Montgomery and Prince George's in Maryland. At December 31, 1999, F&M had assets of $2.946 billion, deposits of $2.482 billion and shareholders' equity of $291.6 million.
F&M was formed in 1969 to serve as the parent holding company of its then sole subsidiary bank, F&M Bank-Winchester, organized in 1902. Since its organization, F&M has acquired 24 banks, which expanded its market area and increased market share in Virginia, West Virginia and Maryland.
The following table sets forth certain information concerning F&M and its operating subsidiaries at December 31, 1999:
_________________ (1) Includes F&M Mortgage Services, Inc., and two insurance agencies. (2) Includes the merger in 1995 of F&M Bank-Broadway, Broadway, Virginia, into F&M Bank-Massanutten. (3) Includes the acquisition in 1998 of Peoples Bank of Virginia, Chesterfield, Virginia. (4) Created from the consolidation in 1998 of F&M Bank-Blakeley, F&M Bank- Martinsburg and F&M Bank-Keyser. (5) Includes the acquisition in 1994 of Hallmark Bank and Trust, Springfield, Virginia, the acquisition in 1995 of The Bank of the Potomac, Herndon, Virginia, the acquisition in 1996 of FB&T Financial Corporation, Fairfax, Virginia, the acquisition in 1998 of The Bank of Alexandria, Alexandria, Virginia, and the acquisition in 1999 of Security Bank Corporation, Manassas, Virginia. (6) Includes F&M Trust Company and F&M Services Inc. each of which was incorporated in 1998.
The business strategy of F&M is to provide its customers with the financial sophistication and breadth of products of a regional bank, while retaining the local appeal and level of service of a community bank. F&M has maintained its community orientation by allowing its subsidiary banks latitude to tailor products and services to meet community and customer needs. While F&M has preserved the autonomy of its subsidiary banks, it has established system-wide policies governing, among other things, lending practices, credit analysis and approval procedures, as well as guidelines for deposit pricing and investment portfolio management. In addition, F&M has established a centralized loan review team that regularly performs a detailed, on-site review and analysis of each subsidiary bank's loan portfolio to ensure the consistent application of credit policies and procedures system-wide. An officer or representative of F&M attends meetings of the board of directors of each subsidiary bank to monitor operations and to serve as a liaison to the Company.
F&M's subsidiary banks are community-oriented and offer services customarily provided by full-service banks, including individual and commercial demand and time deposit accounts, commercial and consumer loans, residential mortgages, credit card services, safe deposit boxes, and home banking. Lending is focused on individuals and small and middle-market businesses in the local market regions of each of F&M's subsidiary banks. In 1998, F&M Trust Company was formed by consolidating the trust departments of F&M Bank-Winchester, F&M Bank- Peoples, and F&M Bank-Northern Virginia. F&M Trust Company provides a variety of personal trust services including management of common trust funds, estate administration and planning specifically addressing the investment and financial management needs of its customers. At December 31, 1999, F&M Trust Company managed assets and accounts totaling $712.1 million.
F&M operates in seven market regions: the Shenandoah Valley of Virginia; the eastern panhandle of West Virginia; Charlottesville/Albemarle County and surrounding areas; Greenville County in southside Virginia; suburban Richmond, primarily Henrico and Chesterfield Counties; the northern Virginia areas of Loudoun, Fairfax and Prince William Counties; Stafford, Warrenton and surrounding Fauquier County area and the counties of Montgomery and Prince George's in Maryland. The more populous sectors within each of the seven market regions experienced substantial population growth between 1980 and 1990, most of which exceeded 20% growth. At June 30, 1999, F&M operated 33 banking offices in the Shenandoah Valley from Winchester to Harrisonburg with deposits of $743.9 million; 14 banking offices in the eastern panhandle of West Virginia with deposits of $281.1 million; 7 banking offices in the Charlottesville/Albemarle County area with deposits of $71.0 million; 3 banking offices in Emporia, Virginia, and surrounding Greenville County with deposits of $63.7 million; 16 banking offices in suburban Richmond, Virginia, with deposits of $259.1 million; 38 banking offices in Loudoun, Fairfax and Prince William Counties of northern Virginia and including the cities of Alexandria, Fairfax, Falls Church, and Manassas with deposits of $802.9 million; 4 offices in the town of Warrenton and Fauquier and Stafford Counties with deposits of $110.1 million; and 9 offices in the counties of Montgomery and Prince George's in Maryland with deposits of $130.4 million. F&M's principal market is Winchester and the surrounding six Virginia counties where its lead bank, F&M Bank-Winchester, is the dominant financial institution in terms of deposit market share, with a 50%
share of total deposits in Winchester, a 22% share of total deposits in surrounding Frederick County, a 28% share of total deposits in Warren County, and a 16% share of total deposits in Loudoun County. In Rockingham County, which has the largest population of any county or city in the Shenandoah Valley, F&M has a 20% deposit market share. In F&M's three-county West Virginia market, F&M has a 23% deposit market share in Jefferson County (which includes Charles Town), a 15% deposit market share in Berkeley County (which includes Martinsburg) and a 41% deposit market share in Mineral County (which includes Keyser). In Fairfax, Prince William and Fauquier Counties (including Warrenton), F&M has 2%, 4%, and 15%, respectively, of deposit market share and, in the cities of Alexandria, Fairfax, Falls Church and Manassas, F&M's deposit market share, respectively, is 3%, 9%, 3% and 19%. Although F&M's deposit market share in the Richmond and Charlottesville areas is small, F&M has positioned its banking offices in these two markets to increase deposit market share as a result of continued business and population growth in the suburban markets surrounding Richmond and Charlottesville. In F&M's two-county Maryland market, F&M is positioning itself to increase market share in Montgomery County and Prince George's County.
F&M's subsidiary banks have not experienced loan quality deterioration due to conservative underwriting standards and focused in-market lending practices. At December 31, 1999, F&M had total nonperforming assets of approximately $19.6 million, representing 1.09% of period end loans and foreclosed properties.
F&M also operates F&M Mortgage Services, Inc., which offers both fixed and adjustable rate residential mortgage loans and servicing. F&M Mortgage Services Inc., F&M Bank-Northern Virginia and F&M Bank-Peoples sell into the secondary market permanent residential mortgage loans that conform to GNMA and FNMA underwriting guidelines. These F&M subsidiaries purchase government insured 1-4 family FHA and VA loans and resell them immediately in package form.
ACQUISITION PROGRAM
F&M has expanded its market area and increased its market share through both internal growth and strategic acquisitions. Since the beginning of 1988, F&M has acquired approximately $1.423 billion in assets and approximately $1.233 billion in deposits through 15 acquisitions. 1999 acquisitions by F&M are outlined in "ITEM 1. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS."
Management believes there are additional opportunities to acquire financial institutions or to acquire assets and deposits that will allow F&M to enter adjacent markets or increase market share in existing markets. Management intends to pursue acquisition opportunities in strategic markets where its managerial, operational and capital resources will enhance the performance of acquired institutions. There can be no assurance that F&M will be able to successfully effect any additional acquisition activity, or that any such acquisition activity will have a positive effect on the value of shares of F&M Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and the Virginia Stock Corporation Act contain certain anti-takeover provisions, including (i) the Affiliated Transactions statue which places restrictions on any significant transaction between a publicly held Virginia corporation and any shareholder who owns more than 10% of any class of its outstanding shares, (ii) the Control Share Acquisitions statue which provides that a shareholder who purchases shares in any one of three statutory ranges (20%-33 1/3%, 33 1/3%-50%, and 50% or more of the outstanding shares) cannot vote those shares on any matter unless the acquisition of the additional shares has been approved by disinterested shareholders, and (iii) a super-majority provision in the Articles of Incorporation that requires the affirmative vote of at lease 80% of the outstanding voting shares on significant transactions, unless at least two- thirds of the Board of Directors then in office have approved the transaction.
EMPLOYEES
At December 31, 1999, F&M had 1,446 full time and 259 part time employees. No employees are represented by any collective bargaining unit. F&M considers relations with its employees to be good.
MARKET REGIONS
The market regions of F&M extend from the eastern panhandle of West Virginia southward to Virginia in Winchester, the surrounding Shenandoah Valley through Harrisonburg and Rockingham County and eastward to Loudoun, Fauquier, Stafford and Prince William counties, to the central Virginia markets of Charlottesville and Richmond, southern Virginia market in Emporia and Greenville County and Montgomery and Prince George's counties in Maryland. The following table displays the market and population data for each of the market regions:
_________________ * Represents less than 1% deposit market share NM=Not meaningful (1) In Virginia, certain cities are separate political entities and not part of the counties that surround them. The city of Winchester and Frederick County, the city of Harrisonburg and Rockingham County, the city of Charlottesville and Albemarle County, the city of Fairfax and Fairfax County and the city of Richmond and Henrico and Chesterfield Counties are examples. The FDIC and OTS provide deposit data for each separately incorporated city. (2) Deposit data includes total bank and thrift deposits and is based on FDIC and OTS data as of June 30, 1999, which is the most recently available information.
LENDING ACTIVITIES
All of F&M's subsidiary banks offer both commercial and consumer loans, but lending activity is generally focused on consumers and small to middle market businesses within each respective subsidiary banks' market regions. Four of F&M's subsidiary banks, F&M Bank-Massanutten, F&M Bank-West Virginia, F&M Bank-Emporia, and F&M Bank-Peoples emphasize consumer lending with activities focused primarily on residential real estate and consumer lending. F&M Bank- Richmond, F&M Bank-Central Virginia, F&M Bank-Northern Virginia and F&M Bank- Allegiance are based in larger markets where commercial loan demand is stronger and, as a result, their lending activities place a greater emphasis on small to medium sized business. F&M Bank-Winchester, because of its size and dominant position in its market, has a greater opportunity to appeal to large commercial customers in addition to consumers.
The following table sets forth the composition of F&M's loan portfolio (by percentage) for the three years ended December 31:
________________ (1) This category generally consists of commercial and industrial loans where real estate constitutes a source of collateral.
Approximately 48.3% of F&M's loan portfolio at December 31, 1999, was comprised of commercial loans, which included loans secured by real estate shown in the table above under the categories of multifamily, non-farm, non- residential and agricultural where real estate is among the sources of collateral securing the loan. F&M's subsidiary banks offer a variety of commercial loans within their market regions, including revolving lines of credit, working capital loans, equipment financing loans, and letters of credit. Although F&M's
subsidiary banks typically look to the borrower's cash flow as the principal source of repayment for such loans, many of the loans within this category are secured by assets, such as accounts receivable, inventory and equipment. In addition, a number of commercial loans are secured by real estate used by such businesses and are generally personally guaranteed by the principals of the business. F&M's commercial loans generally bear a floating rate of interest tied to a system-wide prime rate set by F&M Bank-Winchester.
F&M's residential real estate loan portfolio (including home equity lines and loans held for sale) was 32.2 % of its total loan portfolio at December 31, 1999. The residential mortgage loans made by F&M's subsidiary banks and F&M Mortgage Services, Inc., are made only for single family, owner- occupied residences within their respective market regions. Residential mortgage loans offered by F&M's subsidiary banks are either adjustable rate loans or fixed rate loans with 20 to 30 year amortization schedules that mature with a balloon payment on the third or fifth year anniversary of the loan. In addition, F&M Mortgage Services and several subsidiaries sell into the secondary market permanent residential mortgage loans that conform to GNMA and FNMA underwriting guidelines. These F&M subsidiaries purchase government insured 1-4 family FHA and VA loans and resell them immediately in package form.
F&M's real estate construction portfolio historically has been a relatively small portion of the total loan portfolio. At December 31, 1999, construction loans were $108.4 million or 6.1% of the total loan portfolio. Generally, all construction loans are made to finance owner-occupied properties with permanent financing commitments in place. F&M's subsidiary banks make a limited number of loans for acquisition, development and construction of residential real estate. F&M's construction loans, including its acquisition and development loans, generally bear a floating rate of interest and mature in one year or less. Underwriting standards for such loans generally limit the loan amount to 75% of the finished appraised value of the project. As a result of strict underwriting guidelines, F&M has experienced charge-offs involving residential construction since 1993 of less than one-half of 1%.
Consumer loans were 13.4% of F&M's total loan portfolio at December 31, 1999. F&M's subsidiary banks offer a wide variety of consumer loans, which include installment loans, credit card loans, home equity lines, and other secured and unsecured credit facilities. The performance of the consumer loan portfolio is directly tied to and dependent upon the general economic conditions in each subsidiary banks' respective market regions.
CREDIT POLICIES AND PROCEDURES
F&M has established system-wide guidelines governing, among other things, lending practices, credit analysis and approval procedures, and credit quality review. Within these guidelines, F&M's subsidiary banks have latitude to tailor their loan products to meet the needs of the communities and specific customers. A holding company officer or representative serves on the Board of Directors of each subsidiary bank to monitor practices and to serve as the liaison with F&M.
LOAN APPROVAL. F&M's loan approval policies provide for various levels of officer lending authority. When the aggregate outstanding loans to a single borrower exceed an individual officer's lending authority, the loan request must be approved by an officer with a higher lending limit or by the subsidiary bank's loan review committee. F&M has assigned a lending limit for each subsidiary bank. Loans that would result in a subsidiary bank exceeding its assigned limit must be approved first by the subsidiary bank's loan review committee and then by a central credit committee appointed by the Company. The central credit committee consists of six senior officers of F&M Bank-Winchester and the Company, along with outside directors of either F&M Bank-Winchester or the Company, who rotate at the twice weekly meetings.
All loans to an individual borrower are reviewed each time the borrower requests a renewal or extension of any loan or requests an additional loan. All lines of credit are reviewed annually prior to renewal. These reviews are conducted by each subsidiary bank and, if necessary, by F&M's central credit committee.
LOAN REVIEW. Each subsidiary bank of F&M has a formal loan review function that consists of a committee of bank officers that regularly reviews loans and assigns a classification, if required, based on current perceived credit risk. In addition, the Company has a loan review team that performs a detailed on-site review and analysis of each subsidiary bank's portfolio on at least an annual basis to ensure the consistent application of system-wide policies and procedures. The Company's loan review team reviews all loans over an established principal amount for each subsidiary bank, which results in a review of 60% to 75% of the total principal amount of the subsidiary bank's loan portfolio. In addition, all lending relationships involving a classified loan are reviewed regardless of size. The Company loan review team has the authority to classify any loan it determines is not satisfactory or to change the classification of a loan within F&M's loan grading system.
All classified loans are reviewed at least quarterly by F&M's senior officers and monthly by the subsidiary bank's boards of directors. All past due and nonaccrual loans are reviewed monthly by the subsidiary banks' boards of directors. As a matter of policy, F&M's subsidiary banks place loans on nonaccrual status when management determines that the borrower can no longer service debt from current cash flows and/or collateral liquidation. This generally occurs when a loan becomes 90 days past due as to principal and interest.
ALLOWANCE FOR LOAN LOSSES. Each subsidiary bank of F&M maintains its allowance for loan losses based on loss experience for each loan category over a period of years and adjusts the allowance for existing economic conditions as well as performance trends within specific areas, such as real estate. In addition, each subsidiary bank periodically reviews significant individual credits and adjusts the allowance when deemed necessary. The allowance also is increased to support projected loan growth.
IMPAIRED LOANS. The recorded investment in certain loans that were considered to be impaired in accordance to FASB 114 was $15.0 million at year end 1999 as compared to $11.5 million at year end 1998, of which $5.3 million was classified as nonperforming. Included in
1999 impaired loans are $3.7 million secured by commercial real estate. All impaired loans at year-end 1999 and 1998 had a related valuation allowance totaling $2.6 million and $2.4 million, respectively. The average recorded investment in certain impaired loans for 1999 and 1998 was approximately $15.3 million and $14.5 million, respectively. For the years 1999 and 1998, interest income recognized on impaired loans totaled $1.6 million and $847 thousand, respectively, all of which was recognized on a cash basis.
Loans are placed on nonaccrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Any unpaid interest previously accrued on those loans is reversed from income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Cash payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses.
An impaired loan is charged-off when management determines that the prospect of recovery of the principal of the loan has significantly diminished.
DEPOSITS
F&M's subsidiary banks offer a number of programs to consumers and to small and middle market businesses at interest rates consistent with local market conditions. The following table sets forth the mix of depository accounts offered by the subsidiary banks as a percentage of total deposits at the dates indicated:
F&M's subsidiary banks control deposit flows primarily through pricing of deposits and, to a lesser extent, through promotional activities. F&M's subsidiary banks establish deposit rates based on a variety of factors, including competitive conditions, liquidity needs and compliance with net interest margin requirements established by F&M for all subsidiary banks. As of December 31, 1999, F&M's subsidiary banks had $243.1 million of certificates of deposit greater than $100,000, or 9.8% of total deposits. F&M's subsidiary banks do not accept brokered deposits.
No material portion of the deposits of F&M's subsidiary banks has been obtained from a single or a small group of customers, and the loss of any customer's deposits or a small group of customers' deposits would not have a material adverse effect on the business of any of F&M's subsidiary banks. See "Business-Market Regions" for information regarding each subsidiary bank's deposit share and rank in its respective market.
LIQUIDITY AND SENSITIVITY TO INTEREST RATES
The primary functions of asset/liability management are to ensure adequate liquidity and maintain an appropriate balance between interest- sensitive assets and interest-sensitive liabilities. Liquidity management involves the ability to meet the cash flow requirements of F&M's loan and deposit customers. Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates. F&M does not hedge its position with swaps, options or futures but instead maintains a highly liquid and short-term position in all of its earning assets and interest-bearing liabilities.
In order to meet its liquidity needs, F&M schedules the maturity of its investment securities according to its needs. The weighted-average life of the securities portfolio at the end of 1999 was four years three months, which is indicative of F&M's investment philosophy of investing in U.S. Government securities with maturities between five and ten years. F&M views its securities portfolio primarily as a source of liquidity and safety. However, it may if the market is favorable, make changes in the available for sale portfolio to take advantage of changes in the yield curve. F&M views the total available for sale securities portfolio as a source of liquidity, whereas, liquidity in the held to maturity portfolio is limited to calls and maturities. The maturity ranges of the securities and the average taxable-equivalent yields as of December 31, 1999, are shown in the following table:
A cash reserve, consisting primarily of overnight investments such as Federal Funds, is also maintained to meet any contingencies and to provide additional capital, if needed.
Most of F&M's loans are fixed-rate installment loans to consumers and mortgage loans whose maturities are generally longer than the deposits by which they are funded. A degree of interest-rate risk is incurred if the interest rate on deposits should rise before the loans mature. However, the substantial liquidity provided by the monthly repayments on these loans can be
reinvested at higher rates that largely reduce the interest-rate risk. Home equity lines of credit have adjustable rates that are tied to the prime rate. Many of the loans not in the installment or mortgage categories have maturities of less than one year or have floating rates that may be adjusted periodically to reflect current market rates. These loans are summarized in the following table:
REMAINING MATURITIES OF SELECTED LOANS
F&M's Asset/Liability/Risk Committee is responsible for reviewing the Company's liquidity requirements and maximizing the Company's net interest income consistent with capital requirements, liquidity, interest rate and economic outlooks, competitive factors and customer needs. Liquidity requirements are also reviewed in detail for each of F&M's individual banks; however, overall asset/liability management is performed on a consolidated basis to achieve a consistent and coordinated approach.
FORWARD-LOOKING STATEMENTS - --------------------------
This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (a) competitive pressure in the financial services industry increases significantly; (b) changes in the interest rate environment reduce margins; (c) general economic conditions, either nationally or regionally, are less favorable than expected, resulting in, among other things, a deterioration in credit quality; (d) changes occur in the financial services regulatory environment; and (e) changes occur in the securities markets.
OTHER ACTIVITIES
Effective January 1, 1998, F&M Trust Company, a wholly-owned trust subsidiary of the Company, began operations and assumed responsibility for all the trust and fiduciary activities of the Virginia banking subsidiaries of the Company.
In 1999, F&M Trust Company offered a range of trust services. At December 31, 1999, F&M Trust Company managed $ 712.1 million in assets in approximately 1,712 fiduciary accounts, covering both personal trust activities and employee benefit plans.
COMPETITION
Each of the market regions in which the Company operates is a highly competitive banking market involving commercial banks and thrifts. Other competitors, including credit unions, consumer finance companies, insurance companies and money market mutual funds, compete with the Company for certain lending and deposit gathering services. In its Charlottesville/Albemarle County, northern Virginia, and suburban Richmond markets, the Company faces particularly intense competition from several state-wide, regional, and national banking institutions which have substantial operations in those market regions. Management believes, however, that the Company enjoys certain competitive advantages in its principal market of Winchester, the surrounding northern Shenandoah Valley and Loudoun County where F&M Bank-Winchester is the largest financial institution headquartered in the area and the dominant bank in terms of deposit market share.
Competition among the various financial institutions is based on interest rates offered on deposit accounts, interest rates charged on loans, credit and service charges, the quality of services, the convenience of banking facilities and, in connection with loans to larger borrowers, relative lending limits. Many of the financial organizations in competition with the Company have much greater financial resources, diversified markets, and branch networks than F&M and are able to offer similar services at varying costs with higher lending limits. With reciprocal interstate banking, the Company also faces the prospect of additional competitors entering its markets as well as additional competition in its efforts to acquire other financial institutions.
EXECUTIVE OFFICERS OF THE REGISTRANT
All officers of the Company and its subsidiaries are elected annually to serve at the pleasure of the Board of Directors of the Company. The following table sets forth the name, age, year first elected, and offices held at February 28, 2000, of each of the executive officers of the Company:
Mr. Feltner has been a senior executive officer of the Company since its inception in 1970.
Mr. Whitt joined the Company in 1987 as Director of Human Resources, before which time he served as President of F&M Bank-Massanutten, Harrisonburg, Virginia, since its organization in 1973. In July of 1991, he was appointed Senior Vice President, Senior Financial Officer and Secretary of the Company and F&M Bank-Winchester. As of January 1, 1998, Mr. Whitt was appointed President, Vice Chairman and Chief Financial Officer of the Company, and Vice Chairman and Secretary to the Board of F&M Bank-Winchester. On June 7, 1999, Mr. Whitt was appointed Chairman of F&M Bank-Winchester.
In March of 1996, Mr. Curtis joined the Company as President and Chief Executive Officer of Fairfax Bank and Trust Company, now F&M Bank-Northern Virginia. Mr. Curtis served in this position from July 22, 1985 to December 31, 1997. As of January 1, 1998, Mr. Curtis was appointed Vice Chairman and Chief Administrative Officer of the Company, and Vice Chairman of F&M Bank-Winchester.
Mr. Whitworth, Jr. joined the Company in August 1985, as President of the Suburban Bank, now F&M Bank-Richmond, and served as such until November, 1985, when he became Executive Vice President of the Company. As of January 1, 1998, Mr. Whitworth was appointed President of F&M Trust Company.
Mrs. Carroll has served as President and Chief Executive Officer of F&M Bank-Winchester since December 1988, and was appointed Vice Chairman of the bank on June 7, 1999. She was appointed Senior Vice President of the Company in 1987.
Mr. Bryan was appointed Corporate Secretary and General Counsel of the Company effective January 1, 1998. Prior to this appointment, Mr. Bryan was a partner in the law firm of Bryan & Coleman, P.C., Winchester, Virginia, since February 1, 1995. On June 7, 1999, Mr. Bryan was appointed Secretary of F&M Bank-Winchester.
Mrs. Ward was appointed Senior Vice President of F&M Bank-Winchester in March of 1992. Prior thereto, she was Vice President of F&M Bank-Winchester since 1974. She has been Treasurer of the Company since 1983.
SUPERVISION AND REGULATION
The Company and its subsidiary banks are subject to state and federal banking laws and regulations, which impose specific requirements or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of operations. The following is a brief summary of certain statues, rules and regulations affecting the Company and its subsidiary banks. This summary is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and its subsidiary banks. A change in applicable laws or regulations may have a material effect on the business and prospects of the Company.
THE COMPANY
The Company is registered as a bank holding company under the Bank Holding Company Act ("BHCA") and the Virginia Financial Institution Holding Company Act, and is therefore subject to regulation and examination by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Virginia State Corporation Commission (the "Virginia SCC"). F&M's subsidiary banks are subject to examination and regulation by the Virginia SCC, the West Virginia Board of Banking and Financial Institutions (the "West Virginia Board of Banking") and the Commissioner of Financial Regulation of the State of Maryland (the "Maryland-CFR"). In addition, the Company and its subsidiary banks are subject to certain minimum capital standards established by the Federal Reserve and the FDIC.
Under the BHCA, the Company is required to secure the prior approval of the Federal Reserve before it can merge or consolidate with any other bank holding company, or acquire all or substantially all of the assets of any bank or acquire direct or indirect ownership or control of
any voting shares of any bank that is not already majority owned by it if after such acquisition the Company would directly or indirectly own or control more than 5% of the voting shares of such bank. The BHCA also prohibits the Company from acquiring, directly or indirectly voting shares of, or interests in, or all or substantially all of the assets of, any bank located outside the State of Virginia unless the acquisition is specifically authorized by the laws of the state in which such bank is located, as discussed below.
The Company is prohibited under the BHCA, and regulations promulgated thereunder, from engaging in, and from acquiring direct or indirect ownership or control of more than 5% of voting shares of any company engaged in, nonbanking activities unless the Federal Reserve, by order or regulation, has found such activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The Federal Reserve has by regulation determined that certain activities are closely related to banking within the meaning of the BHCA. These activities include, among others, operating a mortgage, finance, credit card or factoring company; performing certain data processing operations; providing investment and financial advice; acting as an insurance agent for certain types of credit-related insurance; leasing personal property on a full-payout, non-operating basis; and providing certain stock brokerage and investment advisory services.
The Company, as an affiliate of its subsidiary banks within the meaning of the Federal Reserve Act, is subject to certain restrictions under the Federal Reserve Act regarding transactions between a bank and companies with which it is affiliated. These provisions limit extensions of credit (including guarantees of loans) by the subsidiary banks to affiliates, investments in the stock or other securities of the Company by the subsidiary banks and the nature and amount of collateral that subsidiary banks may accept from any affiliate to secure loans extended to the affiliate. Further, under the Federal Reserve Act and the regulations promulgated thereunder, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or service.
The BHCA and the Change in Bank Control Act, together with regulations of the Federal Reserve, require that, depending on the particular circumstances, either Federal Reserve approval must be obtained or notice must be furnished to the Federal Reserve and not disapproved prior to any person or company acquiring "control" of a bank holding company, such as the Company, subject to exemptions for certain transactions. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities and either the company has registered securities under Section 12 of the Securities Exchange Act of 1934, as amended, or no other person will own a greater percentage of that class of voting securities immediately after the transaction. The regulations provide a procedure for challenge of the rebuttable control presumption.
Federal Reserve policy requires a bank holding company to act as a source of financial strength to each of its bank subsidiaries and to take certain measures to preserve and protect bank subsidiaries in situations where additional investments in a troubled bank subsidiary may not
otherwise be warranted. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), in order to avoid receivership of an insured depository institution subsidiary, a bank holding company is required to guarantee up to certain maximum limits the compliance with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking regulator. In addition, if a bank holding company has more than one bank or thrift subsidiary, the bank holding company's other subsidiary depository institutions are responsible under a cross guarantee for any losses to the FDIC resulting from the failure of a depository institution subsidiary. Under these provisions, a bank holding company may be required to loan money to its depository institution subsidiaries in the form of capital notes or other instruments. However, any such loans likely would be unsecured and subordinated to such institution's depositors and certain other creditors.
Under federal legislation, restrictions on interstate bank acquisitions were abolished effective September 29, 1995, and bank holding companies from any state are now able to acquire banks and bank holding companies located in any other state. Effective June 1, 1997, the law permits banks to merge across state lines, subject to earlier "opt-in" or "opt-out" action by individual states. The law also allows interstate branch acquisitions and de novo branching if permitted by the host state. Virginia, Maryland and West Virginia have adopted early "opt-in" legislation that allows interstate bank mergers. The states also permit interstate branch acquisitions and de novo branching if reciprocal treatment is accorded Virginia banks in the state of the acquiror.
All acquisitions, whether by an in-state or out-of-state acquiror, involving a Virginia bank or bank holding company require the prior approval of the Virginia SCC, in addition to approval by the appropriate federal regulatory authority. Similarly, the West Virginia Board of Banking must approve all acquisitions of a West Virginia bank or bank holding company, and the Maryland- CFR must approve all acquisitions of a Maryland bank or bank holding company.
REGULATION OF SUBSIDIARY BANKS
GENERAL. All of F&M's subsidiary banks are state-chartered institutions organized under either Virginia, West Virginia, or Maryland law. Seven of the subsidiary banks, F&M Bank-Winchester, F&M Bank-Massanutten, F&M Bank-Richmond, F&M Bank-Central Virginia, F&M Bank-Emporia, F&M Bank-Northern Virginia, and F&M Bank-Peoples are Virginia-chartered institutions regulated and examined by the Virginia SCC. F&M Bank-West Virginia, Inc., is a West Virginia-chartered institutions regulated and examined by the West Virginia Board of Banking. F&M Bank-Allegiance is a Maryland state-chartered bank regulated and examined by the Maryland-CFR.
F&M's subsidiary banks are all members of the Federal Reserve System and are, therefore, supervised and examined by the Federal Reserve, their primary federal regulator. The Federal Reserve and the Virginia SCC, West Virginia Board of Banking, or the Maryland-CFR, as appropriate, conduct regular examinations of each subsidiary bank, reviewing the adequacy of their allowance for loan losses, quality of loans and investments, propriety of management practices, compliance with laws and regulations and other aspects of operations. In addition to
these regular examinations, each subsidiary bank must furnish the Federal Reserve with quarterly reports containing detailed financial statements and schedules. The FDIC, which provides deposit insurance, also has authority to examine and regulate F&M's subsidiary banks.
Federal and state banking laws and regulations govern all areas of the operations of F&M's subsidiary banks, including maintenance of cash reserves, loans, mortgages maintenance of minimum capital, payment of dividends, and establishment of branch offices. Federal and state bank regulatory agencies also have the general authority to eliminate dividends paid by insured banks if such payment is deemed to constitute an unsafe and unsound practice. As their primary federal regulator, the Federal Reserve has authority to impose penalties, initiate civil administrative actions and take other steps to prevent F&M's subsidiary banks from engaging in unsafe or unsound practices. In this regard, the Federal Reserve has adopted capital adequacy requirements applicable to its member banks.
DEPOSIT INSURANCE. The deposits of F&M's subsidiary banks are currently insured to a maximum of $100,000 per depositor, subject to certain aggregation rules. The FDIC has implemented a risk-related assessment system for deposit insurance premiums and all depository institutions have been assigned to one of nine risk assessment classifications based upon certain capital and supervisory measures. All deposits of F&M's subsidiary banks are subject to the rates of the Bank Insurance Fund ("BIF"), the federal deposit insurance fund that covers commercial bank deposits.
REGULATORY CAPITAL REQUIREMENTS. On December 19, 1991, FDICIA was enacted. Among other things, FDICIA requires the federal banking agencies to take "prompt corrective action" with respect to banks that do not meet minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized", "under capitalized", "significantly undercapitalized", and "critically undercapitalized", which terms are each further defined by federal regulations. A depository institution is "well capitalized" if it significantly exceeds the minimum level required by regulation for each relevant capital measure, "adequately capitalized" if it meets each such measure, "undercapitalized" if it fails to meet any such measure, "significantly undercapitalized" if it is significantly below any such measure, and "critically undercapitalized" if it fails to meet any critical capital level set forth in the regulations. The critical capital level must be a level of tangible equity capital equal to not less than 2.0% of total assets and not more than 65% of the minimum leverage ratio to be prescribed by regulation (except to the extent that 2.0% would be higher than such 65% level). An institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. In order to be classified as a "well capitalized institution," the institution must have a total risk-based capital ratio of 10% and a leverage ratio of 5%.
If a depository institution fails to meet regulatory capital requirements, regulatory agencies can require submission and funding of a capital restoration plan by the institution, place limits on its activities, require the raising of additional capital, and, ultimately, require the appointment of a conservator or receiver for the institution. As of December 31, 1999, all F&M's subsidiary banks exceeded the required regulatory capital requirements under FDICIA.
CAPITAL ADEQUACY AND DIVIDENDS. Information on "Capital Adequacy" may be found under "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", "Capital Resources".
Dividends from F&M's subsidiary banks constitute the major source of funds for dividends to be paid by the Company. The amount of dividends payable by each subsidiary bank to the Company depends upon its earnings and capital position, and is limited by federal and state law, regulations and policy. The Federal Reserve has the general authority to limit dividends paid by F&M's subsidiary banks and the Company if such payments are deemed to constitute an unsafe and unsound practice.
As state member banks subject to the regulations of the Federal Reserve, each subsidiary bank must obtain approval of the Federal Reserve for any dividend if the total of all dividends declared by F&M's subsidiary banks in any calendar year would exceed the total of its net profits for such year, as defined by the Federal Reserve, plus its retained net profits for the preceding two years. In addition, each subsidiary bank may not pay a dividend in an amount greater than its undivided profits then on hand after deducting current losses and bad debts. For this purpose, bad debts are generally defined to include the principal amount of all loans which are in arrears with respect to interest by six months or more, unless such loans are fully secured and in the process of collection.
In addition, Virginia law imposes restrictions on the ability of all banks chartered under Virginia law to pay dividends. Under Virginia law, no dividend may be declared or paid that would impair a bank's paid-in capital. The Virginia SCC also can limit the payment of dividends by any Virginia bank if it determines the limitation is in the public interest and is necessary to ensure the bank's financial soundness.
Under West Virginia law, a state bank may declare a dividend only from its undivided profits and, if the bank's surplus account is not greater than or equal to the par value of the bank's stock, the bank may not declare a dividend unless a portion of the bank's profits for the period for which dividends are declared is credited to the bank's surplus account. Also, a West Virginia- chartered bank must obtain the approval of the West Virginia Board of Banking prior to declaring a dividend if the total of all dividends paid by the bank in any calendar year exceeds the total of its profits for that year plus its undivided profits for the preceding two years.
Pursuant to Maryland law, a state bank may declare a cash dividend only from (i) its undivided profits or (ii) with the prior approval of the Maryland-CFR, its surplus in excess of 100% of its required capital stock. For further information about the Company's dividends, see Part II., Item 5., "Market for Registrant's Common Equity and Related Stockholder Matters."
FINANCIAL MODERNIZATION LEGISLATION
The Gramm-Leach-Bliley Act of 1999 ("GLBA") was signed into law on November 12, 1999. The main purpose of GLBA is to permit greater affiliations within the financial services
industry, primarily banking, securities and insurance. While certain portions of GLBA became effective upon enactment and on March 11, 2000, many other provisions do not become effective until May 2001 and most of the regulations implementing the law have not yet been issued. As a result, the overall impact of GLBA on the Company cannot be predicted at this time. The provisions of GLBA that are believed to be of most significance to the Company are discussed below.
GLBA repeals sections 20 and 32 of the Glass-Steagall Act, which separated commercial banking from investment banking, and substantially amends the BHCA, which limited the ability of bank holding companies to engage in the securities and insurance businesses. To achieve this purpose, GLBA creates a new type of company, the "financial holding company." A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including
. securities activities such as underwriting, dealing, brokerage, investment and merchant banking; and
. insurance underwriting, sales and brokerage activities.
A bank holding company may elect to become a financial holding company only if all of its depository institution subsidiaries are well-capitalized, well- managed and have at least a satisfactory Community Reinvestment Act rating.
GLBA establishes a system of functional regulation under which the federal banking agencies will regulate the banking activities of financial holding companies and banks' financial subsidiaries, the Securities and Exchange Commission ("SEC") will regulate their securities activities and state insurance regulators will regulate their insurance activities.
With regard to Federal securities laws, GLBA removes the blanket exemption for banks from being considered brokers or dealers under the Securities Exchange Act of 1934, and sets out a number of limited activities, including trust and fiduciary activities, in which a bank may engage without being considered a broker, and a set of activities in which a bank may engage without being considered a dealer. The Investment Advisers Act of 1940 also will be amended to eliminate certain provisions exempting banks from the registration requirements of that statute, and the Investment Company Act of 1940 will be amended to provide the SEC with regulatory authority over various bank mutual fund activities.
GLBA also provides new protections against the transfer and use by financial institutions of consumers nonpublic personal information. A financial institution must provide to its customers, at the beginning of the customer relationship and annually thereafter, the institution's policies and procedures regarding the handling of customers' nonpublic personal financial information. The new privacy provisions will generally prohibit a financial institution from providing a customer's personal financial information to unaffiliated third
parties unless the institution discloses to the customer that the information may be so provided and the customer is given the opportunity to opt out of such disclosure.
At this time, the Company is unable to predict the impact GLBA may have upon its or its subsidiaries' financial condition or results of operations. The Company is currently reviewing the new law and at this time has not elected to be treated as a financial holding company under GLBA.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various legislative and regulatory proposals with respect to the regulation of financial institutions are considered by the executive branch of the Federal government, Congress and various state governments, including Virginia, West Virginia, and Maryland. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. The Company cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect the Company.
ITEM 2.
ITEM 2. PROPERTIES.
The principal executive offices of F&M is located at 9 Court Square, Winchester, Virginia, in a multi-story building complex that is owned free of any encumbrances. The Company operates a total of 125 banking offices (103 in Virginia, 13 in West Virginia, and 9 in Maryland), 66 of which are owned by the Company or one of its subsidiary banks free of any encumbrances, and 54 of which are leased under agreements expiring at various dates, including renewal options. The Company also owns additional office facilities for various of its lending, audit, accounting, and data processing functions. Additional information regarding F&M's lease agreements may be found under "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Note 15."
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of its operations, the Company and its subsidiary banks are parties to various legal proceedings. Based on information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company has not submitted any matters to its security holders since its Annual Meeting of Shareholders held April 27, 1999.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The following table sets forth the per share high and low last sale prices for the common stock of the Company as reported on the New York Stock Exchange, and the cash dividends declared per share on the Common Stock for the periods indicated:
PRICE RANGE CASH HIGH LOW DIVIDENDS ---- --- ---------
First Quarter 30.00 23.87 0.195 Second Quarter 33.18 23.93 0.235 Third Quarter 33.50 26.00 0.235 Fourth Quarter 30.25 26.00 0.235
First Quarter 36.25 31.75 0.185 Second Quarter 34.31 32.00 0.185 Third Quarter 31.56 26.13 0.195 Fourth Quarter 31.69 25.06 0.195
At December 31, 1999, there were 22,984,500 shares of Common Stock outstanding held by 8,466 holders of record.
The Company historically has paid cash dividends on a quarterly basis. The final determination of the timing, amount and payment of dividends on the Common Stock is at the discretion of the Board of Directors and will depend upon the earnings of the Company and its subsidiaries, principally its subsidiary banks, the financial condition of the Company and other factors, including general economic conditions and applicable governmental regulations and policies.
The Company or F&M Bank-Winchester has paid regular cash dividends for more than 57 consecutive years.
The Company is a legal entity separate and distinct from its subsidiaries, and its revenues depend primarily on the payment of dividends from F&M subsidiary banks. F&M subsidiary banks are subject to certain legal restrictions on the amount of dividends they are permitted to pay to the Company. At December 31, 1999, F&M's subsidiary banks had available for distribution as dividends to the Company approximately $20.0 million.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated herein by reference, as Exhibit 13, to page 1 of the 1999 Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Incorporated herein by reference, as Exhibit 13, to pages 7 through 25 of the 1999 Annual Report.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Incorporated herein by reference, as Exhibit 13, to pages 9 and 12 of the 1999 Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated herein by reference, as Exhibit 13, to pages 26 through 49 of the 1999 Annual Report.
ITEM 9.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction G(3), the information called for by Part III, Items 10. through 13., is incorporated herein by reference from the Company's definitive proxy statement, dated March 24, 2000, for the Company's Annual Meeting of Shareholders to be held April 25, 2000, which definitive proxy statement was filed with the Commission pursuant to Rule 14a-6 on March 24, 2000. The information regarding executive officers called for by Item 401 of Regulation S-K is included in Part I under "EXECUTIVE OFFICERS OF THE REGISTRANT".
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents included in Part II of this report are incorporated by reference to the Company's 1999 Annual Report (see Exhibit 13):
1. Financial Statements Pages
F&M National Corporation and Subsidiaries: Consolidated Balance Sheets at December 31, 1999 and 1998 26 Consolidated Statements of Income for the years ended December 31, 1999, 1998, and 1997 27 Consolidated Statements of Changes in Shareholders' Equity for years ended December 31, 1999, 1998 and 1997 28 Consolidated Statements in Cash Flows for the years ended December 31, 1999, 1998 and 1997 29 Notes to Consolidated Financial Statements 30 Report of Independent Certified Public Accountants 48
2. Financial Statement Schedules
All schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.
3. Exhibits.
(3) (i) Registrant's Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to Registration Statement #33-45717).
(ii) Registrant's Bylaws (incorporated herein by reference to Exhibit 3.2 to Registration Statement #33-45717).
(10) Material Contracts.
(i) Form of agreement between officers of the Registrant under the Registrant's Defined Benefit Deferred Compensation and Salary Continuation Plan (incorporated herein by reference to Exhibit 10(b) to Registration Statement #33-10696, filed on December 9, 1986).
(ii) Registrant's Officers' Incentive Bonus Plan (incorporated herein by reference to Exhibit 28(i) to Registration Statement #33-25867 filed on December 2, 1988).
(iii) Form of Management Continuity Agreement entered into between the Registrant and certain of its and its subsidiaries' executive officers (filed herewith).
(iv) Registrant's 1992 Incentive and Non-Qualified Stock Option Plan, as amended and restated February 2, 1998 (incorporated herein by reference to Exhibit 99.0 to Registration Statement #333-63111 filed on September 9, 1998).
(v) Registrant's 1998 Employee Stock Discount Plan (incorporated herein by reference to Exhibit 99.1 to Registration Statement #333-63113 filed on September 9, 1998).
(11) Statement re computation of per share earnings (incorporated by reference as Note 11, page 37, of the 1999 Annual Report to Shareholders filed herewith as Exhibit 13).
(13) Portions of the 1999 Annual Report to Shareholders for the fiscal year ended December 31, 1999 (filed herewith).
(21) Subsidiaries of the Registrant (filed herewith).
(23) Consent of Yount, Hyde & Barbour, P. C., Certified Public Accountants (filed herewith).
(27) Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 8th day of March, 2000:
F&M NATIONAL CORPORATION Winchester, Virginia
/s/ W. M. Feltner --------------------------------------------- W. M. Feltner, Chairman of the Board and Chief Executive Officer
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 on the 8th day of March, 2000:
SIGNATURE TITLE - --------- -----
/s/ W. M. Feltner Chairman of the Board, Chief - -------------------------------------- Executive Officer, Director W. M. FELTNER
/s/ Alfred B. Whitt Vice Chairman, President, Chief - -------------------------------------- Financial Officer, Director ALFRED B. WHITT
/s/ Charles E. Curtis Vice Chairman, Chief Administrative - -------------------------------------- Officer, Director CHARLES E. CURTIS
/s/ Frank Armstrong, III Director - -------------------------------------- FRANK ARMSTRONG, III
/s/ William H. Clement Director - -------------------------------------- WILLIAM H. CLEMENT
/s/ John E. Fernstrom Director - -------------------------------------- JOHN E. FERNSTROM
/s/ William R. Harris Director - -------------------------------------- WILLIAM R. HARRIS
/s/ L. David Horner, III Director - ---------------------------------------------- L DAVID HORNER, III
/s/ Jack R. Huyett Director - ---------------------------------------------- JACK R. HUYETT
/s/ George L. Romine Director - ---------------------------------------------- GEORGE L. ROMINE
/s/ J. D. Shockey, Jr. Director - ---------------------------------------------- J. D. SHOCKEY, JR.
/s/ Ronald W. Tydings Director - ---------------------------------------------- RONALD W. TYDINGS
/s/ Fred G. Wayland, Jr. Director - ---------------------------------------------- FRED G. WAYLAND, JR.
EXHIBIT 13. 1999 ANNUAL REPORT TO SHAREHOLDERS
Filed herewith.