UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the SecuritiesOF THE
(Amendment No. ___ )
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| ☐ | Preliminary Proxy Statement |
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☒ | Definitive Proxy Statement |
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| ☐ | Soliciting Material Pursuant to §240.14a-12 |
F & M BANK CORP.
(Name of Registrant as Specified In Itsin its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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F & M BANK CORP.
P. O. Box 1111
Timberville, Virginia 22853
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies for use at the annual meeting of shareholders of F & M Bank Corp. (the Company) to be held on Tuesday,Thursday, May 4, 202112, 2022 at 10:00 A.M. in a virtual format at www.virtualshareholdermeeting.com/FMBM2021.FMBM2022. The principal executive offices of the Company are located at
205 South Main Street, P. O.P.O. Box 1111, Timberville, Virginia 22853. The approximate mailing date of this Proxy Statement and the accompanying proxy is April 6, 2021.12, 2022.
The accompanying proxy is solicited by the Board of Directors of the Company (the Board). The cost of the solicitation of proxies will be borne by the Company. Solicitations will be made only by the use of the mail, except that, if necessary, officers, directors and regular employees of the Company, or its affiliates, may make solicitations of proxies by telephone telegraph or by personal calls.email. Brokerage houses and nominees may be requested to forward the proxy solicitation material to the beneficial owners of the stock held of record by such persons, and the Company may reimburse them for their charges and expenses in this regard.
All properly executed proxies delivered pursuant to this solicitation will be voted at the Annual Meeting in accordance with any instructions thereon. Any record holder signing and mailing the enclosed proxy, or voting online or by telephone may, nevertheless, revoke the proxy at any time prior to the actual voting thereof by (i) filing written notice thereof with the Secretary of the Company (Stephanie Shillingburg, Secretary, F & M Bank Corp., P. O.P.O. Box 1111, Timberville, Virginia 22853); (ii) submitting a duly executed proxy bearing a later date; or (iii) attending the virtual Annual Meeting or any adjournment thereof and voting online. If your shares are held by a brokerage house or nominee, please follow the instructions delivered with the notice from your broker or nominee or contact your broker or nominee for instructions on how to change or revoke your vote.
An Annual Report to shareholders, including audited financial statements for the year ended December 31, 2020,2021, is being mailed to the Company’s shareholders concurrently with this Proxy Statement, but is not part of the proxy solicitation materials.
Interested shareholders may obtain, without charge, a copy of the Company’s Annual Report on Form 10- K10-K for the fiscal year ended December 31, 2020,2021 as filed with the Securities and Exchange Commission (“SEC”), upon written request to Stephanie Shillingburg, Secretary, F & M Bank Corp., P. O. Box 1111, Timberville, Virginia 22853.
OUTSTANDING SHARES AND VOTING RIGHTS
Only common shareholders of record at the close of business on March 9, 20212022 will be entitled to vote at the Annual Meeting. As of March 9, 2021,2022, the Company had outstanding 3,238,4933,451,695 shares of its common stock, $5 par value per share (Common Stock), each of which is entitled to one vote at the Annual Meeting. OnThe Company completed the record date, the Company had outstanding 205,327 sharesredemption of the Company’s 5.10%its Series A Noncumulative Mandatorily Convertible Preferred Stock
Registered shareholders may attend and vote online during the Annual Meeting by using the 16-digit control number included on your proxy card and following the instructions available on the meeting website during the meeting. “Street name” shareholders who hold their shares through a bank, broker or other nominee who wish to attend and vote during the virtual meeting will need to contact their broker or agent to obtain a legal proxy from the institution that holds their shares.
A majority of votesthe shares of Common Stock entitled to be cast on matters consideredvote, represented at the virtual Annual Meeting in person or by proxy, constitutes a quorum for the transaction of business at the Annual Meeting constitutes a quorum.Meeting. If a share is represented for any purpose at the Annual Meeting, it is deemed to be present for purposes of establishing a quorum. Abstentions and shares held of record by a broker or its nominees on behalf of beneficial owners (Broker Shares) that are voted on any matter are included in determining the number of votes present or represented at the Annual Meeting. Conversely, Broker Shares that are not voted on any matter will not be included in determining whether a quorum is present.
If a quorum is established, directors will be elected by a plurality of the votes cast by shareholders at the Annual Meeting, and the auditors will be ratified and the advisory vote to approve the compensation of the named executive officers will be approved by a majority of the votes cast by shareholders at the Annual Meeting. Broker shares may not be cast in the election of directors or the advisory vote on executive compensation without instructioninstructions from the beneficial owner of the shares. Votes that are withheld or abstentions and Broker Shares that are not voted will not be included in determining the number of votes cast and will not have any effect on the outcome of any of the matters at the Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of shares of Common Stock beneficially owned,information as of March 9, 2021, by each2022 regarding the number of shares of the Company’s directorscommon stock beneficially owned by each director, each named executive officer (see “Executive Compensation”) and nominees, each of the executive officers named in the “Summary Compensation Table” below andby all of the Company’s directors and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the named person possesses sole voting and sole investment power with respect to all such shares.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class |
| Edward Ray Burkholder | 1,870 | * |
| Larry A. Caplinger | 176,173(2) | 5.10% |
| Mark C. Hanna | 12,139(3) | * |
| Daniel J. Harshman | 1,005(4) | * |
| Hannah W. Hutman | 1,189 | * |
| Anne B. Keeler | 472 | * |
| Michael W. Pugh | 11,719(5) | * |
| Christopher S. Runion | 5,724(6) | * |
| Daphyne Thomas | 251 | * |
| John A. Willingham | 3,284 | * |
| Dean W. Withers | 40,429(7) | 1.17% |
| Peter H. Wray | 1,172 | * |
| Barton E. Black | 161,689(8) | 4.68% |
| F. Garth Knight | 2,550(9) | * |
| Directors and executive officers as a group (20 individuals) | 298,107(10) | 8.64% |
* Represents less than 1% of the Company’s common stock.
(1) Based on 3,451,695 shares of common stock issued and outstanding on March 9, 2022. For the purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 underof the Securities Exchange Act of 1934 as amended, under which, in general, a person is deemed to be athe beneficial owner of a security if he or she has, or shares, the power to vote, or direct the voting, of the security or the power to dispose of, or direct, the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within 60 days.
(10) Includes 158,905 shares owned by the Company’s Employee Stock Ownership Plan over which Larry A. Caplinger, Carrie A. Comer and Barton E. Black have voting power in their capacity as plan trustees.trustees, and 8,697 shares of unvested restricted stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 9, 2021,2022, unless otherwise noted, regarding the number of shares of Common Stock beneficially owned by all persons known by us who own, or will own under certain conditions, five percent or more of our outstanding shares of Common Stock.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class(1) |
Larry A. Caplinger P. O. Box 1111 Timberville, VA 22853 | 176,173 | |
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and any persons who own more than 10% of the Common Stock, to file with the SEC reports of ownership and changes in ownership of Common Stock. Officers and directors are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to the Company or written representation that no other reports were required, the Company believes that, during 2020,2021, all filing requirements applicable to its officers and directors were timely complied.
PROPOSAL ONE - ELECTION OF DIRECTORS
The Board is divided into three classes, with directors to be apportioned as evenly as possible among the classes and serving staggered three-year terms. The term of office for the current Class AB directors expires at the Annual Meeting. The Board has nominated such directors, namely Anne B. Keeler, Mark C. Hanna,Edward Ray Burkholder, Michael W. Pugh, Christopher S. Runion and Peter H. Wray,Larry A. Caplinger, for re-election for a three-year term atto serve until the Annual Meeting. annual meeting of shareholders in 2025, or each in case until their respective successors have been duly elected and qualified.
On July 23, 2021, the Board appointed Hannah W. Hutman, Daphyne S. Thomas and John A. Willingham as directors of the Company. The Board has designated Ms. Hutman and Mr. Willingham as C directors and has nominated each of them for election for a one-year term to serve until the annual meeting of shareholders in 2023, or in each case until their respective successors have been duly elected and qualified. The Board has designated Ms. Thomas as a Class A director and nominated her for election for a two-year term to serve until the annual meeting of shareholders in 2024, or until her successor has been duly elected and qualified.
The persons named as proxies in the accompanying form of proxy, unless instructed otherwise, intend to vote for the election of each of these nominees for directors. If any nominee should become unavailable to serve, the proxy may be voted for the election of a substitute nominee designated by the Board. The Board has no reason to believe that any of the nominees will be unable to serve if elected.
The Board of Directors recommends that youa vote FOR the election of the directorDirector nominees set forth in the Proxy Statement.
below.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following information, including the principal occupation during the past five years, is given with respect to the nominees, all of whom are current directors, for election to the Board at the Annual Meeting, as well as all directors continuing in office.
| Name and Age | Director Since | Principal Occupation During the Last Five Years |
Director Nominees
CLASS B DIRECTORS
(to serve until the 2025 annual meeting of shareholders)
| Edward Ray Burkholder (48) | 2015 | Executive Senior Vice President of Balzer and Associates, Inc. since 2012. He holds a Bachelor of Landscape Architecture from Virginia Tech. In 2000 acquired his Virginia State Professional Certification in Landscape Architecture. Mr. Burkholder has held many positions within the firm since 1997. In 2003 he opened a branch office in Staunton after working in the Richmond market for 7 years. Key roles involve master planning, land development consulting, rezoning, highest and best use land analysis and studies, overseeing local and regional land development projects, and corporate management as a director of the Board. For the past 6 years, he either has served or is serving as a director for Victory Worship Center, Staunton Rotary, and Augusta Home Builders Association. Other memberships included the Virginia Economic Development Association, Shenandoah Valley Partnership, and Augusta Chamber of Commerce. Mr. Burkholder’s experience benefits the company due to his vast diversity of land development projects and understanding of local and state land use regulatory requirements. | |
| 2012 | |||
| December 2018 (Retired); Corporate Secretary from January 1992 to January 2019; Executive Vice President | |||
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| Michael W. Pugh (67) | 1994 | Chairman of the Board of the Bank & Company since December 2018. President of | |
| Christopher S. Runion (63) | 2010 | President of | |
CLASS C DIRECTORS
(to serve until the 2023 annual meeting of shareholders)
| Hannah W. Hutman (40) | 2021 | Attorney, Partner at Hoover Penrod PLC. Ms. Hutman is a graduate of Columbia Union College and Marshall-Wythe School of Law, College of William and Mary. She has been an attorney practicing in Dayton, Ohio and Harrisonburg with experience in representing creditors, trustees and debtors in bankruptcy proceedings and insolvency matters. She has represented national and regional banks in all aspects of commercial loan transactions and collections, including restructuring obligations, asset liquidations and dispositions, and foreclosure. She is a member of the panel of Chapter 7 trustees for the Western District of Virginia. In addition, she provides legal counsel and services in entity formation and governance matters, financing transactions, contracts, and business asset transfers. She is a former Chair of the Board of Governors of the Bankruptcy Law Section for the Virginia State Bar. She is “AV” rated by Martindale-Hubbell, has routinely been listed in Super Lawyers as a Rising Star, selected as a member of Virginia’s “Legal Elite,” and included in the American Bankruptcy Institute’s 2018 class of “40 under 40.” Ms. Hutman’s skills and experience in commercial loan transactions, asset liquidations and foreclosures benefit the Company in evaluating problem loan management, bankruptcy proceedings, and governance matters. |
John A. Willingham (44) | 2021 | President of Stoneridge Companies, a real estate development and realty company based in Winchester VA and CEO of Total Remodeling, a regional sunroom and outdoor living contractor. Mr. Willingham is a graduate of the Pamplin College of Business at Virginia Tech and holds a current CPA license and real estate agent license. He has served as a Market President and Senior Commercial Lender with Wells Fargo, CFO of Premier Community Bankshares Inc., and practiced in public accounting with YHB and PricewaterhouseCoopers. Mr. Willingham currently serves as Chairman for the Frederick Winchester Service Authority and is a member of the Board for Grafton Integrated Health Network. He has previously served on the F&M Advisory Board for Winchester/Northern Shenandoah Valley and as a City Councilor for the City of Winchester. Mr. Willingham’s experience and expertise benefits the Company in his understanding of accounting and the Winchester real estate market. |
CLASS A DIRECTOR
(to serve until the 2024 annual meeting of shareholders)
| Daphyne S. Thomas (68) | 2021 | Professor Emeritus, Finance & Business Law, James Madison University. Ms. Thomas is a graduate of Virginia Tech, The Washington and Lee School of Law, and James Madison University. She was a professor at JMU from 1981 to 2020 and served as the endowed Adolph Coors Professor of Business Administration chair until her retirement. She currently teaches graduate classes for James Madison University’s Executive Leadership MBA and for the Master of Accounting programs. The was a co-founder and co-director of the CyberCity Summer Program, a nationally award-winning summer technology program for middle and high school students from underrepresented populations. Ms. Thomas is a former chair of the Harrisonburg Electric Commission and the Harrisonburg Rockingham Community Services Board. She currently serves on the boards of Sunnyside Communities, The Explore More Children’s Museum, The Community Services Board Halfway House, The JMU College of Visual and Performing Arts Advisory Board, The Harrisonburg Rockingham Child Daycare Center and The Community Foundation of Harrisonburg Rockingham Grants and Scholarship committee. Ms. Thomas’ education and experience in business law and accounting and previous board service uniquely benefits the Company. |
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Directors Continuing in Office
CLASS C DIRECTORS
(to serve until the 2023 annual meeting of shareholders)
| Daniel J. Harshman | 2001 | Mayor of the Town of Edinburg since 1992 and served as its Town Manager from 1996 until 2010. Mr. Harshman graduated from Virginia Commonwealth University. He has |
Dean W. Withers | 2004 | Vice Chairman since December 2018; CEO of the Bank from December 2017 to June 2018; President and CEO of the Bank from May 2004 to December 2017; Executive Vice President of the Bank from January 2003 to May 2004; Vice President of the Bank from 1993 to 2003. Mr. Withers has thirty-nine years of banking experience including fourteen years as President/CEO of Farmers & Merchants Bank. He graduated from James Madison University and Graduate School of Banking at LSU. He also serves as a director of Valley Southern Title and serves on the Bridgewater Retirement Foundation Board. In the past, he has served as a director in the Virginia Association of Community Banks, Virginia Bankers Association Benefits Corporation and Rockingham Memorial Hospital Foundation. Mr. Withers’ education, experience and skills as President and CEO and former commercial lender benefit the Company through his understanding of bank operations, corporate governance, and lending. |
CLASS BA DIRECTORS
(to serve until the 20222024 annual meeting of shareholders)
Mark C. Hanna (53) | 2017 | President /CEO of the Bank since July 1, 2018. Prior to that he served as President since December 2017. Prior to joining the Company, he served as Executive | |
Peter H. Wray (53) | 2017 | President of Wray Realty, Inc. and Principal Broker of Triangle Realtors since | |
| Anne Keeler served as the Vice President for Finance and Treasurer of | |||
| “Section 403(b) Defined Contribution Plan for Tax-Exempt Colleges and Universities in Virginia”. | |||
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General
The business and affairs of the Company are managed under the direction of the Board of Directors in accordance with the Virginia Stock Corporation Act and the Company’s Articles of Incorporation and Bylaws. Members of the Board are kept informed of the Company’s business through discussions with the Chairman of the Board, the Chief Executive Officer and other officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees.
Board Leadership
The Board of Directors is made up of tentwelve members, including sevennine outside directors and three current or former officers of the Company. The Board leadership structure includes the Chairman of the Board and Vice Chairman of the Board, neither of whom currently serve as the principal executive officer of the Company. The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board has determined that having an independent director serve as Chairman is in the best interest of the Company's shareholders at this time. This structure ensuresencourages a greater role for the independent Directors in the oversight of the Company and active participation of the independent Directors in setting agendas and establishing Board priorities and procedures. Further, this structure permits the CEO to focus on the management of the company's day-to-day operations.
Risk Oversight
The Board has appointed several committees including Audit, Asset/Liability (ALCO), Operational Risk, and Corporate Governance. In addition to the Board’s overall policy making authority and risk management responsibilities, these committees are delegated authority with respect to their various areas of operation. One area of significant risk to financial institutions revolves around the risks associated with the monitoring of existing and proposed loan relationships. The Board receives a number of monthly and quarterly reports that assist in tracking and mitigating lending risk. The Board has also established an Executive Loan Committee which convenes periodically, either in person or telephonicallyvirtually, to consider new loan requests.
Code of Ethics
The Board of Directors has approved a Code of Ethics for Senior Financial Officers of the Company and the Bank. This document covers the Company’s President/Chief Executive Officer and the Chief Financial Officer. The Code of Ethics states that the Senior Financial Officers are expected to conduct business and act in an honest and ethical manner; provide full, fair, accurate, timely and understandable financial reports; report any significant deficiencies in the Company’s internal controls over financial reporting; may not use corporate property, information, or position for improper personal gain or compete with the Company; endeavor to protect the Company’s assets and ensure their efficient use; and respect the rights of and deal fairly with the Company’s customers, suppliers, competitors and employees. A copy of the Code of Ethics is available, without charge, upon request to the Secretary of the Company at P. O. Box 1111, Timberville, VA 22853.
Independence of Directors
The Board of Directors in its business judgment has determined that the following sevennine of its tentwelve members are independent as defined by the listing standards of the Nasdaq Stock Market (“Nasdaq”): Edward Ray Burkholder, John N. Crist, Daniel J. Harshman, Anne B. Keeler, Hannah W. Hutman, Michael W. Pugh, Christopher S. Runion, Daphyne S. Thomas, John A. Willingham, and Peter H. Wray and Anne B. Keeler.Wray.
Our Board of Directors has established standards under which we view the following as impairing a director’s independence:
a director who is or at any time during the past three years was our employee, or whose immediate family member is or at any time during the past three years was an executive officer;
a director who received, or whose immediate family member received, more than $120,000 per year in direct compensation from us during any period of twelve consecutive months within the past three years, other than director and committee fees and pension or other forms of deferred compensation for prior service;
a director who is or at any time during the past three years was affiliated with or employed by, or whose immediate family member is or at any time during the past three years was affiliated with or employed in a professional capacity by, our present or former internal or external auditor;
a director who is employed, or whose immediate family member is employed, as an executive officer of another company where at any time during the past three years any of our executives served on that company’s compensation committee; and
a director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, us for property or services in an amount which, in any single fiscal year, exceeds the greater of $200,000 or 5% of such other company’s consolidated gross revenues.
While we conduct business with several of our directors, including Edward Ray Burkholder (engineering expertise), John Crist (legal services), Michael Pugh (real estate appraisal services, sales and leasing), Christopher Runion (signage), and Peter Wray (real estate sales and leasing), Hannah Hutman (legal services), Daphyne Thomas (education), and John Willingham (real estate services and sales), the total amounts paid to the entities with which our directors are affiliated are significantly less than the thresholds outlined above. DirectorsMr. Withers and Mr. Caplinger are not considered independent due to their recent employment relationships with the Company. DirectorMr. Hanna is not considered independent due to his current employment by the Company. Other than those described above and under “Certain Relationships and Related Transactions,” the Board of Directors did not consider any transactions, relationships or arrangements in determining director independence.
Board and Committee Meeting Attendance
There were 12twelve meetings of the Board of Directors of the Company in 2020.2021. Each director attended greater than 75% of the aggregate number of meetings of the Board of Directors and meetings of committees of which the director was a member in 2020.2021. The Board of the Bank, which met 12twelve times in 2020,2021, primarily manages all matters for the Bank. All the directors of the Company are also directors of the Bank.
Committees of the Board
The Company has an Audit Committee. The Company does not have a standing nominating committee. The Company does not have a standing Compensation Committee; however, the Bank has a Compensation Committee. Since compensation is paid through the Bank, the Bank’s Compensation Committee evaluates compensation policies and makes recommendations to the Company’s Board.
These recommendations are considered for approval by the independent directors of the Company. Other standing committees for the Bank include the ALCO Committee, Operational Risk andCommittee, Corporate Governance Committee, and Building Committee.
Audit Committee
The Audit Committee assists the Board of Directors in fulfilling the Board’s oversight responsibility to the shareholders relating to the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the qualifications, independence and performance of the Company’s independent auditors and the performance of the internal audit function. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company. The Board of Directors has adopted a written charter for the Audit Committee which can be found on our website at www.fmbankva.com/About/Investor-Relations.
The members of the Audit Committee are Daniel J. Harshman, Anne B. Keeler, Christopher S. Runion, Anne B. KeelerDaphyne S. Thomas, John A. Willingham, and Peter
H. Wray all of whom the Board in its business judgment has determined are independent as defined by the SEC regulations and the listing standards of Nasdaq. The Board of Directors also has determined that all of the members of the Audit Committee have sufficient knowledge in financial and auditing matters to serve on the Audit Committee and that Mr. Runion qualifies as an audit committee financial expert as defined by SEC regulations.
The Audit Committee met five times in 2020.2021. For additional information regarding the Audit Committee, see “Audit Information-Audit Committee Report” on pages 19 andpage 20 of this Proxy Statement.
Compensation Committee
The Bank’s Compensation Committee reviews our executive officers performance and compensation, reviews and sets guidelines for compensation of all employees and makes compensation recommendations to the Board. All
recommendations of the Bank’s Compensation Committee relating to the compensation of our executive officers are reported to the Company’s Board of Directors for approval by the independent directors. The Board of Directors has not adopted a written charter for the Compensation Committee.
The members of the Bank’s Compensation Committee are Edward Ray Burkholder, Daniel J. Harshman, Anne B. Keeler, Michael W. Pugh, and Peter
Director Nomination Process
The Company currently does not have a standing nominating committee because the Corporate Governance Committee supports this process by developing qualifications for director membership. The President/CEO as a management director, abstains from discussions and voting for nominees. When the Board performs its nominating function, the Board acts in accordance with the Company’s Articles of Incorporation and Bylaws but does not have a separate charter related to the nomination process.
Should a vacancy occur on the Board of Directors of the Company, the Board would look to the Corporate Governance Committee’s list of director qualifications (listed below) and consider these qualifications in developing a pool of potential nominees from the communities served by the Company. The Board would then appoint the candidate who was best qualified following discussions among the independent directors. The Board also considers potential nominees submitted by shareholders.
The Company’s independent directors consider, at a minimum, the following factors in recommending to the Board potential new directors, or the continued service of existing directors:
The ability of the prospective nominee to represent the interests of the shareholders of the Company;
The prospective nominee’s standards of integrity, commitment and independence of thought and judgment;
The prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective nominee’s service on other public company boards; and
The extent to which the prospective nominee contributes to the range of talent, skill and expertise appropriate for the Board of Directors.
Shareholders entitled to vote for the election of directors may submit candidates for formal consideration by the Company in connection with an annual meeting of shareholders by providing the Company with timely written notice, in proper form, for each such recommended director nominee. If the notice is not timely and in proper form, the nominee will not be considered by the Company. To be timely for the 20222023 annual meeting, the notice must be received within the time frame set forth in “Shareholder Proposals” on page 2021 of this Proxy Statement. To be in proper form, the notice must include each nominee’s written consent to be named as a nominee and to serve, if elected, and information about the shareholder making the nomination and the person nominated for election. These requirements are more fully described in Section 2.5 of the Company’s Bylaws, a copy of which will be provided, without charge, to any shareholder upon written request to the Secretary of the Company, whose address is P. O. Box 1111, Timberville, VA 22853.
While the Company does not have a diversity policy, we consider diversity of the Board based on a number of factors including the geographic locations of potential directors within our branch network, educational background and work experience.
Annual Meeting Attendance
The Company encourages members of the Board of Directors to attend the annual meeting of shareholders. All of the directors attended the 20202021 virtual meeting.
Communications with Directors
Any director may be contacted by writing to him or her c/o P. O. Box 1111, Timberville, VA 22853. Communications to the non-management directors as a group may be sent to the same address, c/o the Secretary of the Company. The Company promptly forwards, without screening, all such correspondence to the indicated directors.
Anti-Hedging Policy
The Company currently does not have any policies with respect to financial instruments or transactions in derivative securities or otherwise that hedge or offset any decrease in the market value of the Company’s common stock.
Director Compensation
The following table showsprovides compensation information for the compensation earned byyear ended December 31, 2021 for each non-employee director of the non-employee directors during 2020. Mr. Hanna does not receive any additional compensation for service as a director. Compensation included meeting fees, retainers and bonuses.company’s Board of Directors:
Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Total ($) | |
| Edward Ray Burkholder | $ 43,560 | $ 3,959 | $ 47,519 |
| Larry A. Caplinger | 41,960 | 3,959 | 45,919 |
John N. Crist(2) | 34,293 | 3,959 | 38,252 |
| Daniel J. Harshman | 44,260 | 3,959 | 48,219 |
Hannah W. Hutman(3) | 13,800 | - | 13,800 |
| Anne B. Keeler | 43,510 | 3,959 | 47,469 |
| Michael W. Pugh | 49,960 | 3,959 | 53,919 |
| Christopher S. Runion | 44,310 | 3,959 | 48,269 |
Daphyne Thomas(3) | 14,000 | - | 14,000 |
John A. Willingham(3) | 14,000 | - | 14,000 |
| Dean W. Withers | 41,960 | 3,959 | 45,919 |
| Peter H. Wray | 43,160 | 3,959 | 47,119 |
| Name | Fees Earned Or Paid in Cash ($) | Total ($) | ||
| Edward Ray Burkholder | 40,290 | 40,290 | ||
| John N. Crist | 38,640 | 38,640 | ||
| Daniel J. Harshman | 41,140 | 41,140 | ||
| Dean W. Withers | 38,640 | 38,640 | ||
| Michael W. Pugh | 47,040 | 47,040 | ||
| Christopher S. Runion | 40,940 | 40,940 | ||
| Larry A. Caplinger | 40,140 | 40,140 | ||
| Peter H. Wray | 38,640 | 38,640 | ||
| Anne B. Keeler | 37,507 | 37,507 | ||
Richard S. Myers1 | 21,813 | 21,813 | ||
Ronald E. Wampler2 | 9,807 | 9,807 |
All directors of the Company, who are also directors of the Bank, received $1,200 for each board meeting attended, $400 for each ALCO, Operational Risk, and Corporate Governance Committee meeting attended, $400 for each Compensation Committee meeting attended and $500 for each Audit Committee meeting attended. Since the Company and Bank board meetings are held on the same day, members are only paid one fee of $1,200 for their attendance at the combined meeting. In addition to meeting fees, each director received a quarterly retainer of $5,000 to compensate for time spent on bank-related activities outside the normal meeting structure. The Audit Committee is a Company committee. All other committees are Bank committees.
Executive Officers Who Are Not Directors
Carrie A. Comer, 52, has served as Executive Vice President/Chief Banking Officer o f t h e Ba n k and t he C om pa ny since July 2016, Executive Vice President/Chief Retail Officer from June 2013 until July 2016 and Senior Vice President/Branch Administrator from February 2005 until June 2013. She also served as Vice President/Branch Administrator from March 2003 until February 2005 and as Branch Manager of the Edinburg Branch from February 2001 until March 2003.
Paul E. Eberly, 39,40, has served as Executive Vice President/Chief Credit Officer since September 2020, Senior Vice President/Agricultural & Rural Programs Leader from January 2020 until September 2020, and Vice President/Agricultural & Rural Programs Leader from January 2019 until January 2020. He also served in various sales, lending, credit, risk management and other leadership roles within the Farm Credit System from June 2005 until January 2019. Mr. Eberly has been in the banking and finance industry since 2005.
F. Garth Knight, 39, has served as Executive Vice President/Chief Banking Officer of the Bank and the Company since January 2022, and Executive Vice President/Chief Lending Officer from June 2020 to December 2021. Prior to joining F&M Bank, he spent 15 years at Wells Fargo Bank serving as Vice President/Business Acquisition Manager for Mid-Atlantic and Greater Philadelphia from May 2017 until May of 2020, Vice President/Business Banking Manager for North and South Carolina from September of 2010 to May of 2017, and Retail Market Leader from June 2005 to September 2010.
Kevin Russell, 45, has served as the Executive Vice President/President of Mortgage, Title and Financial Services at the Bank and the Company since June 16, 2020. Prior to that he served as the President of F&M Mortgage since 2000.
Stephanie E. Shillingburg, 60, has served as Executive Vice President/Chief Experience Officer of the Bank and the Company since January 2022, Executive Vice President/Chief Banking Officer July 2016 to December 2021, Executive Vice President/Chief Retail Officer from June 2013 until July 2016 and Senior Vice President/Branch Administrator from February 2005 until June 2013. She also served as Vice President/Branch Administrator from March 2003 until February 2005 and as Branch Manager of the Edinburg Branch from February 2001 until March 2003.
Aubrey Michael (Mike) Wilkerson, 63, joined F&M Bank on64, has served as Executive Vice President/Chief Lending Officer since January 4, 2021. He serves as the 2022, and Executive Vice President/Chief Strategy Officer and Northern Shenandoah Valley Market Executive.Executive since January 2021. Mr. Wilkerson began his banking career at Wachovia Bank on January 4, 1982. Mr. Wilkerson’s 39 years in banking includes experience in Dealer Financial Services, Retail Banking, Private Banking, Commercial Banking and senior strategic leadership positions. From 2012 to 2018, Mr. Wilkerson was the Business Banking Division Executive for Virginia, Maryland & Washington DC.DC at Wachovia. Most recently, Mr. Wilkerson served as the Commercial Banking Market Executive from 2018 through 2020 for Western Mid-Atlantic Region.Region at Wells Fargo.
EXECUTIVE COMPENSATION
Summary Compensation
The Summary Compensation Table below sets forth the compensation of the Company’s named executive officers for all services rendered to the Company and the Bank for 2020.2021. See the Summary of Compensation Policies beginning on pagespage 15 to 18 of this Proxy Statement for further information regarding our compensation program, including summaries of the Company’s employment agreements and other compensation arrangements.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($)1 | All Other Compensation ($)2 | Total ($) |
Mark C. Hanna President & CEO | 2020 | 389,384 | 116,384 | 60,824 | 566,592 |
| 2019 | 380,714 | 49,350 | 41,975 | 472,039 | |
Stephanie E. Shillingburg EVP/Chief Banking Officer | 2020 2019 | 186,067 182,979 | 55,476 18,258 | 31,374 26,522 | 272,917 227,759 |
Barton E. Black EVP/Chief Strategy & Risk Officer | 2020 | 259,452 | 77,480 | 55,155 | 392,087 |
Name and Principal Position | Year | Salary ($) | Signing Bonus ($) | Non-Equity Incentive Plan Compensation ($) (1) | Stock Awards ($) (2) | All Other Compensation ($) (3) | Total ($) |
Mark C. Hanna | 2021 | 414,853 | - | 106,210 | 78,110 | 58,352 | 657,525 |
President and CEO | 2020 | 389,384 | - | 116,384 | - | 60,824 | 566,592 |
Barton E. Black | 2021 | 275,414 | - | 70,707 | 38,975 | 55,066 | 440,162 |
Chief Operating Officer | 2020 | 259,452 | - | 77,480 | - | 55,155 | 392,087 |
F. Garth Knight | 2021 | 258,250 | - | 47,007 | 23,489 | 50,137 | 379,883 |
Chief Banking Officer | 2020 | 139,423 | 15,000 | 536 | - | 43,013 | 197,972 |
| (1) | The amounts in this column represent non-equity incentive plan compensation pursuant to the Executive Incentive Plan approved for the year listed; however, the actual payments were not made until after the end of each year |
| (2) | The amounts represent the grant date fair value of the awards calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation – Stock Compensation. Awards consist of time-based restricted stock that vest over a period of four years. Assumptions used in the calculation of these amounts are included in Note 14 of the Company’s audited financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2021. |
| (3) | The amounts in this column are detailed in the table titled “All Other Compensation” below. |
ALL OTHER COMPENSATION TABLE
FISCAL YEAR 2021
Name | 401(k) Company Contribution ($) | Company ESOP Contribution ($) (1) | Company Deferred Compensation Contribution ($) (2) | Life Insurance Premiums ($) (3) | Restricted Stock Dividends ($) (4) | Personal and Other Benefits ($) (5) | Total ($) |
Mark C. Hanna | 3,341 | 11,400 | 24,605 | 1,969 | 2,278 | 14,759 | 58,352 |
Barton E. Black | 10,150 | 11,400 | 16,380 | 2,184 | 1,136 | 13,816 | 55,066 |
F. Garth Knight | 7,600 | 10,196 | 15,225 | 1,200 | 637 | 15,279 | 50,137 |
| (1) | The Company has established an Employee Stock Ownership Plan that covers all eligible full and part time employees, including the executive officers. The plan serves as a long-term incentive for employees to promote the achievement of goals which create value for our shareholders. See Employee Stock Ownership Plan on page 18 of the Proxy Statement for further details. |
| (2) | The Company has established a nonqualified deferred compensation plan for the benefit of our directors and certain employees, including the executive officers, to defer receipt of salary or bonus payments. See Deferred Compensation Plan on page 18 of the Proxy Statement for further details. |
| (3) | The amounts in this column represent the annual premium of group term life insurance with a death benefit equal to three times annual compensation. |
| (4) | The amounts in this column represent dividends received during 2021 on unvested shares of restricted stock. Under the 2020 Stock Incentive Plan, holders are entitled to dividends from the grant date through the vesting period. |
| (5) | The amounts in this column include personal use of a company vehicle, bank-owned life insurance premiums and country club dues. |
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Holdings of Stock Awards
| Name | Year | 401(k) Company Match | Company ESOP Contribution1 | Company Deferred Compensation Contribution2 | Life Insurance Premiums3 | Personal and Other Benefits4 | Total ($) |
Mark Hanna | 2020 | 7,796 | 11,200 | 25,037 | 2,520 | 14,272 | 60,824 |
2019 | 7,294 | 9,625 | 25,536 | 2,520 | ---- | 41,975 | |
Stephanie Shillingburg | 2020 | 7,117 | 8,104 | 11,980 | 902 | 3,271 | 31,374 |
2019 | 7,142 | 7,332 | 11,191 | 857 | --- | 26,522 | |
Barton Black | 2020 | 9,829 | 11,200 | 16,668 | 2,100 | 15,358 | 55,155 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Stock Awards | |||
Name | Grant Date | Number of Shares or Units of Stock that Have Not Vested (1) | Market Value of Shares or Units of Stock that Have Not Vested (2) |
Mark C. Hanna | 3/7/2021 | 2,920 | $ 83,950 |
Barton E. Black | 3/7/2021 | 1,457 | $ 41,889 |
F. Garth Knight | 3/1/2021 | 817 | $ 23,489 |
| (1) | These amounts are comprised of unvested shares of time-based restricted stock at December 31, 2021. All shares granted vest over a four-year period whereby the executive receives one-fourth of the shares on the anniversary of the grant date if that executive is employed on the anniversary date. |
| (2) | These amounts represent the fair market value of the restricted stock awards on December 31, 2021. The closing price of the Company’s common stock was $28.75 on that date. |
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2021, relating to the Company’s stock-based compensation plans under which shares of common stock are authorized for issuance.
Plan Category | Number of Shares to Be Issued Upon Exercise of OutstandingOptions, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options,Warrants and Rights | Number of Securities Remaining Available for Future Issuance UnderEquity Compensation Plans |
Equity Compensation Plans | |||
Approved by Shareholders: | |||
2020 Stock Incentive Plan | - | - | 182,799 |
Equity Compensation Plans Not Approved by Shareholders: (1) | - | - | - |
Total | - | - | 182,799 |
| (1) | The Company does not have any equity compensation plans that have not been approved by shareholders. |
Summary of Compensation Policies
Overview.This section provides information regarding the compensation program in place for Mark Hanna, President/CEO, Stephanie E. Shillingburg, EVP/Chief Banking Officer, and Barton E. Black, EVP/Chief Strategy & RiskOperating Officer, and F. Garth Knight, EVP/Chief Banking Officer, collectively referred to as our “named executive officers.” This section includes information regarding the overall objectives of our compensation program and each element of compensation that we provide.
The independent members of our Board of Directors administer the Company’s executive compensation program based on the recommendations of the Bank’s Compensation Committee, which the Company’s independent directors review and approve.
General Compensation Objectives.Our overall objectives applicable to our executive officers are to provide a compensation package intended to attract, motivate, and retain qualified executives and to provide them with incentives to achieve our annual goals and to increase shareholder value. We recognize the need to implement sound principles that enhance our ability to develop and administer compensation and benefit programs. To this end, we follow certain procedures, including the following:
Purchasing survey information related to other Virginia banks of similar size as prepared by the Virginia Bankers Association; and
Obtaining from FIG Partners,Janney Montgomery Scott, LLC a report of peer banks in Virginia and adjoining states that met certain asset and performance characteristics (the “peer group”).
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We rely upon our judgment in making sound compensation decisions, after reviewing the performance of the Company and carefully evaluating the executive’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, career with the Company, current compensation arrangements and long-term potential to enhance shareholder value. Specific factors affecting compensation decisions for the named executive officers include:
Financial measures such as net profit, return on equity (ROE), return on assets (ROA) and efficiency ratio relative to the peer group;
Strategic objectives such as the establishment of new branch offices;
Launching new or improving existing products that help us reach our goals of being a market leader and to attract and retain customers;
Achievement of specific operational goals for the company, including improved productivity, risk management or portfolio management goals;
Achieving excellence in their organizational structure and among their employees;
andSupporting our corporate values by promoting integrity through compliance with laws and regulations.
We generally do not strive for rigid formulas or react to short term changes in business performance in determining the amount or mix of compensation and benefits. The mix of compensation elements is based on the review of the factors outlined above in order to provide the executive with a combination of salary, non-equity incentives and long-term compensation commensurate with responsibilities and competitive with other banks of similar size and characteristics.
While we consider the compensation paid by other banks in the benchmarking report and salary survey, we do not attempt to maintain a certain target percentile within these peer groups.
Base Salaries.Our policy is to provide salaries that we believe are necessary to attract and retain qualified executives. The objective of the base salary is to reflect job responsibilities, value to the Company and individual performance with respect to the Company’s goals and objectives. The salaries of the executive officers are reviewed on an annual basis, as well as at the time of a promotion or other change in responsibilities. Increases in salary are based on an evaluation of the individual’s performance and level of pay compared to industry peers as contained in the previously mentioned salary survey and benchmarking report. With regard to discussion and determination of named executives’ compensation, we exclude Mr. Hanna from discussion of his compensation and rely on the benchmarking report and other survey information.
Equity Compensation. The Compensation Committee may provide equity compensation to employees, directors, and consultants pursuant to the 2020 Stock Incentive Plan. The 2020 Stock Incentive plan was adopted by the Board of Directors of the Company on March 19, 2020 and approved at the Annual Meeting of Shareholders on May 5, 2020.Plan. The plan makes available up to 200,000 shares of Common Stock for the granting of stock options, restricted stock and other stock awards, restricted stock units, and stock appreciation rights.
Equity compensation has been made to executive officers in the form of restricted stock, which is vested over a four-year period whereby the executive receives one-fourth of the shares on the anniversary of the grant date if that executive is employed on the anniversary date. The Board believes thatgoal of the plan willCompensation Committee in granting equity compensation is to stimulate the efforts of employees, directors and consultants upon whose judgment, interest, and efforts the Company depends for the successful conduct of its businesses and will further the alignment of those persons’ interests with the interests of the Company’s shareholders.
Employment AgreementsAgreements.. On December 30, 2020, the The Company entered into employment agreements with certain of its named executive officers, including Mr. Hanna and Mr. Black.as summarized below.
Mark C. Hanna.The term of Mr. Hanna’s employment agreement began on December 30, 2020 and will continuecontinued until December 31, 2021, unless terminated earlier in accordance with its terms.2021. On December 31, 2020, and each December 31 thereafter, the term of the agreement shall be renewed and extended by one year, such that the extended term of this Agreement on December 31, 2020 or the applicable anniversary thereof is two years, unless either Mr. Hanna or the Company gives advance notice to the other in writing.writing
Mr. Hanna’s employment agreement provides for the termination of Mr. Hanna’s employment by the Company without “Cause” or by him for “Good Reason” in the absence of a “Change of Control” (as those terms are defined in the agreement). In such cases, Mr. Hanna will be entitled to receive (i) his then-current base salary for the greater of the remainder of the term or 12 months, (ii) any bonus or other short-term incentive compensation earned, but not yet paid, for prior years and (iii) a welfare continuance benefit in an amount equal to 12 times the excess of COBRA premiums that would apply as of Mr. Hanna’s date of termination for continued health, dental and vision coverage, if COBRA continuation were elected for such coverage, over the amount that he paid for such coverage immediately before his termination of employment. Mr. Hanna’s employment agreement also provides for the termination of Mr. Hanna's employment by the Company following a “Change of Control” or by him for “Good Reason” following a “Change of Control.” In such cases, Mr. Hanna will be entitled to receive, among other things, a lump sum amount equal to (i) the welfare continuance benefit described above, substituting 24 for 12 and (ii) 2.99 times the sum of his base salary and the greater of his target annual bonus or actual annual bonus for the most recent year. Mr. Hanna’s entitlement to the foregoing severance payments is subject to Mr. Hanna's release and waiver of claims against the Company and his compliance with certain restrictive covenants as provided in the employment agreement.
Mr. Hanna will not be entitled to any compensation or other benefits under his employment agreement if his employment is terminated upon his death, by the Company for “Cause,” or by him in the absence of “Good Reason.”
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Mr. Hanna’s employment agreement contains restrictive covenants relating to the protection of confidential information, non-disclosure, non-competition and non-solicitation. The non-compete and non-solicitation covenants generally continue for a period of 18 months following the last day of Mr. Hanna’s employment.
Barton E. Black.The term of Mr. Black’s employment agreement began on December 30, 2020 and will continuecontinued until December 31, 2021, unless terminated earlier in accordance with its terms.2021. On December 31, 2020, and each December 31 thereafter, the term of the agreement shall be renewed and extended by one year, such that the extended term of this Agreement on December 31, 2020 or the applicable anniversary thereof is two years, unless either Mr. Black or the Company gives advance notice to the other in writing.
Mr. Black’s employment agreement provides for the termination of Mr. Black’s employment by the Company without “Cause” or by him for “Good Reason” in the absence of a “Change of Control” (as those terms are defined in the agreement). In such cases, Mr. Black will be entitled to receive (i) his then-current base salary for the greater of the remainder of the term or 12 months, (ii) any bonus or other short-term incentive compensation earned, but not yet paid, for prior years and (iii) a welfare continuance benefit in an amount equal to 12 times the excess of COBRA premiums that would apply as of Mr. Black’s date of termination for continued health, dental and vision coverage, if COBRA continuation were elected for such coverage, over the amount that he paid for such coverage immediately before his termination of employment. Mr. Black’s employment agreement also provides for the termination of Mr. Black's employment by the Company following a “Change of Control” or by him for “Good Reason” following a “Change of Control.” In such cases, Mr. Black will be entitled to receive, among other things, a lump sum amount equal to (i) the welfare continuance benefit described above, substituting 24 for 12 and (ii) 2.99 times the sum of his base salary and the greater of his target annual bonus or actual annual bonus for the most recent year. Mr. Black’s entitlement to the foregoing severance payments is subject to Mr. Black's release and waiver of claims against the Company and his compliance with certain restrictive covenants as provided in the employment agreement.
Mr. Black will not be entitled to any compensation or other benefits under his employment agreement if his employment is terminated upon his death, by the Company for “Cause,” or by him in the absence of “Good Reason.”
Mr. Black’s employment agreement contains restrictive covenants relating to the protection of confidential information, non-disclosure, non-competition and non-solicitation. The non-compete and non-solicitation covenants generally continue for a period of 18 months following the last day of Mr. Black’s employment.
F. Garth Knight. The Company entered into an employment agreement with Mr. Knight on May 18, 2020, which was amended and restated on December 30, 2020. The initial term began on the restated date and continued until December 31, 2021. On December 31, 2020, and each December 31 thereafter, the term of the agreement shall be renewed and extended by one year, such that the extended term of this Agreement on December 31, 2020 or the applicable anniversary thereof is two years, unless either Mr. Knight or the Company gives advance notice to the other in writing.
Mr. Knight’s employment agreement provides for the termination of Mr. Knight’s employment by the Company without “Cause” or by him for “Good Reason” in the absence of a “Change of Control” (as those terms are defined in the agreement). In such cases, Mr. Knight will be entitled to receive (i) his then-current base salary for the greater of the remainder of the term or 12 months, (ii) any bonus or other short-term incentive compensation earned, but not yet paid, for prior years and (iii) a welfare continuance benefit in an amount equal to 12 times the excess of COBRA premiums that would apply as of Mr. Knight’s date of termination for continued health, dental and vision coverage, if COBRA continuation were elected for such coverage, over the amount that he paid for such coverage immediately before his termination of employment. Mr. Knight’s employment agreement also provides for the termination of Mr. Knight's employment by the Company following a “Change of Control” or by him for “Good Reason” following a “Change of Control.” In such cases, Mr. Knight will be entitled to receive, among other things, a lump sum amount equal to (i) the welfare continuance benefit described above, substituting 24 for 12 and (ii) 2.99 times the sum of his base salary and the greater of his target annual bonus or actual annual bonus for the most recent year. Mr. Knight’s entitlement to the foregoing severance payments is subject to Mr. Knight's release and waiver of claims against the Company and his compliance with certain restrictive covenants as provided in the employment agreement.
Mr. Knight will not be entitled to any compensation or other benefits under his employment agreement if his employment is terminated upon his death, by the Company for “Cause,” or by him in the absence of “Good Reason.”
Mr. Knight’s employment agreement contains restrictive covenants relating to the protection of confidential information, non-disclosure, non-competition and non-solicitation. The non-compete and non-solicitation covenants generally continue for a period of 18 months following the last day of Mr. Knight’s employment.
Retirement Benefits.An important retention tool is the Company’s various retirement plans. We balance the effectiveness of these plans as a compensation and retention tool with the cost to the Company of providing them.
Pension Plan.The Company has a noncontributory pension plan that covers all full-time employees hired prior to April 1, 2012, including the executive officers. This plan conforms to the Employee Retirement Income Security Act of 1974, as amended (ERISA). The amount of benefits payable under the plan is determined by an employee’s period of credited service. The amount of normal retirement benefit will be determined based on a participant’s credited service, earnings and the benefit formula as described in the plan’s adoption agreement. The plan provides for early retirement for participants with 10 years of vesting service and the attainment of age 55. A participant who terminates employment with five or more years of vesting service will be entitled to a benefit. The benefits are payable in single or joint/survivor annuities, as well as a lump sum payment option upon retirement or separation of service (subject to limitations as described in the plan’s adoption agreement).
Deferred Compensation Plan.Our deferred compensation plan allows certain employees, including the executive officers, to defer receipt of salary and or bonus payments. The initial decision to create the deferred compensation plan included an evaluation of our total benefits package for our senior management team, compared to the benefits package available to all employees and to other comparable companies. The plan was created as a means of attracting and retaining qualified members of the management team. At the present time, participation in the plan is limited to our senior management team, consisting of twelvefifteen employees, including the sevennine executive officers. Deferred amounts are deposited in separate accounts and are credited with earnings or losses based on the rate of return of mutual funds selected by the plan participants. Distributions are paid either upon termination or returned at a specific date in the future, as elected by the employee. The employee may elect to receive payments in either a lump sum or a series of installments. Participants may defer up to 100% of salary and bonus payments.
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Each year we consider whether to make a discretionary Company contribution to the plan for the benefit of the participants, including the executive officers. Contributions to the plan are based on a number ofseveral factors including an evaluation of overall bank performance and an evaluation of the total contributions to the bank’s other retirement plans, including the ESOP and 401(k) plans. This contribution is shared on a pro-rated basis by the participants in the plan based on each participant’s salary as a percentage of the total salaries of the participants in the plan. For 20202021 and 2019,2020, the total contributions to the plan were $125,000 and $125,000, respectively. Distributions are paid upon termination and the employee may elect to receive payments in either a lump sum or a series of installments.
401(k) Savings Plan.Employees, including the executive officers, may contribute up to 97% of regular earnings on a before-tax basis into their Savings Plan (subject to IRS limits). We match dollar for dollar the first 1% of compensation that an employee contributes. Then we match one dollar for each two dollars the employee contributes up to 6% of compensation. Amounts held in the Savings Plan accounts may not be withdrawn prior to the employee’s termination of employment (subject to certain exceptions as directed by the IRS).
The Savings Plan limits the “annual additions” that can be made to an employee’s account to $44,000 per year. “Annual additions” include our matching contributions, before-tax contributions made by our employee under Section 401(k) of the Internal Revenue Code and employee after-tax contributions. Of those annual additions, the current maximum before-tax contribution is $18,500$19,500 per year. Participant’s age 50 and over may also contribute, on a before-tax basis, and without regard to the $44,000 limitation on annual additions or the $18,500$19,500 general limitation on before-tax contributions, catch-up contributions of up to $6,000$6,500 per year. The Company’s matching contribution for each of the named executive officers is contained in the Summary Compensation Table.
Employee Stock Ownership Plan (ESOP).This plan is a long-term incentive for our employees that promotes the achievement of goals which create value for our shareholders. This noncontributory plan covers all eligible full and part time employees, including the executive officers. This plan conforms to the ERISA. An employee becomes a participant in
the plan as of October 1
1st of the plan year in which the employee completes one full year of service. A participant who
terminates employment with three or more years of vesting service will be vested in their benefit. Cash dividends paid by the Company are passed through to the participants on an annual basis. In 20202021 and 2019,2020, the Company contributed
Termination for Good Reason or Without Cause1 | Termination for Good Reason or Without Cause Following Change2 of Control | |||
| Mark C. Hanna | 556,476 | 1,383,212 | ||
| Barton E. Black | 337,480 | 854,880 | ||
The Company’sCompany, through its subsidiary Bank, grants loans to and accepts deposits from its directors, andprincipal officers and other corporations, business organizations, andrelated parties of such persons with whom some of the Company’s directors and officers are associated, had loan transactions at December 31, 2020 with the Bank totaling approximately $22,525,000 or about 24.06% of average shareholders' equity and had loan transactions at December 31, 2019 totaling approximately $21,722,000 or about 23.72% of average shareholders’ equity. All such transactions were made induring the ordinary course of businessbusiness. Loans are granted on substantially the same terms, including interest rates and collateral, as those prevailing at the time infor comparable transactions with personsother customers not related to the Company and diddo not involve more than the normal risk of collectability or present other unfavorable features. The aggregate balance of loans to directors, principal officers and their related parties was $23,379,000 at December 31, 2021. Deposits are accepted on the same terms, including interest rates, as those prevailing at the time for comparable transactions with other customers. The aggregate balance of deposits from directors, principal officers and their related parties was $8,799,000 at December 31, 2021.
In February 2007, the Board approved the Loan Credit Policy which includes guidelines as contained in Regulation O with regards toaddition, any extensions of credit to executive officers, directors and principal shareholders. All such requestsofficers are presentedrequired to be on substantially the full Boardsame terms as comparable transactions to non-related parties at the time of the extension of credit, pursuant to Regulation O – Loans to Executive Officers, Directors for approval. Underand Principal Shareholders of Member Banks of the policy, no executive officer, board member or principal shareholder may participate in the review of a transaction in which such member has an interest.banking regulations applicable to us.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The Audit Committee has appointed the firm of Yount, Hyde & Barbour, P.C., (“YHB”) served as the independent registered public accounting firm to audit the consolidated financial statements of the Company for the year ended December 31, 2020 and 2019 and has been appointed by the Audit Committee to serve as the Company’s independent registered public accounting firm for thefiscal year ending December 31, 2021.
Although our Bylaws do not require shareholder ratification or other approval of the retention of our independent registered public accounting firm, as a matter of good corporate governance, the Board of Directors is requesting that the shareholders ratify the appointment of YHB, as our independent registered public accounting firm for the fiscal year ending December 31, 2022. A majority of the votes cast by holders of common stock is required for the ratification of the appointment of theYHB, as our independent registered public accountants.accounting firm.
The Board of Directors recommends athe shareholders vote “FOR” Proposal Two.to ratify the appointment of Yount, Hyde & Barbour, P.C. as our independent registered public accounting firm for the fiscal year ending December 31, 2022.
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AUDIT INFORMATION
Audit Committee
The Audit Committee operates under a written charter that the Board has adopted. The foursix members of the Audit Committee are independent as that term is defined in SEC regulations and Nasdaq’s listing standards.
Fees of Independent Registered Public Accounting Firm
Audit Fees
Fees.The aggregate fees billed by YHB for professional services rendered for the audit of the Company’s annual consolidated financial statements for the fiscal years ended December 31, 20202021 and 2019,2020, and for the review of the consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services that are normally provided in connection with statutory and regulatory filings and engagements, for those fiscal years were
Audit Related Fees
Fees.The aggregate fees billed by YHB for audit related services were $25,873$22,686 in 20202021 and $29,032$25,874 in 2019.2020. For both years, the fees consisted of audits of the Bank’s benefit plans.plans; and consultation concerning financial accounting, reporting standards, and other related issues.
Tax Fees
Fees.The aggregate fees billed by YHB for tax services were $5,900 in 2021 and $5,625 in 2020 and $5,355 in 2019.2020.
All Other Fees
Fees.There were no fees billed by YHB or for any other services rendered to the Company for the fiscal years ended December 31, 20202021 and 2019.2020.
Audit Committee Report
Management is responsible for establishing and maintaining the Company’s internal controls over financial reporting, the preparation, presentation and integrity of the Company’s consolidated financial statements and compliance with laws and regulations and ethical business standards. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board of Directors.
The Audit Committee is responsible for overseeing the Company’s overall financial reporting process. In fulfilling its oversight responsibilities for the financial statements for fiscal year 2020,2021, the Audit Committee:
Monitored the preparation of quarterly and annual financial reports by the Company’s management.
Reviewed and discussed the annual audit process and the audited financial statements for the fiscal year ended December 31, 20202021 with management and YHB, the Company’s independent registered public accountant;
Discussed with management, YHB and the Company’s Internal Auditor the adequacy of the system of internal controls;
Discussed with YHB the matters required to be discussed by the auditing standards of the Public Company Accounting Oversight Board (“PCAOB”), including Auditing Standard No. 1301 “Communications with Audit Committees,” and Rule 2-07 of Regulation S-X promulgated by the SEC, as modified or supplemented;
Received written disclosures and a letter from YHB as required by applicable requirements of the PCAOB, including PCAOB Rule 3526, regarding YHB’s communications with the Audit Committee concerning independence. The Audit Committee discussed with YHB its independence.
Conducted an assessment of the Company’s relationship with YHB and evaluated YHB’s performance and the quality of audits.
Based upon its discussions with management and YHB and its review of the representations of management and the report of YHB to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing2021, which was filed with the Securities and Exchange Commission. By recommending to the Board of Directors that the audited financial statements be so included,Commission on March 10, 2022.
Audit Committee Christopher S. Runion, Co-Chairperson Anne B. Keeler, Co-Chairperson Daniel J. Harshman Daphyne Thomas John Willingham Peter H. Wray |
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Audit Committee Pre-Approval Policies
All audit related services and tax services were pre-approved by the Audit Committee, is not opining onwhich concluded that the accuracy, completenessprovision of such services by YHB was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Charter provides for pre-approval of audit, audit-related and tax services. The Charter authorizes the Audit Committee to delegate to one or fairnessmore of the audited financial statements.its members pre-approval authority with respect to permitted services.
PROPOSAL THREE
ADVISORY (NON-BINDING) VOTE ON COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and regulations promulgated thereunder require the Company to conduct a separate shareholder vote to approve the compensation of named executive officers commonly known as “say on pay”, as disclosed pursuant to the compensation disclosure rules of the SEC.
The Dodd-Frank Act further provides that this shareholder vote shall not be binding on the issuer or board of directors of an issuer.
The above-referenced provisions give you as a shareholder the right to endorse or not endorse our executive compensation through the following resolution:
“RESOLVED, that the shareholders approve the compensation of the named executive officers of the Company as set forth under the heading “Executive Compensation” in the Company’s 20212022 Proxy Statement, including the compensation tables, narrative discussion, and related material.”
The Company has opted to hold this advisory vote on an annual basis. Because your vote is advisory, it will not be binding on the Company or the Board of Directors. However, the Compensation Committee of the Bank will take into account the voting results when considering future executive compensation arrangements.
A majority of the votes cast by holders of common stock is required to approve the non-binding vote on the compensation of the named executive officers.
The Board of Directors unanimously recommends that shareholders vote “FOR” approval of the resolution.
SHAREHOLDER PROPOSALS
Under SEC regulations, any shareholder desiring to make a proposal to be acted upon at the 20222023 annual meeting of shareholders must cause such proposal to be delivered, in proper form, to the Secretary of the Company, at its principal executive offices,whose address is, P. O. Box 1111, Timberville, Virginia 22853, no later than December 7, 2021,13, 2022, in order for the proposal to be considered for inclusion in the Company’s Proxy Statement for that meeting. The Company anticipates holding the 20222023 annual meeting of shareholders on May 7, 2022.6, 2023.
The Company’s Bylaws also prescribe the procedure that a shareholder must follow to nominate directors or to bring other business before shareholders’ meetings outside of the proxy statement process. For a shareholder to nominate a candidate for director at the 20222023 annual meeting of shareholders, notice of the nomination must be received by the Secretary of the Company not less than 60 days and not more than 90 days prior to the date of the 20222023 annual meeting. The notice must describe various matters regarding the nominee and the shareholder giving the notice. For a shareholder to bring other business before the 20222023 annual meeting of shareholders, notice of the proposed business must be received by the Secretary of the Company not less than 60 days and not more than 90 days prior to the date of the 20222023 annual meeting. The notice must include a description of the proposed business, the reasons therefor, and other specified matters. Any shareholder may obtain a copy of the Company’s Bylaws, without charge, upon written request to the Secretary of the Company. Based upon an anticipated date of May 7, 20226, 2023 for the 20222023 annual meeting of shareholders, the Company must receive any notice of nomination or other business no later than March 8, 20227, 2023 and no earlier than February 6, 2022.5, 2023.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the Company is not aware of any matters to be presented for consideration at the Annual Meeting other than as set forth herein. If any other matters properly come before the Annual Meeting, or any adjournment thereof, the person or persons voting the proxies will vote them in accordance with their best judgment.
| By Order of the Board of Directors | |||
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| Stephanie E. Shillingburg, Secretary | |||
| April 12, 2022 | |||
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