UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission File Number: 0-13273
June 30, 1997
F & M BANK CORP.
Virginia 54-1280811
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Drawer F
Timberville, Virginia 22853
(540) 896-8941
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes ..X. No ....
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at June 30, 1997
Common Stock, par value - $5 818,654 shares
F & M BANK CORP.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Six Months
Ended June 30, 1997 and 1996 2
Consolidated Statements of Income - Three Months
Ended June 30, 1997 and 1996 3
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 4
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1996 5
Consolidated Statements of Changes in Stockholders'
Equity - Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibit and Reports on Form 8K 16
SIGNATURES 20
<PAGE> 2
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Six Months Ended
June 30,
1997 1996
Interest Income
Interest and fees on loans $ 5,227 $ 4,652
Interest on federal funds sold 39 45
Interest on interest bearing deposits 8 10
Interest and dividends on investment securities
Taxable 1,351 1,417
Nontaxable 7 18
Total Interest Income 6,632 6,142
Interest Expense
Interest on demand accounts 247 267
Interest on savings deposits 510 570
Interest on time deposits 1,722 1,527
Total interest on deposits 2,479 2,364
Interest on short-term debt 72 41
Interest on long-term debt 562 633
Total Interest Expense 3,113 3,038
Net Interest Income 3,519 3,104
Provision for Loan Losses 90 50
Net Interest Income after Provision for Loan Losses 3,429 3,054
Noninterest Income
Service charges 189 121
Other 77 83
Security gains (losses) (25) 169
Total Noninterest Income 241 373
Noninterest Expense
Salaries 762 732
Employee benefits 292 284
Occupancy expense 79 82
Equipment expense 139 132
Other 468 457
Total Noninterest Expense 1,740 1,687
Income before Income Taxes 1,930 1,740
Provision for Income Taxes 579 520
Net Income $ 1,351 $ 1,220
Per Share Data
Net Income $ 1.65 $ 1.50
Cash Dividends $ .48 $ .42
Equivalent Shares Outstanding 818,654 815,224
The accompanying notes are an integral part of these statements.
<PAGE> 3
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Amounts)
Three Months Ended
June 30,
1997 1996
Interest Income
Interest and fees on loans $ 2,658 $ 2,357
Interest on federal funds sold 19 17
Interest on interest bearing deposits 3 3
Interest and dividends on investment securities
Taxable 651 710
Nontaxable 3 9
Total Interest Income 3,334 3,096
Interest Expense
Interest on demand deposits 123 127
Interest on savings accounts 259 272
Interest on time deposits 862 768
Total interest on deposits 1,244 1,167
Interest on short-term debt 40 27
Interest on long-term debt 275 311
Total Interest Expense 1,559 1,505
Net Interest Income 1,775 1,591
Provision for Loan Losses 45 25
Net Interest Income after Provision for Loan Losses 1,730 1,566
Noninterest Income
Service charges 104 63
Other 38 39
Security gains (losses) 10 (3)
Total Noninterest Income 152 99
Noninterest Expense
Salaries 388 361
Employee benefits 138 140
Occupancy expense 41 41
Equipment expense 70 65
Other 251 226
Total Noninterest Expense 888 833
Income before Income Taxes 994 832
Provision for Income Tax 304 243
Net Income $ 690 $ 589
Per Share Data
Net Income $ .84 $ .72
Cash Dividends $ .26 $ .22
Equivalent Shares Outstanding 818,654 816,159
The accompanying notes are an integral part of these statements.
<PAGE> 4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
June 30, December 31,
ASSETS 1997 1996
Cash and due from banks $ 4,309 $ 3,568
Federal funds sold 1,003 3,397
Interest bearing deposits in banks 524 854
Securities held to maturity (note 2) 22,477 22,708
Securities available for sale (note 2) 18,543 19,722
Other investments 1,684 1,513
Loans, net of unearned discount (note 3) 117,410 111,545
Less reserve for loan losses (note 4) (1,088) (1,003)
Net Loans 116,322 110,542
Bank premises and equipment 1,922 1,953
Interest receivable 1,356 1,312
Other assets 945 942
Total Assets $ 169,085 $ 166,511
LIABILITIES
Deposits
Noninterest bearing demand $ 12,992 $ 12,614
Interest bearing
Demand 18,810 19,478
Savings deposits 28,146 28,391
Time deposits 66,532 64,116
Total Deposits 126,480 124,599
Short-term debt 3,488 3,115
Long-term debt 16,553 18,272
Accrued expenses 1,921 1,399
Total Liabilities 148,442 147,385
STOCKHOLDERS' EQUITY
Common stock $5 par value, 818,654 shares
issued and outstanding 4,093 4,093
Surplus 867 867
Retained earnings 14,354 13,396
Unrealized gain on securities
available for sale 1,329 770
Total Stockholders' Equity 20,643 19,126
Total Liabilities and Stockholders' Equity $ 169,085 $ 166,511
The accompanying notes are an integral part of these statements.
<PAGE> 5
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Six Months Ended
June 30,
1997 1996
Cash Flows from Operating Activities:
Net income $ 1,351 $ 1,220
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 121 116
Amortization of security premiums 52 60
(Gain) loss on security transactions 25 (169)
Provision for loan losses 90 50
Increase in interest receivable (44) (17)
Increase in other assets (45)
Increase in accrued expenses 84 104
Losses (gains) on limited partnership
investments (2) 19
Total Adjustments 281 163
Net Cash Provided by Operating Activities 1,632 1,383
Cash Flows from Investing Activities:
Proceeds from sales of investments
available for sale 5,695 1,920
Proceeds from maturity of investments
available for sale 1,381 667
Proceeds from maturity of investments
held to maturity 1,617 6,893
Purchase of investments available for sale (4,285) (4,771)
Purchase of investments held to maturity (2,435) (4,773)
Net decrease in federal funds sold 2,394 1,733
Net increase in loans (5,679) (6,377)
Purchase of property and equipment (84) (66)
Net decrease (increase) in interest
bearing bank deposits 330 (32)
Net Cash Used in Investing Activities (1,066) (4,806)
Cash Flows from Financing Activities:
Net increase in deposits 1,881 2,328
Net increase in other short-term borrowings 373 1,575
Additions to long-term borrowings 1,000
Repayment of long-term borrowings (1,719) (1,619)
Payment of dividends (360) (342)
Net Cash Provided by Financing Activities 175 2,942
Net Increase (Decrease) in Cash
and Cash Equivalents 741 (481)
Cash and Cash Equivalents, Beginning of Period 3,568 3,716
Cash and Cash Equivalents, End of Period $ 4,309 $ 3,235
Supplemental Disclosure
Cash paid for:
Interest expense $ 3,105 $ 3,049
Income taxes 564 545
Noncash Transaction
The Company satisfied the profit sharing liability as of December 31,
1995 by contributing 4,366 common shares to the Plan on May 22, 1996.
The accompanying notes are an integral part of these statements.
<PAGE> 6
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Six Months Ended
June 30,
1997 1996
Balance, beginning of period $ 19,126 $ 17,098
Net income 1,351 1,220
Dividends declared (393) (342)
Common stock issued to fund accrued stock
bonus plan liability (4,366 shares) 142
Change in unrealized gain (loss) on securities
available for sale 559 (241)
Balance, end of period $ 20,643 $ 17,877
The accompanying notes are an integral part of these statements.
<PAGE> 7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements conform to generally
accepted accounting principles and to general industry
practices. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of June
30, 1997 and the results of operations for the six month periods
ended June 30, 1997 and June 30, 1996. The notes included
herein should be read in conjunction with the notes to financial
statements included in the 1996 annual report to stockholders of
the F & M Bank Corp.
The Company does not expect the anticipated adoption of any
newly issued accounting standards to have a material impact on
future operations or financial position.
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in
the consolidated balance sheets and their approximate market
values at June 30, 1997 and December 31, 1996 follows:
1997 1996
Carrying Market Carrying Market
Value Value Value Value
Securities Held to Maturity
U. S. Treasury and
Agency obligations $ 13,696 $ 13,658 $ 14,381 $ 14,336
State and municipal 405 405 450 449
Other securities 4,143 4,169 3,156 3,195
Mortgaged-backed
securities 4,233 4,207 4,721 4,687
Total $ 22,477 $ 22,439 $ 22,708 $ 22,667
1997 1996
Market Market
Value Cost Value Cost
Securities Available for Sale
U. S. Treasury and
Agency obligations $ 4,413 $ 4,415 $ 4,762 $ 4,747
Equity securities 8,711 6,574 7,308 6,077
Mortgage-backed
securities 1,279 1,285 1,468 1,480
Other securities 4,140 4,126 6,184 6,177
Total $ 18,543 $ 16,400 $ 19,722 $ 18,481
<PAGE> 8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
June 30, December 31,
1997 1996
Real Estate
Construction $ 4,371 $ 2,925
Mortgage 68,684 68,614
Commercial and agricultural 29,863 26,922
Installment 13,748 12,248
Credit cards 718 799
Other 26 37
Total $ 117,410 $ 111,545
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses
for the periods ended June 30, 1997 and 1996 follows:
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
Balance, beginning of period $ 1,003 $ 863 $ 1,055 $ 862
Provisions charged to
operating expenses 90 50 45 25
Net (charge offs) recoveries
Loan recoveries 20 6 2 4
Loan charge-offs (25) (35) (14) (7)
Total Net Charge-offs* (5) (29) (12) (3)
Balance, End of Period $ 1,088 $ 884 $ 1,088 $ 884
* Components of net charge-offs:
Real estate
- Construction $ - $ - $ - $ -
Real estate
- Mortgages - - - -
Commercial (4) (7) (5) -
Installment (1) (22) (7) (3)
Total $ (5)$ (29) $ (12)$ (3)
<PAGE> 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The financial condition of F & M Bank Corp. remained strong
throughout the first six months of 1997. Annualized growth in total assets
for the first six months was 3.09% and annualized growth in deposits for
this time period was 3.02%. Net income for the first six months of 1997
increased $131,000 or 10.74% compared to 1996. The increase in capital of
7.93% is attributed to earnings retained from operations for the period and
$559,000 net increase in the unrealized gains on securities available for
sale.
Results of Operations - Six Months Ending June 30, 1997
The dollar amount of the tax equivalent, net interest margin
increased 13.18% in the first six months of 1997 compared to the first six
months of 1996. A decrease in the cost of funds of .16% combined with an
increase in the return on earning assets of .13% yielded the improved
results. The net increase in tax equivalent net interest margin is a
result of approximately equal increases caused by volume increases and the
improvement in both the cost of funds and the return on earning assets. A
schedule of the net interest margin for 1997 and 1996 is shown on page 14
or Table I.
Noninterest income decreased 35.39% in the first six months of 1997
compared to the first six months of 1996. This decrease is attributed to a
change in security transactions from a gain of $169,000 in 1996 to a loss
of $25,000 in 1997. The significant increase in service charges was
primarily the result of an increase in overdraft fees and other account
service charges.
Noninterest expense increased 3.14% in 1997 compared to 1996. All
areas of noninterest expense increased by amounts reflecting the growth in
assets.
Result of Operations - Quarter Ending June 30, 1997
Net income for the quarter ending June 30, 1997 increased 17.15% over
earnings in the same quarter of 1996. Net interest income increased due to
increases in the levels of earning assets and the increase spread between
the cost of funds and the return on earning assets. Noninterest income
increased during 1997 due to asset growth and increases in overdraft fees
and other deposit account service charges. The Company's overhead costs
are low relative to its peer group and it is not anticipated that this will
change in the near future.
<PAGE> 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Financial Condition
Securities
The Company's securities portfolio is held to assist the Company in
liquidity and asset liability management. The securities portfolio
consists of investment securities (commonly referred to as "securities held
to maturity") and securities available for sale. Securities are classified
as investment securities when management has the intent and ability to hold
the securities to maturity. Investment securities are carried at amortized
cost. Securities available for sale include securities that may be sold in
response to general market fluctuations, general liquidity needs and other
similar factors. Securities available for sale are recorded at market
value. Unrealized holding gains and losses on available for sale
securities are excluded from earnings and reported (net of deferred income
taxes) as a separate component of shareholders' equity. As of June 30,
1997, the market value of all securities available for sale exceeded their
amortized cost by $2,143,000 ($1,329,000 after the consideration of income
taxes). This excess is the result of unrecognized gains in the value of
equity securities, primarily stocks of financial institutions held by the
Company. Management has traditionally held debt securities (regardless of
classification) until maturity and thus it does not expect the minor
fluctuations in the value of these debt securities to have a direct impact
on earnings.
Investments in securities decreased slightly in the first six months
of 1997. Maturities and sales of securities have been used in part to fund
continued strong loan demand. The Company has invested in relatively
short-term maturities due to uncertainty in the direction of rates. This
philosophy allows for greater flexibility in an environment of rapidly
changing rates and has served the Company well over the years. Of the
investments in securities available for sale, 47% are invested in equities
which are dividend producing and subject to the dividend exclusion for
taxation purposes. The Company believes these investments render adequate
returns and have the potential for future increases in value.
Loan Portfolio
The Company operates in an agriculturally dominated area which
incudes the counties of Rockingham, Page and Shenandoah in the western
portion of Virginia. The Company does not make a significant number of
loans to borrowers outside its primary service area. The Company is very
active in local residential construction mortgages. The commercial lending
includes small and medium sized businesses within its service area.
The principal economic risk associated with the loan portfolio is the
ability of its borrowers to repay. The risk associated with real estate
and installment notes to individuals is based upon employment, the local
and national economics and consumer confidence. All of these affect the
ability of borrowers to repay indebtedness. The risk associated with
commercial lending is substantially based on the strength of the local and
national economies. A large percentage of agricultural loans are made to
poultry growers. In the past year, the poultry industry has suffered due
to high grain prices, excess supplies of all types of meat and high
mortality rates among poults. In addition to direct agricultural loans, a
significant percentage of residential real estate loans and consumer
installment loans are made to borrowers employed in the agricultural sector
of the economy. The company continues to monitor its past due loans
closely and has not experienced an increase in loan delinquencies as a
result of these economic factors.
<PAGE> 11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio (Continued)
The first six months of 1997 saw continued strong loan demand as
loans grew at an annualized rate of 10.52%. Funding for the increased loan
volume was made possible by the growth in time deposits, sales and
maturities of securities and retained income from operations. Overall,
management has been quite pleased with the loan program and believes that
loan growth will continue throughout 1997.
Nonperforming loans include nonaccrual loans, loans 90 days or more
past due and restructured loans. Nonaccrual loans are loans on which
interest accruals have been suspended or discontinued permanently.
Restructured loans are loans which have changed the original interest rate
or repayment terms due to financial hardship. Loans 90 days or more past
due totaled $711,000 at June 30, 1997 compared to $1,430,000 at December
31, 1996. The Company had no nonaccrual or restructured loans at June 30,
1997.
Real estate acquired through foreclosure was $107,000 at June 30,
1997 and December 31, 1996. All foreclosed property held at June 30, 1997
was in the Company's primary service area. The Company's practice is to
value real estate acquired through foreclosure at the lower of (i) an
independent current appraisal or market analysis less anticipated costs of
disposal, or (ii) the existing loan balance. The Company is actively
marketing all foreclosed real estate and does not anticipate material
write-downs in value before disposition.
An inherent risk in the lending of money is that the borrower will
not be able to repay the loan under the terms of the original agreement.
The allowance for loan losses (see subsequent section) provides for this
risk and is reviewed periodically for adequacy. This review also considers
concentrations of loans in terms of geography, business type or level of
risk. While lending is geographically diversified within the service area,
the Company does have some concentration of loans in the area of
agriculture (primarily poultry farming) and related industries. Management
recognizes these concentrations and considers them when structuring its
loan portfolio. As of June 30, 1997, management is not aware of any
significant potential problem loans in which the debtor is currently
meeting their obligations as stated in the loan agreement but which may
change in future periods.
Allowance for Loan Losses
Management evaluates the loan portfolio in light of national and
local economic trends, changes in the nature and value of the portfolio and
industry standards. Specific factors considered by management in
determining the adequacy of the level of the allowance include internally
generated loan review reports, past due reports, historical loan
loss experience and individual borrowers financial health. Management
evaluates nonperforming loans relative to their collateral value and makes
the appropriate adjustments to the allowance for loan losses when needed.
The provision for loan losses and changes in the allowance for loan
losses are shown in note 4, page 8.
<PAGE> 12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Allowance for Loan Losses (Continued)
The allowance for credit losses of $1,088,000 at June 30, 1997 was up
$85,000 from its level at December 31, 1996. The allowance was equal to
.93% and .90% of total loans at June 30, 1997 and December 31, 1996,
respectively. The Company believes that its allowance should be viewed in
its entirety and, therefore, is available for potential credit losses in
its entire portfolio, including loans, credit-related commitments and other
financial instruments. In the opinion of management, the allowance, when
taken as a whole, is adequate to absorb reasonably estimated credit losses
inherent in the Company's portfolio.
Deposits and Long-Term Debt
The Company's main source of funds is customer deposits received from
individuals, governmental entities and businesses located within the
Company's service area. Deposit accounts include demand deposits, savings,
money market and certificates of deposit. The Company realized annualized
deposit growth of 3.01% in the first six months of 1997. Deposit growth
was mainly in the area of certificates of deposits and was a result of
special promotions designed to attract new deposits.
In 1996, the Company began offering repurchase agreements (a/k/a
"repos") to customers desiring such investments. Repos are designed for
companies and individuals desiring a higher rate of return than traditional
deposit accounts and who will accept the risk of not being covered by FDIC
insurance.
Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) continue
to be an important mechanism in funding real estate loan growth in the
area. The Company's subsidiary bank borrows funds on a fixed rate basis
and uses these borrowings to make fixed rate loans with a fifteen year
repayment term. As an alternative, borrowers may opt for a twenty year
repayment term in which only the first ten years have a fixed rate. This
program allows the bank to match the maturity of its fixed rate real estate
portfolio with the maturity of its debt and thus reduce its exposure to
interest rate changes. No additional borrowings were obtained in the first
six months of 1997. Normal repayments have totalled $1,719,000 so far this
year.
Capital
The Company seeks to maintain a strong capital base to expand
facilities, promote public confidence, support current operations and grow
at a manageable level. As of June 30, 1997, the Company's total risk based
capital ratio was 18.04% which is far above the regulatory minimum of
8.00%. The ratio of total capital to total assets was 12.21% at June 30,
1997 and this exceeds the level of the Company's peer group. Earnings have
been satisfactory to allow an increase in dividends in 1997 over those
levels experienced in 1996. Management anticipates maintaining these
capital levels throughout 1997 and into the foreseeable future.
<PAGE> 13
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity
Liquidity is the ability to meet present and future financial
obligations through either the sale or maturity of existing assets or the
acquisition of additional funds through liability management. Liquid
assets include cash, interest bearing deposits with banks, federal funds
sold, investments and loans maturing within one year. The Company's
ability to obtain deposits and purchase funds at favorable rates determines
its liquidity exposure. As a result of the Company's management of liquid
assets and the ability to generate liquidity through liability funding,
management believes that the Company maintains overall liquidity sufficient
to satisfy its depositors' requirements and meet its customers' credit
needs.
Additional sources of liquidity available to the Company include, but
are not limited to, loan repayments, the ability to obtain deposits through
the adjustment of interest rates and the purchasing of federal funds. To
further meet its liquidity needs, the Company also maintains lines of
credit with correspondent financial institutions. The Company's subsidiary
bank also has a line of credit with the Federal Home Loan Bank of Atlanta
that allows for secured borrowings. In the past, growth in deposits and
proceeds from the maturity of investment securities have been sufficient to
fund most of the net increase in loans and investment securities.
Interest Rate Sensitivity
In conjunction with maintaining a satisfactory level of liquidity,
management must also control the degree of interest rate risk assumed on
the balance sheet. Managing this risk involves regular monitoring of the
interest sensitive assets relative to interest sensitive liabilities over
specific time intervals.
At June 30, 1997 the Company had a negative gap position. This
liability sensitive position typically produces an unfavorable contribution
to earnings during a period of increasing rates. With the largest amount
of interest sensitive assets and liabilities repricing within five years,
the Company monitors these areas very closely. Early withdrawal of
deposits, prepayments of loans and loan delinquencies are some of the
factors that could affect actual versus expected cash flows. In addition,
changes in rates on interest sensitive assets and liabilities may not be
equal, which could result in a change in net interest margin. While the
Company does not match each of its interest sensitive assets against
specific interest sensitive liabilities, it does monitor closely the
maturities of loans, investments and time deposits to limit interest rate
risk and the financial effect of market rate changes.
A summary of asset and liability repricing opportunities is shown on
page 15 as Table II.
Effect of Newly Issued Accounting Standards
The Company does not believe that any newly issued but as yet
unapplied accounting standards will have a material impact on the Company's
financial position or operations.
Securities and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission,
including F & M Bank Corp., and the address is (http://www.sec.gov).
<PAGE> 14
TABLE I
<TABLE>
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $ 114,764 $ 5,244 9.14% $ 100,923 $ 4,657 9.23%
Federal funds sold 1,449 39 5.38% 1,687 45 5.33%
Bank deposits 297 8 5.39% 358 10 5.59%
Investments
Taxable 34,579 1,132 6.55% 38,600 1,203 6.23%
Partially taxable 1 7,045 305 8.66% 6,830 301 8.81%
Tax exempt 1 338 10 5.92% 705 25 7.09%
Total Earning Assets 158,472 6,738 8.50% 149,103 6,241 8.37%
Interest Expense
Demand deposits 19,866 247 2.49% 20,046 267 2.66%
Savings 28,661 510 3.56% 30,208 570 3.77%
Time deposits 64,444 1,722 5.34% 54,418 1,527 5.61%
Repurchase agreements 2,514 61 4.87% 1,087 26 4.78%
Other short-term debt 455 11 4.84% 453 15 6.62%
Long-term debt 17,364 562 6.47% 19,553 633 6.47%
Total Interest Bearing
Liabilities 133,304 3,113 4.67% 125,765 3,038 4.83%
Net Interest Margin 1 $ 3,625 $ 3,203
Net Yield on Interest
Earning Assets 1 4.57% 4.30%
1 On a taxable equivalent basis assuming a 34% tax rate.
</TABLE>
TABLE I (Continued)
<TABLE>
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $ 116,364 $ 2,666 9.16% $ 102,448 $ 2,359 9.21%
Federal funds sold 1,359 19 5.59% 1,314 17 5.18%
Bank deposits 195 3 6.15% 202 3 5.94%
Investments
Taxable 32,857 546 6.65% 38,569 602 6.24%
Partially taxable 1 7,239 151 8.34% 6,858 152 8.87%
Tax exempt 1 405 6 5.93% 710 13 7.32%
Total Earning Assets 158,419 3,391 8.56% 150,101 3,146 8.38%
Interest Expense
Demand deposits 19,520 123 2.52% 19,792 127 2.57%
Savings 28,895 259 3.59% 29,807 272 3.65%
Time deposits 64,496 862 5.34% 55,120 768 5.57%
Repurchase agreements 2,578 32 4.97% 1,647 20 4.86%
Other short-term debt 644 8 4.97% 593 7 4.72%
Long-term debt 16,909 275 6.51% 19,130 311 6.50%
Total Interest Bearing
Liabilities 133,042 1,559 4.69% 126,089 1,505 4.77%
Net Interest Margin 1 $ 1,832 $ 1,641
Net Yield on Interest
Earning Assets 1 4.63% 4.37
1 On a taxable equivalent basis assuming a 34% tax rate.
</TABLE>
<PAGE> 15
TABLE II
<TABLE>
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 1997
(In Thousands of Dollars)
<CAPTION>
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
<S> <C> <C> <C> <C> <C> <C>
Uses of Funds
Loans:
Commercial $ 18,572 $ 1,945 $ 8,501 $ 871 $ $ 29,889
Installment 45 570 13,032 101 13,748
Real estate 5,933 8,567 39,202 19,353 73,055
Credit cards 718 718
Interest bearing
bank deposits 524 524
Investment securities 5,089 4,531 19,328 3,360 10,396 42,704
Federal funds sold 1,003 1,003
Total 31,884 15,613 80,063 23,685 10,396 161,641
Sources of Funds
Interest bearing
deposits 18,810 18,810
Regular savings 28,146 28,146
Certificates of deposit
$100,000 and over 773 4,222 2,147 7,142
Other certificates
of deposit 9,312 33,331 16,747 59,390
Short-term borrowings 3,488 3,488
Long-term debt 660 2,351 11,234 2,308 16,553
Total 61,189 39,904 30,128 2,308 133,529
Discrete Gap (29,305) (24,291) 49,935 21,377 10,396 28,112
Cumulative Gap (29,305) (53,596) (3,661) 17,716 28,112
Ratio of Cumulative
Assets to Cumulative
Liabilities (18.13%) (33.16%) (2.26%) 10.96% 17.39%
Table II reflects the earlier of the maturity or repricing dates for various assets and liabilities
at June 30, 1997. In preparing the above table no assumptions are made with respect to loan
prepayments or deposit runoffs. Loan principal payments are included in the earliest period in
which the loan matures or can be repriced. Principal payments on installment loans scheduled prior
to maturity are included in the period of maturity or repricing. Proceeds from the redemption of
investments and deposits are included in the period of maturity.
</TABLE>
<PAGE> 16
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders - On April 12, 1997, the
stockholders held their annual
meeting. The following item was
approved by the shareholders by
the required majority:
1) Election of the Board of
Directors as proposed in the
proxy material without any
additions or exceptions.
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
3 i Articles of Incorporation of F & M Bank Corp. are
incorporated by reference to Exhibits to F & M Bank
Corp.'s Form S14 filed February 17, 1984.
3 ii Bylaws of F & M Bank Corp. are incorporated by reference
to Exhibits to F & M Bank Corp.'s Form S14 filed
February 17, 1984.
21 Subsidiaries of the small business issuers are
incorporated by reference to Exhibits to F & M Bank
Corp.'s 1995 Form 10-KSB filed March 26, 1996.
27 Financial Data Schedule attached.
(b) Reports on Form 8-K
The Corporation did not file any reports on Form 8-K for the
quarter ending June 30, 1997.
<PAGE> 17
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
June 30, 1997 18
<PAGE> 20
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
F & M BANK CORP.
JULIAN D. FISHER
Julian D. Fisher
President and Chief Executive Officer
NEIL W. HAYSLETT
Neil W. Hayslett
Vice President and Chief Financial Officer
Date August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from F & M Bank
Corp. Form 10QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,309
<INT-BEARING-DEPOSITS> 524
<FED-FUNDS-SOLD> 1,003
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,543
<INVESTMENTS-CARRYING> 22,477
<INVESTMENTS-MARKET> 22,439
<LOANS> 117,410
<ALLOWANCE> (1,088)
<TOTAL-ASSETS> 169,085
<DEPOSITS> 126,480
<SHORT-TERM> 3,488
<LIABILITIES-OTHER> 1,921
<LONG-TERM> 16,553
0
0
<COMMON> 4,093
<OTHER-SE> 16,550
<TOTAL-LIABILITIES-AND-EQUITY> 169,085
<INTEREST-LOAN> 5,227
<INTEREST-INVEST> 1,358
<INTEREST-OTHER> 47
<INTEREST-TOTAL> 6,632
<INTEREST-DEPOSIT> 2,479
<INTEREST-EXPENSE> 3,113
<INTEREST-INCOME-NET> 3,519
<LOAN-LOSSES> 90
<SECURITIES-GAINS> (25)
<EXPENSE-OTHER> 1,740
<INCOME-PRETAX> 1,930
<INCOME-PRE-EXTRAORDINARY> 1,351
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,351
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
<YIELD-ACTUAL> 4.57
<LOANS-NON> 0
<LOANS-PAST> 711
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,003
<CHARGE-OFFS> 25
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 1,088
<ALLOWANCE-DOMESTIC> 1,088
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
