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
September 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 September 30, 1997
Common Stock, par value - $5 818,654 shares
<PAGE> 1
F & M BANK CORP.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Nine Months
Ended September 30, 1997 and 1996 2
Consolidated Statements of Income - Three Months
Ended September 30, 1997 and 1996 3
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1997 and 1996 5
Consolidated Statements of Changes in Stockholders'
Equity - Nine Months Ended September 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 8-K 16
SIGNATURES 18
<PAGE> 2
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
Nine Months Ended
September 30,
1997 1996
Interest Income
Interest and fees on loans $ 7,967 $ 7,119
Interest on federal funds sold 79 53
Interest on interest bearing deposits 13 12
Interest and dividends on investment securities
Taxable 1,991 2,098
Nontaxable 11 25
------ ------
Total Interest Income 10,061 9,307
------ ------
Interest Expense
Interest on demand deposits 368 389
Interest on savings accounts 759 835
Interest on time deposits 2,647 2,301
------ ------
Total interest on deposits 3,774 3,525
Interest on short-term debt 118 79
Interest on long-term debt 829 935
------ ------
Total Interest Expense 4,721 4,539
------ ------
Net Interest Income 5,340 4,768
Provision for Loan Losses 135 115
------ ------
Net Interest Income after Provision for Loan Losses 5,205 4,653
------ ------
Noninterest Income
Service charges 295 185
Other 124 120
Security gains 226 176
------ ------
Total Noninterest Income 645 481
------ ------
Noninterest Expense
Salaries 1,195 1,102
Employee benefits 431 422
Occupancy expense 121 122
Equipment expense 203 197
Other 721 716
------ ------
Total Noninterest Expense 2,671 2,559
------ ------
Income before Income Taxes 3,179 2,575
Provision for Income Tax 987 764
------ ------
Net Income $ 2,192 $ 1,811
====== ======
Per Share Data
Net Income $ 2.68 $ 2.22
======= =======
Cash Dividends $ .77 $ .64
======= =======
Equivalent Shares Outstanding 818,654 816,375
======= =======
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
September 30,
1997 1996
Interest Income
Interest and fees on loans $ 2,740 $ 2,467
Interest on federal funds sold 40 8
Interest on interest bearing deposits 5 2
Interest and dividends on investment securities
Taxable 640 681
Nontaxable 4 7
------ ------
Total Interest Income 3,429 3,165
------ ------
Interest Expense
Interest on demand deposits 121 122
Interest on savings accounts 249 265
Interest on time deposits 925 774
------ ------
Total interest on deposits 1,295 1,161
Interest on short-term debt 46 38
Interest on long-term debt 267 302
------ ------
Total Interest Expense 1,608 1,501
------ ------
Net Interest Income 1,821 1,664
Provision for Loan Losses 45 65
------ ------
Net Interest Income after Provision for Loan Losses 1,776 1,599
------ ------
Noninterest Income
Service charges 106 64
Other 47 37
Security gains 251 7
------ ------
Total Noninterest Income 404 108
------ ------
Noninterest Expense
Salaries 433 370
Employee benefits 139 138
Occupancy expense 42 40
Equipment expense 64 65
Other 253 259
------ ------
Total Noninterest Expense 931 872
------ ------
Income before Income Taxes 1,249 835
Provision for Income Tax 408 244
------ ------
Net Income $ 841 $ 591
====== ======
Per Share Data
Net Income $ 1.03 $ .72
======= =======
Cash Dividends $ .29 $ .22
======= =======
Equivalent Shares Outstanding 818,654 818,654
======= =======
The accompanying notes are an integral part of these statements.
<PAGE> 4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
September 30, December 31,
ASSETS 1997 1996
Cash and due from banks $ 3,307 $ 3,568
Federal funds sold 2,216 3,397
Interest bearing deposits in banks 918 854
Securities held to maturity (note 2) 21,173 22,708
Securities available for sale (note 2) 22,531 19,722
Other investments 1,664 1,513
Loans, net of unearned discount (note 3) 119,667 111,545
Less allowance for loan losses (note 4) (1,135) (1,003)
------ ------
Net Loans 118,532 110,542
Bank premises and equipment 1,919 1,953
Interest receivable 1,340 1,312
Other assets 952 942
------ ------
Total Assets $174,552 $166,511
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $14,228 $12,614
Interest bearing
Demand 19,063 19,478
Savings deposits 27,842 28,391
Time deposits 68,347 64,116
------ ------
Total Deposits 129,480 124,599
Short-term debt 3,614 3,115
Long-term debt 16,893 18,272
Accrued expenses 2,565 1,399
------ ------
Total Liabilities 152,552 147,385
------- -------
STOCKHOLDERS' EQUITY
Common stock, $5 par value,818,654 shares
issued and outstanding 4,093 4,093
Surplus 867 867
Retained earnings 14,958 13,396
Unrealized gain on securities available for sale 2,082 770
Total Stockholders' Equity 22,000 19,126
------ ------
Total Liabilities and Stockholders' Equity $174,552 $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)
Nine Months Ended
September 30,
1997 1996
Cash Flows from Operating Activities:
Net income $ 2,192 $ 1,811
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 177 174
Amortization of security premiums 73 88
Gain on security transactions (226) (176)
Provision for loan losses 135 115
Increase in interest receivable (28) (14)
(Increase) decrease in other assets (30) 9
Increase in accrued expenses 257 185
Losses (gains) on limited partnership investments (5) 29
------ ------
Total Adjustments 353 410
------ ------
Net Cash Provided by Operating Activities 2,545 2,221
------ ------
Cash Flows from Investing Activities:
Proceeds from sales of investments
available for sale 6,805 1,945
Proceeds from maturity of investments
available for sale 1,381 901
Proceeds from maturity of investments
held to maturity 6,432 8,453
Purchase of investments available for sale (7,940) (5,317)
Purchase of investments held to maturity (5,949) (4,879)
Net (increase) decrease in interest
bearing bank deposits (64) 19
Net change in federal funds sold 1,181 152
Net increase in loans (7,934) (10,886)
Purchase of property and equipment (146) (203)
------ ------
Net Cash Used in Investing Activities (6,234) (9,815)
------ ------
Cash Flows from Financing Activities:
Net increase in deposits 4,882 6,294
Net increase in short-term borrowings 498 2,315
Additions to long-term borrowings 1,000 1,000
Repayment of long-term borrowings (2,379) (2,254)
Payment of dividends (573) (523)
------ ------
Net Cash Provided by Financing Activities 3,428 6,832
------ ------
Net Increase (Decrease) in Cash and Cash Equivalents (261) (762)
Cash and Cash Equivalents at Beginning of Period 3,568 3,716
------ ------
Cash and Cash Equivalents at End of Period $ 3,307 $ 2,954
====== ======
Supplemental Disclosure
Cash paid for:
Interest expense $ 4,689 $ 4,531
Income taxes 919 750
Noncash Transactions:
Subsequent to the year of accrual, the Company satisfied its stock bonus plan
liability by the issuance of 4,366 shares in 1996 for the 1995 liability at a
value of $142,000.
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)
Nine Months Ended
September 30,
1997 1996
Balance, beginning of period $19,126 $17,098
Net income for period 2,192 1,811
Dividends declared (630) (523)
Common stock issued to fund accrued stock
bonus plan liability (4,366 shares) 142
Change in unrealized gain (loss) on securities
available for sale 1,312 (139)
------ ------
Balance, end of period $22,000 $18,389
====== ======
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 September 30, 1997, and the results of operations for
the three and nine month periods ended September 30, 1997 and 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.
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in the
consolidated balance sheets and their approximate market values at
September 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 $12,619 $ 12,639 $ 14,381 $14,336
State and municipal 405 405 450 449
Other securities 4,145 4,175 3,156 3,195
Mortgage-backed
securities 4,004 3,998 4,721 4,687
------- -------- ------- ------
Total $21,173 $ 21,217 $ 22,708 $22,667
====== ======= ======= ======
1997 1996
--------------------------------------
Market Market
Value Cost Value Cost
Securities Available for Sale
U. S. Treasury and
Agency obligations $ 5,424 $ 5,404 $ 4,762 $ 4,747
Equity securities 10,707 7,432 7,308 6,077
Mortgage-backed
securities 2,255 2,227 1,468 1,480
Other 4,145 4,113 6,184 6,177
------ ------- ------- ------
Total $22,531 $ 19,176 $ 19,722 $18,481
====== ======= ======= ======
<PAGE> 8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
September 30, December 31,
1997 1996
Real Estate
Construction $ 4,208 $ 2,925
Mortgage 70,272 68,614
Commercial and agricultural 29,799 26,922
Installment 14,622 12,248
Credit cards 739 799
Other 27 37
------ -------
Total $119,667 $111,545
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
nine months ended September 30, 1997 and 1996, follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
Balance, beginning of period $1,003 $ 863 $1,088 $ 884
Provisions charged to
operating expenses 135 115 45 65
Net (charge offs) recoveries
Loan recoveries 33 14 13 8
Loan charge-offs (36) (70) (11) (35)
----- ----- ----- -----
Total Net Charge-Offs * (3) (56) 2 (27)
----- ----- ----- -----
Balance, End of Period $1,135 $ 922 $1,135 $ 922
===== ===== ===== =====
*Components of Net Charge-Offs
Real estate - construction
Real estate - mortgagees (9) (9)
Commercial (2) (6) 2 1
Installment (1) (41) (19)
----- ----- ----- -----
Total $ (3) $ (56) $ 2 $ (27)
===== ===== ===== =====
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
F & M Bank Corp. continued to experience strong earnings and consistent
asset growth in the first nine months of 1997. Annualized growth in total assets
was 6.44% and annualized growth in deposits was 5.22%. Net income for the first
nine months of 1997 increased $381,000 or 21.04% compared to 1996. The increase
in capital of 15.03% for the first nine months was the result of retained
operating income of $1,562,000 and a $1,312,000 net increase in unrealized gains
on securities available for sale.
Results of Operations
Year to Date
The dollar amount of the tax equivalent, net interest margin increased
11.96% ($588,000) in the first nine months of 1997 compared to the first nine
months of 1996. An increase in the return on earning assets of .07% combined
with a decrease in the cost of funds of .08% accounted for $159,000 of the
increase in the net interest margin. The remaining increase was thus
attributable to the relationship of the increase in earning assets relative to
interest bearing liabilities (i.e. volume increase). A schedule of the net
interest margin for 1997 and 1996 is shown on page 14 as Table I.
Noninterest income increased 34.10% in the first nine months of 1997
compared to the first nine months of 1996. Securities gains increased $50,000
from $176,000 in 1996 to $226,000 in 1997. The remainder of the increase
resulted primarily from additional service charges generated following the
implementation of higher overdraft fees and other account service charges.
Overall noninterest expenses increased 4.38% in 1997 compared to 1996.
Salaries and employee benefits rose 6.69% ($102,000) due to increased staffing
and normal salary increases. Other noninterest expense categories were virtually
unchanged.
Quarter Ending September 30, 1997
Third quarter net income increased 42.30% compared to the same quarter of
1996. Factors contributing to this increase include a $157,000 increase in the
net interest margin, $244,000 of additional securities gains and a decline of
$20,000 in the provision for loan losses. These additional sources of income
were partially offset by higher personnel expenses and additional income tax
expense.
<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 of available for sale securities are excluded from earnings and
reported (net of deferred income taxes) as a separate component of shareholders'
equity. As of September 30, 1997, the market value of all securities available
for sale exceeded their amortized cost by $3,355,000 ($2,082,000 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 the securities to have a direct impact on
earnings.
The carrying value of securities available for sale and held to maturity
increased $1,274,000 during the first nine months of 1997. This increase was due
to a $2,114,000 increase in unrealized gains on securities available for sale
net of a decline in investments in corporate securities. 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 current returns and have the
potential for future increases in value. As of September 30, 1997, investments
of all types comprised 25.99% of total assets compared to 26.39% of total assets
at December 31, 1996.
Loan Portfolio
The Company operates in an agriculturally dominated area which includes the
counties of Rockingham, Page, Shenandoah and Augusta 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 economies 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
and a half, the poultry industry has suffered due to high grain prices, excess
supplies of all types of meat and high mortality rates among poults. In the most
recent quarter, there has been an improvement in grain prices and mortality
rates. However, these improvements have not been sufficient to completely offset
depressed prices caused by an over supply of meat. 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 nine months of 1997 saw continued strong loan demand as loans grew
at an annualized rate of 9.64%. The Bank has made a conscious effort to increase
lending locally as loans represent the best return available in the present
credit markets. Funding of the new loans was made possible by increases in time
deposits, retained income from operations and sales and maturities of debt
securities. Overall, management has been quite pleased with the loan program and
believes that loan growth will continue throughout the remainder of 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 $565,000 at September
30, 1997 compared to $1,430,000 at December 31, 1996 The Company had no
nonaccrual or restructured loans at September 30, 1997.
Real estate acquired through foreclosure was $107,000 at December 31, 1996.
This property was sold prior to September 30, 1997.
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. 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 September 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. This review also considers concentrations of loans in terms of
geography, business type or level of risk. 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.
The allowance for credit losses of $1,135,000 at September 30, 1997 was up
$132,000 from its level at December 31, 1996. The allowance was equal to .95%
and .90% of total loans at September 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 is adequate to absorb
reasonably estimated credit losses inherent in the Company's portfolio.
<PAGE>12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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. Deposit growth was good in the first nine months of
1997 with an annualized growth rate of 5.22%.
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. As of
September 30, 1997 balances in repo accounts total $2,965,000 and are included
with short-term debt on the balance sheet.
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 fund fixed rate loans with repayments over a fifteen year term. As
an alternative, borrowers may opt for a twenty year repayment term of which 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. Year-to-date borrowings
total $1,000,000 in 1997 compared to repayments of $2,379,000 in 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 September 30, 1997, the Company's total risk based capital ratio
was 18.16%, far above the regulatory minimum of 8.00%. The ratio of total
capital to total assets was 12.60% at September 30, 1997 which exceeds that of
the Company's peers. Earnings have been satisfactory to allow an increase in
dividends in 1997 over those levels experienced in 1996 and management has no
reason to believe this increased level of dividends will not continue.
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.
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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 September 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.
Existence of 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>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $115,868 $ 7,992 9.20% $102,600 $ 7,127 9.26%
Federal funds sold 1,918 79 5.49% 1,335 53 5.29%
Bank deposits 310 13 5.59% 284 12 5.63%
Investments
Taxable 33,723 1,656 6.55% 37,019 1,776 6.40%
Partially
taxable 1 7,348 468 8.49% 6,835 453 8.84%
Tax exempt 1 360 17 6.30% 637 34 7.12%
Total Earning Assets 159,527 10,225 8.55% 148,710 9,455 8.48%
Interest Expense
Demand deposits 19,630 368 2.50% 19,929 389 2.60%
Savings 28,355 759 3.57% 29,927 835 3.72%
Time deposits 65,528 2,647 5.39% 55,166 2,301 5.56%
Repurchase agreements 2,762 103 4.97% 1,466 53 4.82%
Other short-term debt 410 15 4.88% 581 26 5.97%
Long-term debt 16,998 829 6.50% 19,161 935 6.51%
Total Interest Bearing
Liabilities 133,683 4,721 4.71% 126,230 4,539 4.79%
Net Interest Margin 1 $ 5,504 $ 4,916
Net Yield on Interest
Earning Assets 1 4.60% 4.41%
1 On a taxable equivalent basis assuming a 34% tax rate.
</TABLE>
<PAGE> 14
TABLE I (Continued)
<TABLE>
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Related Income
Loans 1 $118,076 $ 2,747 9.31% $106,397 $ 2,470 9.29%
Federal funds sold 2,855 40 5.60% 640 8 5.00%
Bank deposits 336 5 5.95% 139 2 5.76%
Investments
Taxable 32,001 524 6.55% 36,008 573 6.37%
Partially
taxable 1 7,953 163 8.20% 6,844 152 8.88%
Tax exempt 1 405 6 5.93% 501 9 7.19%
Total Earning Assets 161,626 3,485 8.63% 150,529 3,214 8.54%
Interest Expense
Demand deposits 19,157 121 2.53% 19,698 122 2.48%
Savings 27,742 249 3.59% 28,948 265 3.66%
Time deposits 67,697 925 5.47% 56,647 774 5.47%
Repurchase agreements 3,258 42 5.16% 2,240 27 4.82%
Other short-term debt 319 4 5.02% 807 11 5.45%
Long-term debt 16,266 267 6.57% 18,387 302 6.57%
Total Interest Bearing
Liabilities 134,439 1,608 4.78% 126,727 1,501 4.74%
Net Interest Margin 1 $ 1,877 $ 1,713
Net Yield on Interest
Earning Assets 1 4.65% 4.55%
1 On a taxable equivalent basis assuming a 34% tax rate.
</TABLE>
<PAGE> 15
TABLE II
<TABLE>
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
September 30, 1997
(In Thousands of Dollars)
The following table presents the Company's interest sensitivity.
<CAPTION>
Over
0 - 3 4 - 12 1 - 5 5 -10 Not
Months Months Years Years Classified Total
<S> <C> <C> <C> <C> <C> <C>
Uses of Funds
Loans
Commercial $ 18,543 $ 1,873 $ 8,980 $ 608 $ $ 30,004
Installment 45 595 13,897 77 14,614
Real estate 5,402 10,003 40,711 18,194 74,310
Credit cards 739 739
Interest bearing
bank deposits 918 918
Investment securities 1,000 6,023 22,641 3,333 12,371 45,368
Federal funds sold 2,216 2,216
----- ----- ----- ----- ----- -----
Total 28,863 18,494 86,229 22,212 12,371 168,169
------ ------ ------ ------ ------ -------
Sources of Funds
Interest bearing
demand deposits 19,063 19,063
Regular savings 27,842 27,842
Certificates of deposit
$100,000 and over 2,417 3,178 2,177 7,772
Other certificates
of deposit 16,648 28,401 15,526 60,575
Repurchase agreements 2,764 2,764
Short-term borrowings 850 850
Long-term borrowings 917 2,551 10,308 3,117 16,893
------ ------ ------- ----- ----- -------
Total 70,501 34,130 28,011 3,117 135,759
------ ------ ------- ----- ----- -------
Discrete Gap (41,638) (15,636) 58,218 19,095 12,371 32,410
Cumulative Gap (41,638) (57,274) 944 20,039 32,410
Ratio of Cumulative
Gap to Total
Earning Assets (24.76)% (34.06)% .56% 11.91% 19.27%
</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-Not Applicable
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 1996 Form
10-KSB filed March 26, 1997.
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 September 30, 1997.
<PAGE> 17
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
September 30, 1997 19
<PAGE> 18
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 November 13, 1997
<PAGE> 19
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,307
<INT-BEARING-DEPOSITS> 918
<FED-FUNDS-SOLD> 2,216
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,531
<INVESTMENTS-CARRYING> 21,173
<INVESTMENTS-MARKET> 21,217
<LOANS> 119,667
<ALLOWANCE> (1,135)
<TOTAL-ASSETS> 174,552
<DEPOSITS> 129,480
<SHORT-TERM> 3,614
<LIABILITIES-OTHER> 2,565
<LONG-TERM> 16,893
0
0
<COMMON> 4,093
<OTHER-SE> 17,907
<TOTAL-LIABILITIES-AND-EQUITY> 174,552
<INTEREST-LOAN> 7,967
<INTEREST-INVEST> 2,002
<INTEREST-OTHER> 92
<INTEREST-TOTAL> 10,061
<INTEREST-DEPOSIT> 3,774
<INTEREST-EXPENSE> 4,721
<INTEREST-INCOME-NET> 5,340
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 226
<EXPENSE-OTHER> 2,671
<INCOME-PRETAX> 3,179
<INCOME-PRE-EXTRAORDINARY> 2,192
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,192
<EPS-PRIMARY> 2.68
<EPS-DILUTED> 2.68
<YIELD-ACTUAL> 4.60
<LOANS-NON> 0
<LOANS-PAST> 565
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,003
<CHARGE-OFFS> 36
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 1,135
<ALLOWANCE-DOMESTIC> 1,135
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
