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
March 31, 1998
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 March 31, 1998
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 - Three Months
Ended March 31, 1998 and 1997 2
Consolidated Balance Sheets - March 31, 1998
and December 31, 1997 3
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibit and Reports on Form 8K 15
SIGNATURES 16
<PAGE> 2
Part I Financial Information
Item 1. Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
Interest Income
Interest and fees on loans $ 2,838 $ 2,569
Interest on federal funds sold 57 20
Interest on interest bearing deposits 19 5
Interest and dividends on investment securities
Taxable 515 697
Nontaxable 4 7
------- ------
Total Interest Income 3,433 3,298
------- ------
Interest Expense
Interest on demand accounts 123 124
Interest on savings deposits 241 251
Interest on time deposits 882 860
------- ------
Total interest on deposits 1,246 1,235
Interest on short-term debt 55 32
Interest on long-term debt 339 287
------- ------
Total Interest Expense 1,640 1,554
------- ------
Net Interest Income 1,793 1,744
Provision for Loan Losses 45 45
------- ------
Net Interest Income after Provision for Loan Losses 1,748 1,699
------- ------
Noninterest Income
Service charges 95 85
Other 38 39
Security gains (losses) 1,498 (35)
------- ------
Total Noninterest Income 1,631 89
------- ------
Noninterest Expense
Salaries 408 374
Employee benefits 110 154
Occupancy expense 44 38
Equipment expense 63 69
Other 268 217
------- ------
Total Noninterest Expense 893 852
------- ------
Income before Income Taxes 2,486 936
Income Taxes 859 275
------- ------
Net Income $ 1,627 $ 661
======= ======
Per Share Data
Net Income $ 1.99 $ .81
====== ======
Cash Dividends $ .29 $ .22
====== ======
Equivalent Shares Outstanding 818,654 818,654
======= =======
The accompanying notes are an integral part of these statements.
<PAGE> 3
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
March 31, December 31,
ASSETS 1998 1997
------------ --------
Cash and due from banks $ 3,843 $ 3,574
Federal funds sold 4,247 2,255
Interest bearing deposits in banks 791 827
Securities held to maturity (note 2) 15,176 17,545
Securities available for sale (note 2) 23,035 21,171
Other investments 1,581 1,612
Loans, net of unearned discount (note 3) 125,717 123,190
Less allowance for loan losses (note 4) 1,164 1,121
------- -------
Net Loans 124,553 122,069
Other real estate 453 454
Bank premises and equipment 1,845 1,883
Interest receivable 1,190 1,278
Other assets 1,057 1,142
------- -------
Total Assets $177,771 $173,810
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $ 14,860 $ 14,388
Interest bearing
Demand 19,739 19,650
Savings deposits 27,895 27,024
Time deposits 67,008 65,289
------- -------
Total Deposits 129,502 126,351
Short-term debt 4,642 5,204
Long-term debt 17,320 16,977
Accrued expenses 2,803 2,376
------- -------
Total Liabilities 154,267 150,908
------- -------
STOCKHOLDERS' EQUITY
Common stock $5 par value, 818,654 shares
issued and outstanding 4,093 4,093
Surplus 867 867
Retained earnings 16,926 15,536
Unrealized gain on securities available for sale 1,618 2,406
Total Stockholders' Equity 23,504 22,902
------- -------
Total Liabilities and Stockholders' Equity $177,771 $173,810
The accompanying notes are an integral part of these statements.
<PAGE> 4
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Three Months
Ended
March 31,
1998 1997
Balance, beginning of period $ 22,902 $ 19,126
Net income for period 1,627 661
Net change in unrealized appreciation on
investment securities available for sale,
net of taxes (788) (133)
------- -------
Total comprehensive income 839 528
Dividends declared (237) (180)
------- -------
Balance, end of period $ 23,504 $ 19,474
======= =======
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)
Three Months
Ended
March 31,
1998 1997
Cash Flows from Operating Activities:
Net income $ 1,627 $ 661
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 55 61
Amortization of security premiums 21 24
Provision for loan losses 45 45
Gain on sale of assets (10)
Increase (decrease) in interest receivable 88 (42)
Decrease in other assets 104 9
Increase in accrued expenses 911 141
(Gain) loss on security transactions (1,498) 35
Losses (income) on limited partnership
investments 31 (3)
Net adjustments (253) 270
------- -------
Net Cash Provided by Operating Activities 1,374 931
------- -------
Cash Flows from Investing Activities:
Purchase of investments available for sale (7,403) (3,784)
Purchase of investments held to maturity (1,350) (2,268)
Proceeds from sales of investments available
for sale 2,550 2,189
Proceeds from maturity of investments available
for sale 1,853 683
Proceeds from maturity of investments held to
maturity 5,061 1,374
Net increase in loans (2,556) (4,024)
Purchase of property and equipment (10) (48)
Sale of other real estate 11
Change in federal funds sold (1,992) 3,307
Net decrease in interest bearing bank deposits 36 817
------- -------
Net Cash Used in Investing Activities (3,800) (1,754)
------- -------
Cash Flows from Financing Activities:
Net increase in demand and savings deposits 1,432 2,105
Net increase in the time deposits 1,719 (95)
Net decrease in short-term debt (562) (531)
Cash dividends paid (237) (180)
Increase in long-term debt 3,147
Repayment of long-term debt (2,804) (802)
------- -------
Net Cash Provided by Financing Activities 2,695 497
------- -------
Net Decrease in Cash and Cash Equivalents 269 (326)
Cash and Cash Equivalents, Beginning of Period 3,574 3,568
------- -------
Cash and Cash Equivalents, End of Period $ 3,843 $ 3,242
======= =======
Supplemental Disclosure:
Cash paid for:
Interest expense $ 1,636 $ 1,560
Income taxes 360 44
The accompanying notes are an integral part of these statements.
<PAGE> 6
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 March 31, 1998 and the results of operations for the
three month periods ended March 31, 1998 and March 31, 1997. The notes
included herein should be read in conjunction with the notes to
financial statements included in the 1997 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
March 31, 1998 and December 31, 1997 follows:
1998 1997
--------------------------------------------
Carrying Market Carrying Market
Value Value Value Value
Securities Held to Maturity
U. S. Treasury and
Agency obligations $ 8,470 $ 8,501 $ 9,283 $ 9,314
State and municipal 405 406 405 405
Other securities 3,149 3,163 4,147 4,167
Mortgage-backed
securities 3,152 3,154 3,710 3,701
Total $ 15,176 $ 15,224 $ 17,545 $ 17,587
======= ======= ======= =======
1998 1997
--------------------------------------------
Fair Fair
Cost Value Cost Value
Securities Available for Sale
U. S. Treasury and
Agency obligations $ 6,214 $ 6,262 $ 3,471 $ 3,494
Equity securities 7,217 9,728 6,634 10,436
Mortgage-backed
securities 3,911 3,930 3,088 3,110
Other securities 3,090 3,115 4,101 4,131
------- ------- ------- -------
Total $ 20,432 $ 23,035 $ 17,294 $ 21,171
======= ======= ======= =======
<PAGE> 7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
March 31, December 31,
1998 1997
Real Estate
Construction $ 5,060 $ 4,708
Mortgage 75,188 73,611
Commercial and agricultural 29,655 27,049
Consumer 15,051 16,977
Credit cards 744 818
Other 19 27
------- -------
Total $125,717 $123,190
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
three months ended March 31, 1998 and 1997 follows:
1998 1997
Balance, beginning of period $ 1,121 $ 1,003
Provision charged to operating expenses 45 45
Net (charge-offs) recoveries
Loan recoveries 9 18
Loan charge-offs (11) (11)
------- -------
Total Net (Charge-offs ) Recoveries (2) 7
------- -------
Balance, End of Period $ 1,164 $ 1,055
======= =======
Components of net (charge-offs) recoveries:
Commercial 1 1
Installment (3) 6
------- -------
$ (2) $ 7
======= =======
<PAGE> 8
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 in the first
quarter of 1998. Annualized growth in total assets increased to 9.12% and
annualized growth in deposits was 9.98%. Net income for the first quarter
increased $966,000 or 146.14% as a result of a $950,000 after tax change in
security gains and losses.
Results of Operations
The dollar amount of the tax equivalent net interest margin increased
$56,000 or 3.13% in the first quarter of 1998 compared to the first quarter of
1997. An increase in the return on earning assets of seven basis points was
partially offset by a twenty-one basis point increase in the cost of funds. The
increase in the cost of funds can be attributed primarily to prepayment
penalties incurred to refinance a portion of the long-term debt. The increase in
net interest margin income is primarily attributable to an increase in net
earning assets (i.e. volume increases). A schedule of the net interest margin
for the first quarter of 1998 and 1997 is shown on page 13 as Table I.
Noninterest income increased $1,542,000 in the first three months of 1998.
This increase was the result of the combination of a $1,498,000 gain on
securities transactions in 1998 compared to a $35,000 loss on securities
transactions in 1997. Other noninterest income increased as a result of
increased deposits.
Noninterest expense increased 4.81% in 1998 compared to 1997. The principal
reason for this was a 23.50% increase in other expenses (primarily legal and
professional, stationary and postage, and data processing). Employee salaries
and benefits declined 1.90% which was due to the Company's use of Trigon stock
received in the demutualization to offset health insurance expenses.
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 March 31, 1998, the market value of all securities available for
sale exceeded their amortized cost by $2,603,000 ($1,618,000 after the
consideration of income taxes). This excess is the result of increases in the
value of equity securities held by the parent. Management has traditionally held
debt securities (regardless of classification) until maturity and thus it does
not expect the minor fluctuation in the value of the securities to have a direct
impact on earnings.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Securities (Continued)
Investments in securities decreased 1.30% in the first quarter of 1998 as
loan growth has been steady and absorbed most of the growth in deposits. The
Company has invested in relatively short-term maturities due to uncertainty in
the direction of interest 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, 42% 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 they have resulted in significant increases in value.
Loan Portfolio
The Company operates in an agriculturally dominated area which includes 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
based on the strength of the local and national economies. A large percentage of
agricultural loans are made to poultry growers. In the past two years, 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.
The first three months of 1998 saw continued strong loan demand as loans
grew at an annualized rate of 8.21%. Funding of the new loans was made possible
by increases in demand and time deposits, Overall, management has been quite
pleased with the loan program and believes that loan growth will continue
throughout 1998.
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 $742,000 at March 31,
1998 compared to $825,000 at December 31, 1997. The Company had no nonaccrual or
restructured loans at March 31, 1998.
Real estate acquired through foreclosure totaled $27,000 at March 31, 1998
and December 31, 1997. All foreclosed property held at March 31, 1998 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.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio (Continued)
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 March 31, 1998, 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 borrower's
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 when needed.
The provision for credit losses and changes in the allowance for loan losses
are shown in Note 4, Page 7.
The allowance for credit losses of $1,164,000 at March 31, 1998 was up
$43,000 from its level at December 31, 1997. The allowance was equal to .93% and
.91% of total loans at March 31, 1998 and December 31, 1997, 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
9.98% in the first quarter of 1998. Growth was mainly in the area of transaction
and time deposits but is not believed to be from any single event or promotion.
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 borrows funds on a fixed rate basis and uses these borrowings to fund
loans on a fixed rate basis 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. Additional borrowings
obtained in the first quarter of 1998 totaled $3,147,000 of which $2,147,000 was
for the refinancing of existing debt. Normal repayments (in excess amounts paid
to refinance debt) totaled $656,000.
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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 March 31, 1998, the Company's total risk based capital ratio was
19.50%, far above the regulatory minimum of 8.00%. The ratio of total capital to
total assets was 13.22% at March 31, 1998 which exceeds that of the Company's
peers. Earnings have been sufficient to allow an increase in dividends in 1998
over those in 1997. Management anticipates maintaining these capital levels
throughout 1998.
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, deposits obtained through the adjustment of interest rates and
purchases of federal funds. To further meet its liquidity needs, the Company
also maintains lines of credit with correspondent financial institutions. The
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 interest
sensitive assets relative to interest sensitive liabilities over specific time
intervals.
At March 31, 1998 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 14
as Table II.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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.
Year 2000 Preparedness
The Bank has formed a committee to oversee its year 2000 plan
implementation. The Bank has inventoried all personal computers, software and
equipment that could be affected by the year 2000 date change in preparation for
testing its equipment. Correspondence regarding year 2000 preparedness has been
received from some vendors and letters have been sent requesting updated status
reports from these and other vendors. Letters will also be sent to significant
loan customers that appear to have the potential for material impact in the
event of a year 2000 failure.
Funds have been budgeted to cover anticipated expenses related to consulting
fees, hardware and software replacements. A legal firm has been engaged to
assist in the development of a comprehensive year 2000 plan and for review of
vendor correspondence and major contracts. Management does not anticipate other
events or uncertainties related to the year 2000 that are reasonably likely to
have a material effect on the issuer's liquidity, capital resources 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> 13
TABLE I
<TABLE>
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(ON A FULLY TAXABLE EQUIVALENT BASIS)
(Dollar Amounts in Thousands)
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------------- -----------------
Average Income/ Average Income/
Balance Expense Rates Balance Expense Rates
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $124,429 $ 2,844 9.14 $113,164 $2,572 9.09%
Federal funds sold 4,188 57 5.44 1,539 20 5.20
Interest bearing
deposits 1,574 19 4.83 399 5 5.01
Investments
Taxable 3 26,327 413 6.27 36,301 586 6.46
Partially taxable 2,3 7,240 148 8.18 6,852 154 8.99
Tax exempt 2,3 405 6 6.18 468 8 6.84
----- ------ ----- ------ ----- ------
Total Earning Assets 164,163 3,487 8.50 158,723 3,345 8.43
Interest Expense
Demand deposits 19,533 123 2.52 20,213 124 2.45
Savings 27,521 241 3.50 28,427 251 3.53
Time deposits 66,210 882 5.33 64,393 860 5.34
Short-term debt 4,223 55 5.21 2,717 32 4.71
Long-term debt 17,450 339 7.77 17,819 287 6.44
------ ------ ----- ------ ----- ------
Total Interest Bearing
Liabilities $134,937 1,640 4.86 $133,569 1,554 4.65
======= ------ ----- ======= ----- ------
Net Interest Margin 1 $ 1,847 $1,791
======== =====
Net Yield on Interest
Earning Assets 4.50% 4.51%
===== ======
1 Interest income on loans includes loan fees.
2 An incremental income tax rate of 34% was used to calculate the tax
equivalent income on nontaxable and partially taxable investments.
3 Average balance information is reflective of historical cost and has not been
adjusted for changes in market value.
</TABLE>
<PAGE> 14
TABLE II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
MARCH 31, 1998
(In Thousands of Dollars)
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans:
Commercial $ 22,131 $ 1,593 $ 8,843 $ 551 $ $ 33,118
Installment 58 646 14,336 11 15,051
Real estate 6,980 9,252 43,896 16,676 76,804
Credit cards 744 744
Interest bearing
bank deposits 791 791
Investment securities 2,320 8,489 15,669 2,005 11,309 39,792
Federal funds sold 4,247 4,247
------ ------ ------ ------ ----- ------
Total $ 37,271 $19,980 $82,744 $19,243 $11,309 $170,547
Sources of Funds
Interest bearing
deposits $ 19,739 $ $ $ $ $ 19,739
Regular savings 27,895 27,895
Certificates of deposit
$100,000 and over 1,579 2,119 3,092 6,790
Other certificates
of deposit 12,397 22,595 25,226 60,218
Short-term borrowings 4,642 4,642
Long-term debt 906 2,293 10,788 3,333 17,320
------ ------ ------ ------ ----- ------
Total $ 67,158 $27,007 $39,106 $ 3,333 $ $136,604
Discrete Gap $(29,887) $(7,027) $43,638 $15,910 $11,309 $ 33,943
Cumulative Gap (29,887) (36,914) 6,724 22,634 33,943
Ratio of Cumulative Gap
to Total Earning Assets (17.52)% (21.64)% 3.94% 13.27% 19.90%
Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities at March 31, 1998. 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.
<PAGE> 15
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) Exhibit
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 27, 1998.
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 March 31, 1998.
<PAGE> 16
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
March 31, 1998 18
<PAGE> 17
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 & Chief Financial Officer
Date May 13, 1998
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,843
<INT-BEARING-DEPOSITS> 791
<FED-FUNDS-SOLD> 4,247
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,035
<INVESTMENTS-CARRYING> 15,176
<INVESTMENTS-MARKET> 15,224
<LOANS> 125,717
<ALLOWANCE> (1,164)
<TOTAL-ASSETS> 177,771
<DEPOSITS> 129,502
<SHORT-TERM> 4,642
<LIABILITIES-OTHER> 2,803
<LONG-TERM> 17,320
0
0
<COMMON> 4,093
<OTHER-SE> 19,411
<TOTAL-LIABILITIES-AND-EQUITY> 177,771
<INTEREST-LOAN> 2,838
<INTEREST-INVEST> 519
<INTEREST-OTHER> 76
<INTEREST-TOTAL> 3,433
<INTEREST-DEPOSIT> 1,246
<INTEREST-EXPENSE> 1,640
<INTEREST-INCOME-NET> 1,793
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 1,498
<EXPENSE-OTHER> 893
<INCOME-PRETAX> 2,486
<INCOME-PRE-EXTRAORDINARY> 1,627
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,627
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.99
<YIELD-ACTUAL> 4.50
<LOANS-NON> 0
<LOANS-PAST> 742
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,121
<CHARGE-OFFS> 11
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 1,164
<ALLOWANCE-DOMESTIC> 1,164
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
