UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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, 1999
F & M BANK CORP.
Virginia 54-1280811
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Drawer 1111
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, 1999
Common Stock, par value - $5 2,454,143 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, 1999 and 1998 2
Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998 3
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1999 and 1998 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 17
<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,
1999 1998
Interest Income
Interest and fees on loans $ 2,887 $ 2,838
Interest on federal funds sold 38 57
Interest on interest bearing deposits 10 19
Interest and dividends on investment securities
Taxable 598 515
Nontaxable 4
------- ------
Total Interest Income 3,533 3,433
------- ------
Interest Expense
Interest on demand accounts 114 123
Interest on savings deposits 231 241
Interest on time deposits 927 882
------- ------
Total interest on deposits 1,272 1,246
Interest on short-term debt 69 55
Interest on long-term debt 288 339
------- ------
Total Interest Expense 1,629 1,640
------- ------
Net Interest Income 1,904 1,793
Provision for Loan Losses 10 45
------- ------
Net Interest Income after Provision for Loan Losses 1,894 1,748
------- ------
Noninterest Income
Service charges 102 95
Other 82 38
Security gains 568 1,498
------- ------
Total Noninterest Income 752 1,631
------- ------
Noninterest Expense
Salaries 460 408
Employee benefits 160 110
Occupancy expense 39 44
Equipment expense 61 63
Other 253 268
------- ------
Total Noninterest Expense 973 893
------- ------
Income before Income Taxes 1,673 2,486
Income Taxes 540 859
------- ------
Net Income $ 1,133 $ 1,627
======= ======
Per Share Data
Net Income $ .46 $ .66
======= ======
Cash Dividends $ .12 $ .10
======= ======
Equivalent Shares Outstanding 2,454,840 2,455,962
========= =========
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 1999 1998
--------------------------
Cash and due from banks $ 3,487 $ 4,198
Federal funds sold 2,760 2,436
Interest bearing deposits in banks 1,374 2,145
Securities held to maturity (note 2) 8,279 9,715
Securities available for sale (note 2) 35,548 33,941
Other investments 3,420 2,701
Loans, net of unearned discount (note 3) 131,885 132,301
Less allowance for loan losses (note 4) (1,153) (1,162)
-------- --------
Net Loans 130,732 131,139
Other real estate 426 472
Bank premises and equipment 2,219 2,080
Interest receivable 1,424 1,352
Other assets 1,066 1,316
------- -------
Total Assets $190,735 $191,495
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $ 15,284 $ 16,232
Interest bearing
Demand 20,369 20,213
Savings deposits 29,008 27,443
Time deposits 68,883 71,251
------- -------
Total Deposits 133,544 135,139
Short-term debt 7,763 7,155
Long-term debt 21,020 21,854
Accrued expenses 4,153 3,269
------- -------
Total Liabilities 166,480 167,417
------- -------
STOCKHOLDERS' EQUITY
Common stock $5 par value, 2,454,143
and 2,455,962 shares issued and
outstanding in 1999 and 1998, respectively 12,280 12,280
Surplus 867 867
Retained earnings 9,896 9,057
Treasury stock (40)
Accumulated other comprehensive income 1,252 1,874
------- -------
Total Stockholders' Equity 24,255 24,078
------- -------
Total Liabilities and Stockholders' Equity $190,735 $191,495
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,
1999 1998
Balance, beginning of period $ 24,078 $ 22,902
Comprehensive Income:
Net income for period 1,133 1,627
Net change in unrealized appreciation on
investment securities available for sale,
net of taxes (622) (788)
-------- -------
Total comprehensive income 511 839
Purchase of treasury stock (40)
Dividends declared (294) (237)
-------- -------
Balance, end of period $ 24,255 $ 23,504
======= =======
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,
1999 1998
Cash Flows from Operating Activities:
Net income $ 1,133 $ 1,627
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 47 55
Amortization of security premiums 63 21
Provision for loan losses 10 45
Gain on sale of assets (1) (10)
(Increase) decrease in interest receivable (72) 88
Decrease in other assets 303 104
Increase in accrued expenses 1,243 911
(Gain) loss on security transactions (568) (1,498)
Losses (income) on limited partnership
investments 30 31
Net adjustments 1,055 (253)
------- -------
Net Cash Provided by Operating Activities 2,188 1,374
------- -------
Cash Flows from Investing Activities:
Purchase of investments available for sale (9,235) (7,403)
Purchase of investments held to maturity (1,350)
Proceeds from sales of investments available
for sale 4,551 2,550
Proceeds from maturity of investments available
for sale 1,863 1,853
Proceeds from maturity of investments held to
maturity 1,422 5,061
Net (increase) decrease in loans 397 (2,556)
Purchase of property and equipment (189) (10)
Sale of other real estate 11
Change in federal funds sold (324) (1,992)
Net decrease in interest bearing bank deposits 770 36
------- -------
Net Cash Used in Investing Activities (745) (3,800)
-------- -------
Cash Flows from Financing Activities:
Net increase in demand and savings deposits 773 1,432
Net increase (decrease) in time deposits (2,368) 1,719
Net increase (decrease) in short-term debt 608 (562)
Cash dividends paid (294) (237)
Purchase of treasury stock (40)
Increase in long-term debt 3,147
Repayment of long-term debt (833) (2,804)
-------- -------
Net Cash Provided by (Used in) Financing Activities (2,154) 2,695
-------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (711) 269
Cash and Cash Equivalents, Beginning of Period 4,198 3,574
------- -------
Cash and Cash Equivalents, End of Period $ 3,487 $ 3,843
======= =======
Supplemental Disclosure
Cash paid for:
Interest expense $ 1,654 $ 1,636
Income taxes 360
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, 1999 and the results of operations for the
three month periods ended March 31, 1999 and March 31, 1998. The notes
included herein should be read in conjunction with the notes to
financial statements included in the 1998 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, 1999 and December 31, 1998 follows:
1999 1998
---------------------------------------------------
Carrying Market Carrying Market
Value Value Value
Value
Securities Held to
Maturity
U. S. Treasury and
Agency obligations $ 4,978 $ 4,999 $ 4,986 $ 5,030
State and municipal 250 250
Other securities 2,756 2,765 3,258 3,311
Mortgaged-backed
securities 545 555 1,220 1,230
Total $ 8,279 $ 8,319 $ 9,714 $ 9,821
======= ======= ======= =======
1999 1998
---------------------------------------------------
Market Market
Value Cost Value Cost
Securities Available
for Sale
U. S. Treasury and
Agency obligations $ 15,110 $ 15,117 $ 13,886 $ 13,849
Equity securities 11,347 9,295 10,490 7,605
Mortgage-backed
securities 3,513 3,506 3,883 3,870
Other securities 5,578 5,596 5,682 5,602
------- ------- ------- -------
Total $ 35,548 $ 33,514 $ 33,941 $ 30,926
======= ======= ======= =======
<PAGE> 7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
March 31, December 31,
1999 1998
Real Estate
Construction $ 4,796 $ 4,376
Mortgage 77,579 78,349
Commercial and agricultural 31,703 31,567
Consumer 16,946 17,125
Credit cards 782 832
Other 79 52
------ -------
Total $131,885 $132,301
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
three months ended March 31, 1999 and 1998 follows:
1999 1998
Balance, beginning of period $ 1,162 $ 1,121
Provisions charged to operating expenses 10 45
Net (charge offs) recoveries
Loan recoveries 17 9
Loan charge-offs (36) (11)
------- -------
Total Net (Charge-offs) Recoveries (19) (2)
------- -------
Balance, End of Period $ 1,153 $ 1,164
====== =======
Components of net (charge-offs) recoveries:
Commercial $ $ 1
Installment (19) (3)
------- -------
$ (19) $ (2)
======= =======
<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 1999. Loans and deposits both decreased slightly, due to increased
competition within the Bank's market area. Income from operations, exclusive of
securities transactions, increased $83,000 (11.89%). Most of this increase
resulted from an increase in non-interest income and a reduction in the
provision for loan losses. Net income including securities transactions
decreased $494,000 (30.36%) as a result of a $577,000 after tax reduction in
securities gains realized.
Results of Operations
The dollar amount of the tax equivalent net interest margin increased
$113,000 or 6.12% in the first quarter of 1999 compared to the first quarter of
1998. A decrease of forty-six basis points in the return on earning assets was
virtually offset by a forty-three basis point decrease in the cost of funds. The
decrease in the return on earning assets can be attributed to a general decline
in rates received on investment securities and increased competition creating
downward pressure on loan rates. The decrease in the cost of funds occurred
across all liability types. The reduction in interest expense on long-term debt
of two hundred thirty-six basis points resulted from the non-recurrence of
prepayment penalties incurred in 1998 to refinance debt and lower rates on the
remaining 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 1999 and 1998 is
shown on page 13 as Table I.
Non-interest income decreased $879,000 in the first three months of 1999.
This decrease was primarily the result of a $930,000 decrease in securities
gains in 1999. Other non-interest income increased as a result of increased
credit insurance commissions and fees generated from title insurance and
brokerage activities.
Non-interest expense increased 8.96% in 1999 compared to 1998. The principal
reason for this was a 8.03% increase in salaries and employee benefits. These
increases resulted from a combination of normal salary increases, staffing
increases and the expiration of benefit cost savings that resulted in 1998 from
the sale of stock received in the Trigon demutualization.
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, 1999, the market value of all securities available for
sale exceeded their amortized cost by $2,034,000 ($1,252,000 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 not
expect the minor fluctuation in the value of these 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 increased 1.92% in the first quarter of 1999 as
loan originations slowed. 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, 32% 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. Commercial lending includes loans to small and medium
sized business within its service area.
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. 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.
While lending is geographically diversified within the service area, the
Company does have some concentration in agricultural loans (primarily poultry
farming). In the past two and a half years, the poultry industry has suffered
due to high grain prices, excess supplies of all types of meat and high
mortality rates among poults. Recently there has been a sharp improvement in
grain prices and some improvement in mortality rates. However, these
improvements have not been sufficient to completely offset depressed turkey
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.
The first three months of 1999 resulted in a slight decline of $416,000 in
the loan portfolio. This decline appears to be the result of increased
competition from new banks entering the market area. The influx of new banks
caused a substantial amount of pressure on loan rates. The Bank has chosen to
attempt to retain as much of its existing loan portfolio as possible, but it has
not been aggressively pricing loans to achieve loan growth in the short-term.
Non-performing loans include non-accrual loans, loans 90 days or more past
due and restructured loans. Non-accrual 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 $1,951,000 at March
31, 1999 compared to $2,059,000 at December 31, 1998. Approximately 90% of these
past due loans are secured by real estate. Although the potential exists for
some loan losses, management believes the bank is generally well secured and
continues to actively work with these customers to effect payment. The Company
had no non-accrual or restructured loans at March 31, 1999.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio (Continued)
As of March 31, 1999 the Company did not hold any real estate that was
acquired through foreclosure.
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 non-performing
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 $1,153,000 at March 31, 1999 was down
$11,000 from its level at December 31, 1998. The allowance was equal to .87% and
.88% of total loans at March 31, 1999 and December 31, 1998, 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 la 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 runoff of
5.59% in the first quarter of 1999. This runoff was mainly in the area of time
deposits and resulted from the maturing of promotional rate deposits and higher
rate plans offered by competitors.
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. These borrowings
are used to fund either a fifteen-year fixed rate loan or a twenty-year loan, 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. Due to the
decrease in loan demand, no additional funds have been borrowed in 1999. Normal
repayments have totaled $833,000.
<PAGE> 11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Capital
The Company maintains a strong capital base to expand facilities, promote
public confidence, support operations and grow at a manageable level. As of
March 31, 1999, the Company's total risk based capital and total capital to
total assets ratios were 18.60% and 12.74%, respectively. Both ratios are in
excess of regulatory minimums and exceed the ratios of the Company's peers.
Earnings have been sufficient to allow an increase in dividends in 1999 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, 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 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
has 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, 1999 the Company is in an asset sensitive position. This asset
sensitive position typically produces an unfavorable contribution to earnings
during a period of decreasing 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 Readiness Disclosure
The following statements are being designated as Year 2000 Readiness
Disclosures under the Year 2000 Information and Readiness Disclosure Act,
enacted by the 105th Congress on October 19, 1998.
The Company has formed a year 2000 project team to identify information
technology and non-technology systems that require modification for the year
2000. A project plan has been established with goals and target dates. The
Company has completed the assessment phase and has begun the renovation and
validation phases of the project. Substantially all mission critical systems
have been tested. Redeployment of renovated or new equipment will continue
through mid-1999.
The impact of year 2000 issues on the Company depends not only on corrective
actions that the Company takes, but also on the actions of governmental
agencies, businesses and other third parties that provide services to, or
receive services from, the Company. The Company has implemented an ongoing
process of identifying and contacting mission critical third parties to
determine their year 2000 readiness. Although the Company has undertaken these
measures, there can be no assurance that mission critical third parties will
adequately address their year 2000 issues.
The Company is developing contingency plans for implementation in the event
that testing of alternate vendors to provide mission critical systems. There may
be certain mission critical third parties, such as utilities or
telecommunications companies, where alternative arrangements or sources are
limited or unavailable.
The Company has reviewed its significant loan customers to assess the risk of
increased problem loans and credit losses due to borrowers failure to adequately
address year 2000 issues. Although it is not possible to quantify the potential
impact of such credit losses at this time, management has designated a portion
of the allowance for loan losses as an undesignated reserve which can be used to
absorb uncertainties, including year 2000 problems, within the loan portfolio.
The Company has incurred expenses throughout 1998 related to its year 2000
project. Additional funds have been budgeted in anticipation of costs related to
testing and renovation that will be incurred during 1999. At the present time,
management of the Company does not believe that the costs of addressing this
issue will have a material adverse impact on the Company's financial condition.
If, however, the Company and third parties upon which it relies are unable to
address this issue in a timely manner, it could result in a material financial
risk to the Company. The Company plans to continue to devote all resources
necessary to resolve any significant year 2000 issues in a timely manner.
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 1
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(ON A FULLY TAXABLE EQUIVALENT BASIS)
(Dollar Amounts in Thousands)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
-------------------- --------------------
Average Income/ Average Income/
Balance 2 Expense Rates Balance 2 Expense Rates
Interest Income
Loans1 $131,900 $ 2,901 8.80% $124,429 $ 2,844 9.14%
Federal funds sold 3,248 38 4.68 4,188 57 5.44
Interest bearing
deposits 951 10 4.21 1,574 19 4.83
Investments
Taxable 3 34,048 504 5.92 26,327 413 6.27
Partially
taxable 2,3 8,486 136 6.41 7,240 148 8.18
Tax exempt 2,3 405 6 6.18
----- ------ --- ------ ----- -----
Total Earning
Assets 178,633 3,589 8.04 164,163 3,487 8.50
Interest Expense
Demand deposits 20,498 114 2.22 19,533 123 2.52
Savings 28,352 231 3.26 27,521 241 3.50
Time deposits 70,332 927 5.27 66,210 882 5.33
Short-term debt 6,658 69 4.17 4,223 55 5.21
Long-term debt 21,304 288 5.41 17,450 339 7.77
------ ------ ---- ------ ----- -----
Total Interest
Bearing
Liabilities $147,144 $ 1,629 4.43 $134,937 $ 1,640 4.86
Net Interest
Margin 1 $ 1,960 $ 1,847
======== =====
Net Yield on
Interest
Earning Assets 4.39% 4.50%
===== =====
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.
<PAGE> 14
TABLE II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
MARCH 31, 1999
(In Thousands of Dollars)
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans:
Commercial $24,571 $ 2,558 $ 8,550 $ 438 $ $36,117
Installment 53 769 14,171 596 15,589
Real estate 7,331 6,808 48,335 16,923 79,397
Credit cards 782 782
Interest bearing
bank deposits 1,020 1,020
Investment securities 537 4,770 20,365 6,808 14,767 47,247
Federal funds sold 2,760 2,760
------ ------ ------ ------ ----- ------
Total 37,054 14,905 91,421 24,765 14,767 182,912
Sources of Funds
Interest bearing
deposits 20,075 20,075
Regular savings 29,008 29,008
Certificates of
deposit $100,000
and over 2,598 1,225 2,911 6,734
Other certificates
of deposit 18,124 18,729 25,296 62,149
Short-term borrowings 7,763 7,763
Long-term debt 143 3,313 17,564 21,020
------ ------ ------ ------ ----- ------
Total 77,711 19,954 31,520 17,564 146,749
Discrete Gap (40,657) (5,049) 59,901 7,201 14,767 36,163
Cumulative Gap (40,657) (45,706) 14,195 21,396 36,163
Ratio of Cumulative Gap (22.23)% (24.99)% 7.76% 11.70% 19.77%
to Total Earning
Assets
Table II reflects the earlier of the maturity or repricing dates for
various assets and liabilities at March 31, 1999. 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) 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 1998 Form
10-KSB filed March 31, 1999.
27 Financial Data Schedule attached.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter
ending March 31, 1999.
<PAGE> 16
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
March 31, 1999 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 and Chief Financial Officer
Date May 11, 1999
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,487
<INT-BEARING-DEPOSITS> 1,374
<FED-FUNDS-SOLD> 2,760
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,548
<INVESTMENTS-CARRYING> 8,279
<INVESTMENTS-MARKET> 8,319
<LOANS> 131,885
<ALLOWANCE> (1,153)
<TOTAL-ASSETS> 190,735
<DEPOSITS> 133,544
<SHORT-TERM> 7,763
<LIABILITIES-OTHER> 4,153
<LONG-TERM> 21,020
0
0
<COMMON> 12,280
<OTHER-SE> 11,975
<TOTAL-LIABILITIES-AND-EQUITY> 190,735
<INTEREST-LOAN> 2,887
<INTEREST-INVEST> 598
<INTEREST-OTHER> 48
<INTEREST-TOTAL> 3,533
<INTEREST-DEPOSIT> 1,272
<INTEREST-EXPENSE> 1,629
<INTEREST-INCOME-NET> 1,904
<LOAN-LOSSES> 10
<SECURITIES-GAINS> 568
<EXPENSE-OTHER> 973
<INCOME-PRETAX> 1,673
<INCOME-PRE-EXTRAORDINARY> 1,133
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,133
<EPS-PRIMARY> .46
<EPS-DILUTED> .45
<YIELD-ACTUAL> 4.39
<LOANS-NON> 0
<LOANS-PAST> 1,951
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,162
<CHARGE-OFFS> 36
<RECOVERIES> 17
<ALLOWANCE-CLOSE> 1,153
<ALLOWANCE-DOMESTIC> 1,153
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
