UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC  20549

                                      FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the transition period from -- to -- .

                            Commission file number 0-12638

                                     F&M BANCORP
                (Exact name of registrant as specified in its charter)


               Maryland                               52-1316473
    	(State or other jurisdiction         (I.R.S. Employer Identification No.)
     incorporation or organization)

                            110 Thomas Johnson Drive
                            Frederick, Maryland 21702
               (Address of principal executive offices) (zip code)

                                   301-694-4000
               (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
                            required to be filed by
     Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
                             preceding 12 months
  (or for such shorter period that the registrant was required to file such 
                            reports), and (2) has been
          subject to such filing requirements for the past 90 days.

                      YES [X]             NO [  ]

      Indicate the number of shares outstanding of each of the issuer's
          classes of common stock, as of the latest practicable date.

Common Stock $5 par value, 6,395,629 shares outstanding as of August 10, 1998

                    Exhibit index located on page 27.

F&M BANCORP
TABLE OF CONTENTS


PART I:	FINANCIAL INFORMATION                                          PAGE

     Consolidated Balance Sheets,
     June 30, 1998 and 1997 (Unaudited) and December 31, 1997              3

     Consolidated Statements of Income (Unaudited),
     Three and Six Months Ended June 30, 1998 and 1997                     5

     Consolidated Statements of Comprehensive Income (Unaudited),
     Three and Six Months Ended June 30, 1998 and 1997                     7

     Consolidated Statements of Cash Flows (Unaudited),
     Six Months Ended June 30, 1998 and 1997                               8

     Consolidated Statements of Changes in Shareholders' Equity
     (Unaudited), Six Months Ended June 30, 1998 and Twelve Months
     Ended December 31, 1997                                              10 

     Notes to Consolidated Financial Statements (Unaudited)               11

     Management's Discussion and Analysis of Financial Condition and
     Results of Operations                                                16

     Quantitative and Qualitative Disclosures about Market Risk           25

PART II     OTHER INFORMATION

     Item 4. Submission of Matters to Vote of Security Holders            27
	
     Item 6.  Exhibits and Reports on Form 8-K                            27

     Signatures                                                           27

                          CONSOLIDATED BALANCE SHEETS 
                          F&M Bancorp and Subsidiaries
<TABLE>
<CAPTION>

                                  June 30,      June 30,        December 31,
(Dollars in thousands,            1998          1997            1997
except per share amounts)       (Unaudited)   (Unaudited)
------------------------------------------------------------------------------
<S>                               <C>           <C>             <C> 
ASSSETS
Cash and due from banks           $ 35,930      $ 33,934	    $ 30,200
Federal fund sold                    9,011            --           1,700
Interest-bearing deposits with
 banks                               6,987         4,410           9,073
-----------------------------------------------------------------------------
Total cash and cash equivalents     51,928        38,344          40,973
-----------------------------------------------------------------------------
Loans held for sale                    552           212             283
-----------------------------------------------------------------------------
Investment securities
 Held-to-maturity, fair value
 $91,361, $99,318, and $96,650,
 respectively                       89,876        98,526          94,940
Available-for-sale, at fair
 value                             164,620       155,342         136,065
----------------------------------------------------------------------------
Total investment securities        254,496       253,868         231,005
----------------------------------------------------------------------------
Loans, net of unearned income      716,518       692,053         724,295
Less:  Allowance for credit
 losses                             (9,797)       (9,731)         (9,530)
----------------------------------------------------------------------------
Net loans                          706,721       682,322         714,765
----------------------------------------------------------------------------
Bank premises and equipment, net    23,955        25,363          24,956
Other real estate owned              1,456         6,389           5,055 
Interest receivable                  7,461         6,944           7,393
Intangible assets                    3,570         3,692           3,664
Other assets                        18,331        18,023          17,500
----------------------------------------------------------------------------
Total assets                    $1,068,470    $1,035,157      $1,045,594 
----------------------------------------------------------------------------
</TABLE>

                         CONSOLIDATED BALANCE SHEETS 
                     F&M Bancorp and Subsidiaries (cont.)

<TABLE>
<CAPTION>
                                June 30,      June 30,        December 31,
(Dollars in thousands,          1998          1997            1997
except per share amounts)     (Unaudited)   (Unaudited)
----------------------------------------------------------------------------
<S>                             <C>           <C>              <C>
LIABILITIES AND SHAREHOLDERS'
 EQUITY
Liabilities
Deposits
 Noninterest-bearing            $  110,303    $  112,608       $  113,215
 Interest-bearing                  734,915       697,849          708,752
----------------------------------------------------------------------------
Total deposits                     845,218       810,457          821,967
----------------------------------------------------------------------------

Federal funds purchased 
 and securities sold under
 agreements to repurchase           50,599        59,095          45,051
Other short-term borrowings          8,903        51,637          41,342
Long term borrowings                50,173         6,320          24,114
Accrued interest and other
 liabilities                         9,925        10,838          11,653
----------------------------------------------------------------------------
Total liabilities                  964,818       938,347         944,127
----------------------------------------------------------------------------
Shareholders' equity
Common stock, par value $5 per share;
 authorized 50,000 shares;
 issued and outstanding 6,387,349
 shares (1), 5,980,786 shares, and
 6,004,469 shares, respectively     31,937        30,165          30,283
Surplus                             48,747        36,560          37,028
Retained earnings                   22,958        30,230          33,865
Accumulated other comprehensive
 income                                 10          (145)            291
----------------------------------------------------------------------------
Total shareholders' equity         103,652        96,810         101,467
----------------------------------------------------------------------------
Total liabilities and 
 shareholders' equity           $1,068,470    $1,035,157      $1,045,594
----------------------------------------------------------------------------
(1) Restated to reflect 5% stock dividend paid July 29, 1998.
</TABLE>

                 CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                         F&M BANCORP and Subsidiaries

<TABLE>
<CAPTION>

                                   Three months ended        Six months ended
(Dollars in thousands,                 June 30                 June 30
except per share amounts)          1998       1997         1998      1997
----------------------------------------------------------------------------
<S>                                <C>        <C>          <C>       <C>
Interest Income
 Interest and fees on loans        $15,426    $15,022      $31,049   $29,490
 Interest and dividends on
  investment securities
    Taxable                          2,668      2,626        5,277     5,284
    Tax-exempt                         832        857        1,667     1,727
 Interest on deposits with banks       160         62          251        98
 Interest on federal funds sold        148         10          234        24
----------------------------------------------------------------------------
Total interest income               19,234     18,577       38,478    36,623
----------------------------------------------------------------------------
Interest Expense
 Interest on deposits                7,295      6,895       14,414    13,728
 Interest on federal funds
  purchased and securities
  sold under agreements to
  repurchase                           549       579         1,098     1,074 
Interest on Federal Home Loan 
  bank borrowings                      832       835         1,735     1,656
 Interest on other short-term
  borrowings                            53        41            87        74
-----------------------------------------------------------------------------
Total interest expense               8,729     8,350        17,334    16,532
-----------------------------------------------------------------------------
Net interest income                 10,505    10,227        21,144    20,091
 Provision for credit losses           525       450         1,050       900
-----------------------------------------------------------------------------
Net interest income after
 provision for credit losses         9,980     9,777        20,094    19,191
-----------------------------------------------------------------------------
Noninterest Income
 Trust income                          663       569         1,321     1,180
 Service charges on deposit accounts 1,369     1,334         2,687     2,560
 Gains on sales of securities           21         2            35         2
 Gains on sales of loans               306        61           453       104 
 Gains (losses) on sales of property   395        20           395        15
 Other operating income              1,712     1,792         3,249     3,450
-----------------------------------------------------------------------------
Total noninterest income             4,466     3,778         8,140     7,311
----------------------------------------------------------------------------
</TABLE>


                 CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                     F&M BANCORP and Subsidiaries (cont.)

<TABLE>
<CAPTION>

                                   Three months ended        Six months ended
(Dollars in thousands,                 June 30                 June 30
except per share amounts)          1998       1997         1998      1997
----------------------------------------------------------------------------
<S>                                <C>        <C>          <C>       <C>
Noninterest Expenses
 Salaries and employee benefits    $ 5,316    $ 4,924      $10,374   $ 9,857
 Occupancy and equipment expense     1,616      1,506        3,225     3,050
 Other operating expense             3,121      2,901        5,760     5,615
----------------------------------------------------------------------------
Total noninterest expenses          10,053      9,331       19,359    18,522
----------------------------------------------------------------------------
Income before provision for income
 taxes                               4,393      4,224        8,875     7,980
Provision for income taxes           1,260      1,309        2,587     2,371
----------------------------------------------------------------------------
Net Income                         $ 3,133    $ 2,915      $ 6,288   $ 5,609
----------------------------------------------------------------------------
Earnings per Common Share - Basic
 based on weighted average shares
 outstanding of 6,377,345 for 1998,
 6,329,008 for 1997(1)             $  0.49    $  0.46      $ 0.99    $  0.89
Earnings per Common Share - Diluted
  based on weighted average shares
  outstanding of 6,450,080 for 1998,
  6,370,437 for 1997 (1)           $0.48      $  0.46      $ 0.97    $  0.88
----------------------------------------------------------------------------
Dividends per Share (1)            $0.49      $  0.21      $ 0.72    $  0.42
----------------------------------------------------------------------------
(1) Restated to reflect 5% stock dividend paid July 29, 1998.
</TABLE>


        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
                          F&M BANCORP and Subsidiaries 

<TABLE>
<CAPTION>

                                   Three months ended        Six months ended
(Dollars in thousands,                 June 30                 June 30
except per share amounts)          1998       1997         1998      1997
----------------------------------------------------------------------------
<S>                                <C>        <C>          <C>       <C>
Net income                         $3,133     $2,915       $6,288    $5,609
Other comprehensive income,
 net of tax:
  Unrealized (losses) gains
   on securities:
  Unrealized holding (losses) gains
   arising during period             (144)       509         (301)       49
  Less: reclassification adjustment
   for gains included in net income   (12)        --          (20)       --
----------------------------------------------------------------------------
Comprehensive income               $3,001     $3,424       $6,007    $5,658
----------------------------------------------------------------------------
</TABLE>

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                          F&M BANCORP and Subsidiaries
<TABLE>
<CAPTION>

                                                        Six Months Ended
                                                            June 30,
(Dollars in thousands)                                 1998         1997
----------------------------------------------------------------------------
<S>                                                <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                        $  6,288     $  5,609
Adjustments to reconcile net income to net cash
 provided by operating activities
  Provision for credit losses                         1,050          900
  Provision for other real estate owned	                  2           --
  Depreciation and amortization                         933        1,303
  Amortization of intangibles                           259          262
  Net premium amortization on investment securities     121          247
  Increase in interest receivable                       (68)        (243)
  Increase (decrease) in interest payable                23          (67)
  Deferred income tax benefit                           (59)         (15)
  Amortization (accretion) of net loan origination
   cost (fees)                                          (94)          85
  Gain on sales of property                            (155)         (15)
  (Gain) loss on sales/calls of securities              (35)           2
  (Increase) decrease in loans held for sale           (269)          97
  Increase in other assets                           (1,417)         (10)
  Decrease in other liabilities                      (1,034)      (1,289)
----------------------------------------------------------------------------
Net cash provided by operating activities             5,545        6,866
----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of investment securities to be held
  to maturity                                       (6,303)      (1,110)
 Purchases of investment securities available
  for sale                                         (95,092)     (56,883)
 Proceeds from sales/calls of securities held
  to maturity                                         8,924           --
 Proceeds from sales/calls of securities
  available for sale                                 17,844           --
 Proceeds from maturing securities available
  for sale                                           48,290       47,765
 Proceeds from maturing securities held to maturity   2,309        2,008
 Net decrease (increase) in loans                     7,139      (22,507)
 Purchases of premises and equipment                   (200)      (1,377)
 Proceeds from sales of property                      3,851          107
 Other investing activities                             199        1,003
----------------------------------------------------------------------------
Net cash used in investing activities               (13,039)     (30,994)
----------------------------------------------------------------------------
</TABLE>


          CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                     F&M BANCORP and Subsidiaries (cont.)

<TABLE>
<CAPTION>

                                                        Six Months Ended
                                                            June 30,
(Dollars in thousands)                                 1998         1997
----------------------------------------------------------------------------
<S>                                                <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase in noninterest-bearing
  deposits, interest-bearing checking,
  savings and money market accounts                11,888       15,900
 Net increase (decrease) in certificates
  of deposit                                       11,363         (193)
 Net increase in securities sold under
  agreements to repurchase                          5,548       17,219
 Net increase (decrease) in long-term borrowings   26,059         (366)
 Net decrease in other short-term borrowings      (32,440)      (6,694)
 Cash dividends paid                               (4,609)      (2,503)
 Dividend reinvestment plan                           (18)         (63)
 Proceeds from issuance of common stock               658          382
----------------------------------------------------------------------------
Net cash provided by financing activities          18,449       23,682
----------------------------------------------------------------------------
 Net increase (decrease) in cash and cash
  Equivalents                                      10,955        (446)
 Cash and cash equivalents at beginning of period  40,973      38,790
----------------------------------------------------------------------------
Cash and cash equivalents at end of period        $51,928     $38,344
----------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 Cash payments for interest                       $17,306     $16,569
 Cash payments for income tax                       2,496       2,856

NON-CASH INVESTING AND FINANCING ACTIVITIES
 Fair value adjustment for securities available
  for sale, net of deferred income taxes (benefits)
  payable                                            (281)         49
----------------------------------------------------------------------------
</TABLE>

   CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
                         F&M BANCORP and Subsidiaries

<TABLE>
<CAPTION>		

                                                            Accumulated
                                                            Other
(Dollars in thousands,         Common             Retained  Comprehensive
except per share amounts)      Stock     Surplus  Earnings  Income     Total
------------------------------------------------------------------------------
<S>                            <C>       <C>      <C>       <C>       <C>
Balance at December 31, 1996	 $28,654   $29,214  $35,625  $ (194)    $93,299
Comprehensive net income            --        --   12,108     485      12,593
Dividend reinvestment plan          --        --      (80)     --         (80)
5% Stock dividend
 (283,322 shares)                1,416     7,013   (8,429)     --          --
Stock options exercised 
 (52,097 shares)                   260       861       --      --       1,121
Cash dividends paid
 ($.81 per share)                   --        --   (5,138)     --      (5,138)
Stock consideration for options
 exercised (9,514 shares)          (47)      (60)    (221)     --        (328)
------------------------------------------------------------------------------
Balance at December 31, 1997   $30,283   $37,028  $33,865  $  291    $101,467
Comprehensive net income            --        --    6,288    (281)      6,007
Dividend reinvestment plan          --        --      (18)     --         (18)
5% Stock dividend (302,819
 shares)(1)                      1,514    10,977  (12,491)     --          --
Cash dividends paid
 ($.72 per share)                   --        --   (4,609)     --      (4,609)
Stock options exercised
 (30,664 shares)                   153       759       --      --         912
Stock consideration for options
 exercised (2,720 shares)          (13)      (17)     (77)     --        (107)
------------------------------------------------------------------------------
Balance at June 30, 1998       $31,937   $48,747  $22,958  $   10    $103,652
------------------------------------------------------------------------------
(1) 5% Stock Dividend paid July 29, 1998.
</TABLE>

             Notes to Consolidated Financial Statements  (Unaudited)


Note 1.  Summary of Significant Accounting Policies

The foregoing financial statements are unaudited; however, in the opinion of 
management, all adjustments (comprising only normal recurring accruals) 
necessary for a fair presentation of the financial statements have been 
included. A summary of F&M Bancorp's ("Bancorp's") significant accounting 
policies is set forth in Note 1 to the consolidated financial statements in its 
Annual Report on Form 10-K for the year ended December 31, 1997.

Certain reclassifications to prior year balances have been made in the 
accompanying consolidated financial statements to make disclosures consistent 
with those of the current year.

Note 2. Acquisition

On May 29, 1998, Bancorp consummated a merger with Keller-Stonebraker 
Insurance, Inc.  ("KSI"), a Hagerstown, Maryland based, full-line independent 
insurance agency with offices in Hagerstown and Cumberland, MD and Keyser, WV.  
The merger was accounted for as a pooling of interests.  Accordingly, the 
consolidated financial statements have been restated to include the accounts 
of KSI for all periods presented.

Note 3. Investment Securities


<TABLE>
<CAPTION>

Investment securities are summarized as follows:
                                        June 30, 1998
------------------------------------------------------------------------------
                                           Gross       Gross    Estimated
                             Amortized   Unrealized Unrealized    Fair
(In thousands)                  Cost       Gains       Losses     Value
------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>        <C>  
Available-for-sale:
 U.S. Treasury securities and 
  obligations of U.S. government
  corporations and agencies      $ 98,476   $   327    $  118     $ 98,685
 Obligations of states and 
  political subdivisions              636         1         3          634
 Mortgage-backed securities         8,492        --       107        8,385
 Other debit securities            31,139       158        57       31,240
------------------------------------------------------------------------------
Total debt securities             138,743       486       285      138,944
Equity securities                  25,801        --       125       25,676
------------------------------------------------------------------------------
Total securities available for
 sale:                            164,544       486       410      164,620
------------------------------------------------------------------------------
Held-to-maturity:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies           985        15        --        1,000
 Obligations of states and political
  subdivisions                     70,956     1,327        30       72,253
 Mortgage-backed securities        17,935       173        --       18,108
------------------------------------------------------------------------------
Total securities to be held to
 maturity                          89,876     1,515        30       91,361
------------------------------------------------------------------------------
Total investment securities      $254,420    $2,001      $440     $255,981
------------------------------------------------------------------------------



                                        June 30, 1997
------------------------------------------------------------------------------
                                           Gross       Gross    Estimated
                             Amortized   Unrealized Unrealized    Fair
(In thousands)                  Cost       Gains       Losses     Value
------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>        <C>  
Available-for-sale:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies      $62,888    $   94     $ 138      $  62,844
 Obligations of states and 
  political subdivisions           6,216        37        --          6,253
 Other securities                 24,960        --        --         24,960
 Mortgage-backed securities       53,882       213       320         53,775
------------------------------------------------------------------------------
Total debt securities            147,946       344       458        147,832
Equity securities                  7,510        --        --          7,510
------------------------------------------------------------------------------
Total securities available 
 for sale:                       155,456       344       458        155,342
------------------------------------------------------------------------------
Held-to-maturity:
 U.S. Treasury securities and 
  obligations of U.S. government
  corporations and agencies       11,951        33        75        11,909
 Obligations of states and 
  political subdivisions          62,696     1,027        95        63,628
 Mortgage-backed securities       23,879        88       186        23,781
------------------------------------------------------------------------------
Total securities to be held 
 to maturity                      98,526     1,148       356        99,318
------------------------------------------------------------------------------
Total investment securities     $253,982    $1,492     $ 814      $254,660
------------------------------------------------------------------------------


                                           December 31, 1997
------------------------------------------------------------------------------
                                           Gross       Gross    Estimated
                             Amortized   Unrealized Unrealized    Fair
(In thousands)                  Cost       Gains       Losses     Value
------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>        <C>  
Available-for-sale:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies      $ 79,940   $  419     $   39     $ 80,320
 Obligations of states and
  political subdivisions            1,021        6         --        1,027
 Mortgage-backed securities        41,841      255         76       42,020
------------------------------------------------------------------------------
Total-debt securities             122,802      680        115      123,367
Equity securities                  12,698       --         --       12,698
------------------------------------------------------------------------------
Total securities available
 for sale:                        135,500      680        115      136,065
------------------------------------------------------------------------------
Held-to-maturity:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies         4,967       33         --        5,000
 Obligations of states and 
  political subdivisions           68,079    1,444         10       69,513
 Mortgage-backed securities        21,894      243         --       22,137
------------------------------------------------------------------------------
Total securities to be held
 to maturity                       94,940    1,720         10       96,650
------------------------------------------------------------------------------
Total investment securities      $230,440   $2,400     $  125     $232,715
------------------------------------------------------------------------------
</TABLE>

Bancorp classifies its investments in debt and equity securities in two 
categories: held-to-maturity and available-for-sale. Securities classified as 
held-to-maturity are those debt securities that Bancorp has both the positive 
intent and ability to hold to maturity. These securities are carried at cost, 
adjusted for amortization of premiums and accretion of discounts, which are 
recognized as adjustments to interest income using the interest method.

Securities classified as available-for-sale are equity securities with readily 
determinable fair values and those debt securities that Bancorp intends to 
hold for an indefinite period of time but not necessarily to maturity. These 
securities may be sold as part of its asset/liability management strategy, or 
in response to significant movements in interest rates, liquidity needs, 
regulatory capital considerations, and other similar factors. These securities 
are carried at fair value, with any unrealized gains and losses reported as a 
separate component of shareholders' equity, net of the related deferred tax 
effect.

Regardless of the classification, dividend and interest income, including 
amortization of premiums and accretion of discounts arising at acquisition, 
are included in interest income in the consolidated statements of income. 
Realized gains and losses, if any, determined based on the adjusted cost of 
the specific securities sold, are reported as a separate line item in 
noninterest income in the consolidated statements of income.

The amortized cost and estimated fair values of investments at June 30, 1998 
by contractual maturity are shown below. Expected maturities may differ from 
contractual maturities because borrowers have the right to call or prepay 
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                         Amortized        Fair
(in thousands)                             Cost          Value
------------------------------------------------------------------------------
<S>                                       <C>             <C>
Available-for-sale:
 Within 1 year                            $27,826         $27,728
 After 1 but within 5 years                51,608          51,573
 After 5 years but within 10 years         28,170          28,403
 Mortgage-backed securities                31,139          31,240
 Equity securities                         25,801          25,676
------------------------------------------------------------------------------
 Total securities available for sale      164,544         164,620
------------------------------------------------------------------------------
Held-to-maturity:
 Within 1 year                              5,915           5,970
 After 1 but within 5 years                31,029          31,655
 After 5 years but within 10 years         32,012          32,641
 After 10 years                             2,985           2,987
 Mortgage-backed securities                17,935          18,108
------------------------------------------------------------------------------
Total securities to be held to maturity    89,876          91,361
------------------------------------------------------------------------------
Total investment securities              $254,420        $255,981
------------------------------------------------------------------------------
</TABLE>

The amortized cost of investment securities pledged to secure public deposits, 
securities sold under repurchase agreements, Federal Home Loan Bank advances, 
and for other purposes as required and permitted by law, totaled $119.3 
million at June 30, 1998.

Note 4. Loans

<TABLE>
<CAPTION>

Loans, net of unearned income, consist of the following:

                                         June 30,      December 31,
------------------------------------------------------------------------------
 (In thousands)                       1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Real Estate Loans:
 Construction and land development   $25,266	      $ 30,416     $ 30,621
 Secured by farmland                   5,712          6,693        5,970
 Residential mortgage                182,030        187,562      185,798
 Other mortgage                      157,579        127,012      146,197
Agricultural                             557            920          795
Commercial and industrial loans       85,259         73,369       79,984
Consumer                             256,568        261,461      271,882
Other loans                            3,547          4,620        3,048
------------------------------------------------------------------------------
Totals                              $716,518       $692,053     $724,295
------------------------------------------------------------------------------
</TABLE>

Loans to states and political subdivisions and industrial revenue bonds are 
included in all other loans in the schedule above and in total loans in the 
statement of condition.

The allowance for credit losses is maintained at a level which, in 
management's opinion, is considered adequate to provide for possible loan 
losses on loans currently held in the loan portfolio.


Note 5. Bank Premises and Equipment

<TABLE>
<CAPTION>

Investments in bank premises and equipment are as follows

                                         June 30,      December 31,
------------------------------------------------------------------------------
 (In thousands)                       1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Bank premises and land                $22,252      $22,691      $22,531
Furniture and equipment                18,800       18,541       18,358
Leasehold improvements                  1,806        1,803        1,784
------------------------------------------------------------------------------
                                       42,858       43,035       42,673
Less accumulated depreciation
 and amortization                     (18,903)     (17,672)     (17,717)
------------------------------------------------------------------------------
Net premises and equipment            $23,955      $25,363      $24,956
------------------------------------------------------------------------------
</TABLE>

Note 6.  Comprehensive Income

Bancorp adopted Financial Accounting Standards Board  ("FASB") Statement No. 
130, "Reporting Comprehensive Income," effective January 1, 1998.  In 
accordance with the requirements of this Statement, comprehensive income and 
its components, as recognized under the accounting standards, are displayed in 
a financial statement with the same prominence as other financial statements.  
As of the June 30, 1998 interim reporting date, unrealized gains (losses) on 
securities is the only item included in other comprehensive income.

Note 7.  Earnings Per Share

Earnings per share ("EPS") data is computed and presented in accordance with 
FASB Statement No. 128, "Earnings Per Share." As prescribed by the Statement, 
the presentation of primary EPS has been replaced with the dual presentation 
of basic and diluted EPS.  Basic EPS excludes dilution and is computed by 
dividing net income available to common shareholders ("numerator") by the 
weighted-average number of common shares outstanding for the period after 
giving retroactive effect to stock dividends and stock splits ("denominator"). 
Diluted EPS reflects the potential dilution that could occur if stock options 
or other contracts to issue common stock or resulted in the issuance of common 
stock that then shared in the earnings of Bancorp. Diluted EPS is equal to the 
numerator divided by the denominator plus the dilutive effect of outstanding 
stock options.

The calculations of earnings per share below are based on weighted average 
number of shares outstanding, adjusted for the 5% stock dividend paid July 29, 
1998.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
                                                      June 30,
(in thousands except per share amounts)          1998	      1997
------------------------------------------------------------------------------
<S>                                              <C>         <C>  
Basic EPS:
 Net income available to common stockholders     $6,288     $5,609
 Average shares outstanding                       6,377      6,329
 Basic EPS                                       $ 0.99	$ 0.89
Diluted EPS:
 Net income available to common stockholders     $ 6,288    $5,609
 Average shares outstanding                        6,377     6,329
 Effect of dilutive securities (options)              73        41
 Average shares outstanding-diluted                6,450     6,370
 Diluted EPS                                      $ 0.97	$ 0.88
------------------------------------------------------------------------------
</TABLE>

Note 8.  Future Changes in Accounting Principles

In June 1997, the Financial Accounting Standards Board issued Statement No. 
131, "Disclosures About Segments of an Enterprise and Related Information". 
This statement requires that public business enterprises report certain 
information about operating segments in complete sets of financial statements 
of the enterprise and in condensed financial statements of interim periods 
issued to shareholders. It also requires that public business enterprises 
report certain information about their products and services, the geographic 
areas in which they operate, their major customers, and the nature of 
differences between reportable segment measurements and those used for the 
consolidated entity. This statement is effective for all periods ending after 
December 15, 1997. Adoption in interim financial statements is not required 
until the year following initial adoption.  Once adopted, however, comparative 
prior period information is required. Adoption of this Statement is not 
expected to have a material impact on Bancorp.

Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

OVERVIEW

F&M Bancorp's net income for the second quarter of 1998, including special 
items, was $3.1 million, or $0.49 basic earnings per share, an increase of 8% 
compared with net income of $2.9 million, or $0.46 basic earnings per share, 
for the second quarter of 1997.  Per share and dollar amounts reported 
previously have been restated to give effect to a 5% stock dividend declared 
in June 1998 and the acquisition of Keller-Stonebraker, Inc. completed in May 
1998 and accounted for as a pooling of interests.  Before special items, 
earnings for the second quarter of 1998 increased 10% to $3.2 million, or 
$0.50 basic earnings per share.  Special items reduced current-period earnings 
by $67,000 after tax, or $0.01 per share.  Returns on average assets and 
average equity were 1.19% and 12.16%, respectively, for the second quarter of 
1998 compared with 1.16% and 12.33%, respectively, for the second quarter of 
1997.

For the six months ended June 30, 1998 compare with June 30, 1997, net income 
including special items increased 12% to $6.3 million, or $0.99 basic earnings 
per share, from $5.6 million, or $0.89 basic earnings per share.  Returns on 
average assets and average equity were 1.21% and 12.37%, respectively, for the 
first half of 1998 compared with 1.13% and 12.08%, respectively, for the first 
six months of 1997.

Earnings growth for the current quarter and six-month period was largely 
attributed to loan growth, strong fee income and continued expense control. 

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, which is the sum of interest and certain fees generated 
by earning assets minus interest paid on deposits and other funding sources, 
is the principal source of Bancorp's earnings, representing approximately 72% 
of Bancorp's gross revenue through the first half of 1998.  Net interest 
income is influenced by a number of external economic and competitive factors 
such as Federal Reserve Board monetary policy and its influence on market 
interest rates; loan demand and competition from nonbank lenders; and 
competition with investment managers, brokerage firms and investment bankers 
for consumer and commercial business assets that might otherwise be deposited 
in banks.  Internal factors impacting levels and changes in net interest 
income are attributed to Bancorp's interest rate risk management policies, 
which address a variety of issues including loan and deposit pricing 
strategies, funding alternatives, and maturity schedules.  Bancorp has not 
made use of derivatives, interest rate hedges, or similar instruments or  
transactions to manage interest rate risk.

Average balances and rates for each major category of interest-earning assets 
and interest-bearing liabilities for the second quarter and year-to-date 
periods are presented in Table 1.  Net interest income on a taxable-equivalent 
basis increased by 2% to $11.0 million for the second quarter of 1998, and 
increased by 5% to $22.0 million for the first half of 1998 compared with 
corresponding periods for 1997.  The increases were primarily attributed to 
higher volumes of loans and investment securities, partly offset by declines 
in average interest rates earned thereon.  Growth in net interest income for 
the quarter and year-to-date periods was suppressed, however, by a change in 
the mix of earning assets favoring short-term investments, which provided 
added liquidity to satisfy anticipated loan demand.  Average loan growth 
slowed to 5% in the second quarter of 1998 compared with 6% growth between the 
comparable six-month periods.

Average interest-bearing deposits increased by 5% for the comparable quarter 
and six-month periods, at average interest rates only slightly higher in 1998.  
While savings deposits continue to decline in line with industry trends, 
growth was achieved in all other major deposit categories assisted by the 
introduction of new deposit products and pricing changes.  Deposits have been 
supplemented largely by Federal Home Loan Bank advances, which increased by 
13% and 19% for the quarter and year-to-date periods, respectively.  FHLB 
borrowings have been a dependable source of relatively low-cost funds to 
support growth in loans and investment securities. 

<TABLE>
<CAPTION>

Table 1. Consolidated Average Balances, Interest and Average Rates
         (Taxable Equivalent Basis)

                                               June 30,
------------------------------------------------------------------------------
                                   1998                       1997
------------------------------------------------------------------------------
                       YTD Average          Average  YTD Average       Average
(Dollars in thousands)   Balance   Interest  Rate     Balance Interest Rate
------------------------------------------------------------------------------
<S>                  <C>           <C>      <C>       <C>     <C>     <C>
ASSETS
Interest-earning assets
Short-term funds     $  19,512    $   485   4.97%	    $ 6,030 $  124	4.11%
------------------------------------------------------------------------------
Total investment securities
 - Tax-exempt(1)        70,613      2,526   7.15       70,221  2,617	7.45
------------------------------------------------------------------------------
Total investment securities
 - Taxable             169,866      5,277   6.21      165,377  5,284  6.39
------------------------------------------------------------------------------
Total investment
 securities            240,479      7,803   6.49      235,598  7,901  6.71
------------------------------------------------------------------------------
Total loans            719,879     31,094   8.71      681,389 29,560  8.75
------------------------------------------------------------------------------
Total interest-earning
 assets                979,870     39,382   8.10      923,017 37,585  8.21
------------------------------------------------------------------------------
Total noninterest-earning
 assets                 72,277                         78,927
------------------------------------------------------------------------------
TOTAL ASSETS        $1,052,147                     $1,001,944
------------------------------------------------------------------------------
LIABILITIES
Interest-bearing liabilities
 Interest-bearing deposits
 Savings            $  110,568    $ 1,344   2.45%	 $  115,496 $1,455 2.54%
 Interest checking	   113,109      1,085   1.93      103,040  1,027 2.01
 Money market savings  129,544      2,127   3.31      114,290  1,719 3.03
 Total time deposits   368,413      9,858   5.40      357,246  9,527 5.38
------------------------------------------------------------------------------
Total interest-bearing
 deposits              721,634     14,414   4.03      690,072 13,728 4.01
------------------------------------------------------------------------------
Borrowed funds
 Federal funds purchased 
  and securities sold
  under agreements to
  repurchase            43,758      1,098   5.06       42,766  1,074 5.06
 Other short-term
  borrowings            24,185        705   5.88       54,091  1,533 5.72
------------------------------------------------------------------------------
Total short-term
  borrowings            67,943      1,803   5.35       96,857  2,607 5.43
------------------------------------------------------------------------------
Long-term borrowings    40,160      1,117   5.61        5,994    197 6.63
------------------------------------------------------------------------------
 Total borrowed funds  108,103      2,920   5.45      102,851  2,804 5.50
------------------------------------------------------------------------------
Total interest-bearing
 liabilities           829,737     17,334   4.21      792,923 16,532 4.20
------------------------------------------------------------------------------
Noninterest-bearing
  liabilities
 Demand deposits      108,441                         103,253
 Other liabilities     11,427                          12,121
 Shareholders' equity 102,542                          93,647
------------------------------------------------------------------------------
TOTAL LIABILITIES 
 AND EQUITY        $1,052,147                      $1,001,944
------------------------------------------------------------------------------
NET INTEREST INCOME *             $22,048                    $21,053
------------------------------------------------------------------------------
NET INTEREST SPREAD                        3.89%                     4.01%
------------------------------------------------------------------------------
NET INTEREST MARGIN AS A
 PEPRCENT OF EARNING ASSETS                4.54%                     4.60%
------------------------------------------------------------------------------




                                           June 30,
------------------------------------------------------------------------------
                                     1998                     1997
------------------------------------------------------------------------------
(Dollars in          QTD Average          Average  QTD Average        Average
thousands)             Balance   Interest  Rate     Balance Interest  Rate
------------------------------------------------------------------------------
<S>                  <C>         <C>      <C>       <C>     <C>       <C>
ASSETS
Short-term interest
 bearing deposits    $  23,223  	$   308  5.31%     $ 6,849 $   75  4.38%
------------------------------------------------------------------------------
Total investment
 securities 
 - Tax-exempt(1)        71,021       1,260  7.10       69,802  1,300  7.45
------------------------------------------------------------------------------
Total investment
 securities
 - Taxable             174,329       2,668  6.12      164,104  2,626  6.40
------------------------------------------------------------------------------
Total investment
 securities            245,350       3,928  6.40      233,906  3,926  6.71
------------------------------------------------------------------------------
Total loans            718,433      15,450  8.63      687,397 15,054  8.78
------------------------------------------------------------------------------
Total interest 
 - earning assets      987,006      19,686  8.00      928,152 19,055  8.23
------------------------------------------------------------------------------
Total noninterest
 - earning assets       70,483                         79,122   	
------------------------------------------------------------------------------
TOTAL ASSETS        $1,057,489                     $1,007,274 
------------------------------------------------------------------------------
LIABILITIES
Interest-bearing
 liabilities
  Interest-bearing
   deposits
  Basic savings, time
   open & clubs      $111,362     $   677  2.44%   $  116,861 $  738  2.53%
  Interest checking   114,013         550  1.93       104,427    520  2.00
  Money market 
   savings            133,238       1,115  3.36       115,474    867  3.01
  Total time deposits 369,635       4,953  5.37       355,098  4,770  5.39
------------------------------------------------------------------------------
Total interest-bearing
 Deposits             728,248       7,295  4.02       691,860  6,895  4.00
------------------------------------------------------------------------------
Borrowed funds
 Federal funds 
  purchased and 
  repurchase accounts  43,696         549  5.04        44,059    578  5.26
 Other short-term
  borrowings           17,822         263  5.90        54,952    777  5.67
------------------------------------------------------------------------------
Total short-term
 borrowings            61,518         812  5.29        99,011  1,355  5.49
------------------------------------------------------------------------------
Long-term
 borrowings            44,360         622  5.62         5,195     98	7.57
------------------------------------------------------------------------------
Total borrowed funds  105,878       1,434  5.43       104,206  1,453  5.59
------------------------------------------------------------------------------
Total interest-bearing
 liabilities          834,126       8,729  4.20       796,066  8,348  4.21
------------------------------------------------------------------------------
Non-interest bearing 
 liabilities
  Demand deposits     110,244                         103,937
  Other liabilities     9,767                          12,445
  Shareholders'
   equity             103,352                          94,826
------------------------------------------------------------------------------
TOTAL LIABILITIES 
 AND EQUITY        $1,057,489                      $1,007,274
------------------------------------------------------------------------------
NET INTEREST
 INCOME *                        $10,957                      $10,707
------------------------------------------------------------------------------
NET INTEREST SPREAD                        3.80%                         4.02%
------------------------------------------------------------------------------
NET INTEREST MARGIN AS A
  PERCENT OF EARNING ASSETS                4.45%                         4.63%
------------------------------------------------------------------------------
* Based on an effective federal tax rate of 34% for 1998 and 1997.
(1) Based on amortized cost (i.e. excludes mark-to-market adjustments).
</TABLE>

Despite the relative stability of market interest rates for the comparable 
periods, slowing loan growth and added liquidity contributed to a decline in 
the net interest margin, which is the ratio of taxable-equivalent net interest 
income to average earning assets, by 18 basis points to 4.45% for the second 
quarter of 1998 compared with 4.63% the second quarter of last year.  For the 
year-to-date periods, the net interest margin declined to 4.54% for 1998 from 
4.60% for 1997. 

Provision for Credit Losses. 

Bancorp increased the provision for credit losses by 17% for the three- and 
six-month periods, to $525,000 and $1.1 million, respectively, for 1998 
compared with $450,000 and $900,000, respectively, for 1997.  The increase was 
largely attributed to a 6% increase in year-to-date average total loans 
inasmuch as net loan losses declined 3% and 18%, respectively, between the 
comparable three- and six-month periods.

Noninterest Income.

Total noninterest income increased 18% to $4.5 million for the second quarter 
of 1998 compared with $3.8 million for the second quarter of 1997.  Excluding, 
for purposes of comparison, income from credit card merchant servicing for the 
second quarter of 1997, noninterest income increased by 31% between the 
comparable quarters.  The merchant processing line of business was sold at a 
substantial gain in the third quarter of 1997.  Several categories of 
noninterest income increased related to management's strategic emphasis on new 
sources of revenue and innovative marketing and distribution.  Trust and 
investment management income increased 17% to $663,000 for the second quarter 
of 1998 from $569,000 for the second quarter of 1997.  Trust assets under 
management reached $428 million at June 30, 1998, a 12% increase from $383 
million at June 30, 1997.  Service charges on deposit accounts increased 3% to 
$1.4 million attributed largely to increased transaction volume.  Gains on 
sales of loans, largely residential mortgages, increased to $306,000 for the 
second quarter of 1998 compared to $61,000 for the same quarter last year 
attributed to the favorable interest rate environment and high refinance 
activity.  Other operating income for the quarter ended June 30, 1998 included 
a $467,000 nonrecurring gain on the sale of real property.

For the comparable six-month periods, total noninterest income advanced by 11% 
to $8.1 million for 1998 from $7.3 million for 1997.  Excluding merchant 
servicing income described above, the comparable increase in total noninterest 
income amounted to 24%.  Trust and investment management income increased by 
12% related to growth in managed assets, service charges on deposit accounts 
rose 5%, and other operating income included the aforementioned $467,000 gain 
on the sale of real property, and gains on the sale of loans amounted to 
$453,000 compared with $104,000 for the first half of 1997. 

Noninterest Expense

Total noninterest expense increased by 8% to $10.1 million for the second 
quarter of 1998 compared with $9.3 million for the second quarter of last 
year.  Excluding expenses associated with credit card merchant servicing for 
the second quarter of 1997, total noninterest expense increased by 11% between 
the comparable quarters.  Salaries and benefits increased by 8% largely due to 
merit-based compensation increases.  Occupancy and equipment expense increased 
by 7%.  Other operating expense, excluding the credit card merchant servicing 
expense recorded last year, increased 18% to $3.1 million.  Other operating 
expense for the second quarter of 1998 included $388,000 of merger-related 
expense.  The efficiency ratio (the ratio of adjusted noninterest expense to 
the sum of net interest income on a tax equivalent basis and recurring 
noninterest income) declined to 61.8% for the second quarter of 1998 from 
63.1% for the second quarter of 1997 evidencing improved control of operating 
expenses relative to higher revenue.


For the comparable six-month periods, total noninterest expense increased 5% 
to $19.4 million, or by 8% after excluding merchant servicing income for the 
first half of 1997.  Salaries and benefits increased by 5%, occupancy and 
equipment expense rose by 6%, and other operating expense, reflecting $388,000 
in merger-related expense, increased by 14% excluding, for comparative 
purposes, the previously described merchant servicing income for 1997.  For 
the year-to-date periods, the efficiency ratio declined to 61.8% for 1998 
compared with 64.0% for 1997.

Income Taxes.

The provision for income taxes declined 4% to $1.2 million for the second 
quarter of 1998, from $1.3 million for the second quarter of 1997.  Tax 
expense varies from one period to the next with changes in the level of income 
before taxes, changes in the amount of tax-exempt income, and the relationship 
of these changes to each other. Bancorp's effective tax rate for the second 
quarter of 1998 was 29% compared with 31% for the second quarter of 1997.  The 
previously described gain on the sale of real property in the second quarter 
of 1998, at capital gains tax rates, contributed to the decline in the 
effective rate between the comparable quarters. Bancorp's income tax expense 
differs from the amount computed at statutory rates primarily due to tax-
exempt interest from certain loans and investment securities.

For the six months ended June 30, 1998, the effective tax rate was 29% 
compared with 30% for the first half of 1997.

NONPERFORMING ASSETS

Table 3 summarizes Bancorp's nonperforming assets and contractually past-due 
loans. Total nonperforming assets at June 30, 1998 declined $5.9 million 
compared with year earlier levels and declined $2.8 million since year-end 
1997. Loans past due 90 days or more as to interest or principal decreased 
$39,000 compared with prior year levels and increased $278,000 since year-end. 
Although there is no direct correlation between nonperforming loans and 
ultimate loan losses, an analysis of the nonperforming loans may provide some 
indication of the quality of the loan portfolio.

POTENTIAL PROBLEM LOANS

At June 30, 1998, Bancorp had $9.7 million in loans to borrowers who were 
currently experiencing financial difficulties such that management had 
reasonable concerns that such loans might become contractually past due or be 
classified as a nonperforming asset. These loans are subject to the same close 
attention and regular credit reviews as extended to loans past due 90 days or 
more and nonperforming assets. As of June 30, 1998, management does not 
believe that these loans present any significant risk of loss. 

TABLE 3.  NONPERFORMING ASSETS AND CONTRACTUALLY PAST-DUE LOANS

<TABLE>
<CAPTION>

                                         June 30,      December 31,
------------------------------------------------------------------------------
 (Dollars in thousands)               1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Nonperforming assets:
 Nonaccrual loans (1)                 $  6,235     $ 7,162      $ 5,396
 Other real estate owned net of
  valuation allowance(2)                 1,456       6,389        5,055
------------------------------------------------------------------------------
Total nonperforming assets            $  7,691     $13,551      $10,451
------------------------------------------------------------------------------
Loans past due 90 or more days
 as to interest or principal(3)       $    945     $   855      $   538
------------------------------------------------------------------------------
Nonperforming loans to total loans        0.87%       1.03%        0.75%
Nonperforming assets to total loans
 and other real estate owned              1.07%       1.94%        1.43%
Nonperforming assets to total assets      0.72%       1.31%        1.00%
Allowance for credit losses times
 nonperforming loans                      1.57x       1.36x        1.77x
Allowance for credit losses times
 nonperforming assets                     1.27x       0.72x        0.91x

(1) Loans are placed on nonaccrual status when, in the opinion of management, 
reasonable doubt exists as to the full, timely collection of interest or 
principal or a specific loan meets the criteria for nonaccrual status 
established by regulatory authorities. When a loan is placed on nonaccrual 
status, all interest previously accrued but not collected is reversed against 
current period interest income. No interest is taken into income on nonaccrual 
loans unless received in cash or until such time the borrower demonstrates 
sustained performance over a period of time in accordance with contractual 
terms.

(2) Other real estate owned includes: banking premises no longer used for 
business purposes and real estate acquired by foreclosure (in partial or 
complete satisfaction of debt) or otherwise surrendered by the borrower to 
Bancorp's possession. Other real estate owned is recorded at the lower of cost 
or fair value on the date of acquisition or transfer from loans. Write-downs 
to fair value at the date of acquisition are charged to the allowance for 
credit losses. Subsequent to transfer, these assets are adjusted through a 
valuation allowance to the lower of the net carrying value or the fair value 
(net of estimated selling expenses) based on periodic appraisals.

(3) Nonaccrual loans are not included.
</TABLE>

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level, which in 
management's judgment, is adequate to absorb losses inherent in the loan 
portfolio. The adequacy of the allowance for credit losses is reviewed 
regularly by management.  Additions to the allowance are made by charges to 
the provision for credit losses.  On a quarterly basis, a comprehensive review 
of the adequacy of the allowance is performed considering factors such as 
historical relationships among loans outstanding, loss experience, delinquency 
levels, individual loan reviews, and evaluation of the present and future 
local and national economic environment.  While management believes the 
allowance for credit losses is adequate at June 30, 1998, the estimate of 
losses and related allowance are subject to change due to economic and other 
uncertainties inherent in the estimation process.
	
As reflected in Table 4, the allowance for credit losses as a percentage of 
total loans decreased, principally attributed to improved credit quality as 
evidenced by the decline in both nonperforming loans, as referenced above, and 
net chargeoffs.

Bancorp had loans amounting to approximately $5.1 million and  $5.8 million at 
June 30, 1998 and June 30, 1997, respectively, that were specifically 
classified as impaired and included in nonaccrual loans in Table 3. The 
average balance of impaired loans for the six and three months ended June 30, 
1998 and 1997 amounted to $4.7 million and $5.4 million, and $6.0 million, and 
$5.9 million, respectively. Cash receipts for these same periods were $213,000 
and $35,000, for 1998 and $1.1 million and $971,000 for 1997. All cash 
receipts were applied to reduce the principal balance of those impaired loans, 
and no interest income was recognized. The specific allowance for credit 
losses related to these impaired loans was $957,000 and $576,000, at June 30, 
1998 and June 30, 1997, respectively.

TABLE 4.	ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>

                                               Period ended
------------------------------------------------------------------------------
                                          June 30,      December 31,
------------------------------------------------------------------------------
(Dollars in thousands)                1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Average loans outstanding less
 average unearned income (1)          $718,778     $681,222     $695,070
------------------------------------------------------------------------------
Allowance for credit losses at 
 beginning of year                    $  9,530     $  9,639     $  9,639
------------------------------------------------------------------------------
Charge-offs:
 Real estate                               325          132          371
 Commercial and industrial                  --           24           24
 Consumer                                1,926        2,053        4,345
------------------------------------------------------------------------------
Total loans charged-off                  2,251        2,209        4,740
------------------------------------------------------------------------------
Recoveries
 Real estate                               220           82          416
 Commercial and industrial                   7           --            7
 Consumer                                1,241        1,319        2,408
------------------------------------------------------------------------------
Total recoveries                         1,468        1,401        2,831
------------------------------------------------------------------------------
Net charge-offs                            783          808        1,909
------------------------------------------------------------------------------
Provision for credit losses              1,050          900        1,800
------------------------------------------------------------------------------
Allowance for credit losses at end 
 of period                              $9,797     $  9,731     $  9,530
------------------------------------------------------------------------------
Ratio of net charge-offs to average 
 loans outstanding                        0.11%        0.12%        0.27%
------------------------------------------------------------------------------
(1) Exclusive of loans held for sale.
</TABLE>


Table 5 presents an allocation of the allowance for credit losses to various 
loan categories. This allocation does not limit the amount of the allowance 
available to absorb losses from any type of loan and should not be viewed as 
an indicator of the specific amount or specific loan categories in which 
future charge-offs may ultimately occur.

TABLE 5.	ALLOCATION OF ALLOWANCES FOR CREDIT LOSSES

<TABLE>
<CAPTION>


                                          June 30,          December 31,
------------------------------------------------------------------------------
                                   1998            1997           1997
------------------------------------------------------------------------------
                                 %Gross            %Gross           %Gross             
(Dollars in thousands)   Amount   Loans(1) Amount   Loans(1) Amount  Loans(1)
------------------------------------------------------------------------------
<S>                     <C>      <C>       <C>     <C>       <C>     <C>
Real estate:
 Construction and land
  development           $1,516   3.5%      $2,009    4.4%    $1,479   4.2%
 Residential mortgage      435  25.4          593   27.1        600  25.7
 Other mortgage          2,405  22.0        1,489   18.4      1,795  20.2
Commercial and industrial  906  11.9          621   10.6        714  11.0
Consumer                 3,472  35.8        3,281   37.7      4,084  37.6
Unallocated              1,063   1.4        1,738    1.8        858   1.3
------------------------------------------------------------------------------
Total allowance for
 credit losses          $9,797 100.0%      $9,731  100.0%    $9,530 100.0%
------------------------------------------------------------------------------
(1) Excludes loans held for sale.
</TABLE>

YEAR 2000 COMPUTER READINESS

In July 1997, management initiated an enterprise-wide Assurance Plan ("Plan") 
to prepare Bancorp's computer systems and applications for the Year 2000.  
Approved and monitored by Bancorp's Board of Directors and overseen by senior 
management, the Plan is administered by a task team representing every 
relevant area of the company and sets forth a detailed time line that is 
intended to address all critical issues in a timely and prudent manner.

At June 30, 1998 Bancorp's Plan was on schedule and calls for testing of 
internal and external systems to be substantially complete by December 31, 
1998. We have received Year 2000 compliance communications from 97% of our 
mission critical vendors, and we are continuing on schedule with Year 2000 
testing.  During the past quarter, Bancorp hosted three local seminars to 
address the Year 2000 challenge for businesses and to educate our customers on 
the issues surrounding the century change.

The assessment and resolution of internal and external Year 2000 issues under 
the Plan, and within the control of Bancorp, is not expected to have a 
material adverse impact on Bancorp or on its ability to conduct business. 
There can be no assurance, however, that there would be no adverse impact on 
Bancorp if vendors, service providers, major borrowers, or others with whom 
Bancorp conducts business, fail to achieve full Year 2000 compliance.

CAPITAL RESOURCES

Shareholders' equity totaled $103.7 million at June 30, 1998, an increase of 
2.1% compared with the 1997 year-end level of $101.5 million, and an increase 
of 7.1% from the year-earlier level of $96.8 million. The fair value of the 
available-for-sale portfolio declined $281,000 (net of deferred taxes) since 
year-end. Capital levels were considered sufficient to absorb anticipated 
future price volatility in the available-for-sale portfolio.

Bancorp's risk-based capital and leverage capital ratios continue to exceed 
regulatory guidelines as of June 30, 1998, as follows:

TABLE 6.	CAPITAL RATIOS

<TABLE>
<CAPTION>

                       Risk-based Capital
------------------------------------------------------------------------------
                        Tier 1       Total     Leverage
                       Capital      Capital    Ratio
------------------------------------------------------------------------------
<S>                    <C>          <C>        <C>
Actual                 12.89%       14.00%     9.51%
Minimum                 4.00%        8.00%     3.00%
------------------------------------------------------------------------------
Excess                  8.89%        6.00%     6.51%
------------------------------------------------------------------------------
</TABLE>


Fair value adjustments to shareholders' equity for changes in the fair value 
of securities classified as available-for-sale are excluded from the 
calculation of these capital ratios in accordance with regulatory guidelines.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Market risk is defined as the future changes in market prices that increase or 
decrease the value of financial instruments, i.e. cash, investments, loans, 
deposits and debt.  Included in market risk are interest rate risk, foreign 
currency exchange rate risk, commodity price risk, and other relevant market 
risks.  Bancorp's primary source of market risk is interest rate risk.  Market 
risk sensitive financial instruments are entered into for purposes other than 
trading.

Interest rate risk refers to the exposure of Bancorp's earnings and capital to 
changes in interest rates. The magnitude of the effect of changes in market 
rates depends on the extent and timing of such changes and on Bancorp's 
ability to adjust.  The ability to adjust is controlled by the time remaining 
to maturity on fixed-rate obligations, the contractual ability to adjust rates 
prior to maturity, competition, and customer actions.

There are several common sources of interest rate risk that must be 
effectively managed if there is to be minimal impact on Bancorp's earnings and 
capital.  Repricing risk arises largely from timing differences in the pricing 
of assets and liabilities.  Reinvestment risk refers to the reinvestment of 
cash flows from interest payments and maturing assets at lower rates.  Basis 
risk exists when different yield curves or pricing indices do not change at 
precisely the same time or in the same magnitude such that assets and 
liabilities with the same maturity are not all affected equally.  Yield curve 
risk refers to unequal movements in interest rates across a full range of 
maturities.

In determining the appropriate level of interest rate risk, Bancorp considers 
the impact on earnings and capital of the current outlook on interest rates, 
potential changes in interest rates, regional economies, liquidity, business 
strategies, and other factors. To effectively measure and manage interest rate 
risk, traditional cumulative gap and simulation analysis are used to determine 
the impact on net interest income and the market value of portfolio equity 
("MVE").  Bancorp attempts to manage interest rate sensitivity on the basis of 
when assets and liabilities will reprice as opposed to when then can reprice.

Cumulative gap analysis presents the net amount of assets and liabilities that 
will most likely reprice through specified periods if there are no changes in 
balance sheet mix.  Using that analysis, the effect of changes in market 
interest rates, both rising and falling, on net interest income can be 
calculated.  Bancorp had a cumulative net liability position of $66.8 million 
within the one-year timeframe at June 30, 1998.  This position indicated that 
Bancorp was exposed to the potential for decreased earnings if interest rates 
were to rise in the next twelve months.  In that case, the Asset/Liability 
Management Committee ("ALCO") would consider actions to change Bancorp's asset 
mix, funding sources, and interest rates to mitigate any negative impact on 
net interest income.

Because of inherent limitations in traditional cumulative gap analysis, ALCO 
also employs more sophisticated interest rate risk measurement techniques. 
Simulation analysis is used to subject the current repricing positions to 
rising and falling interest rates in increments and decrements of 100, 200, 
and 300 basis points, and to determine how net interest income varies under 
alternative interest rate and business activity scenarios. ALCO also measures 
the effects of changes in interest rates on the MVE, i.e. the net present 
value of all the future cash flows from Bancorp's financial instruments 
expressed as the percentage change in portfolio value of equity for any given 
change in prevailing interest rates. Table 7 presents Bancorp's MVE at June 
30, 1998.


TABLE 7.	Effects of Changes in Interest Rates on MVE at June 30, 1998

<TABLE>
<CAPTION>

(Dollars in thousands)
------------------------------------------------------------------------------
                                                    Percent Change
------------------------------------------------------------------------------
                               Hypothetical
                 Market Value     Change        Hypothetical
Change in        of Portfolio     Increase        Increase         Board
Interest Rates   Equity          (Decrease)      (Decrease)        Limit(1)
------------------------------------------------------------------------------
<S>              <C>           <C>              <C>                <C>
300 bp rise	$  96,558       $ (18,593)       (16.1)%            (30.0)%
200 bp rise      103,122         (12,029)       (10.4)             (20.0)
100 bp rise      109,019          (6,132)        (5.3)             (10.0)
Base scenario    115,151              --           --                 --
100 bp decline   120,297	          5,146          4.5              (10.0)
200 bp decline   125,718          10,567          9.2              (20.0)
300 bp decline   132,235          17,084         14.8              (30.0)
------------------------------------------------------------------------------
(1) Established by Bancorp's Board of Directors
</TABLE>

PART II - Other Information

Item 4	Submission of Matters to Vote of Security Holders

(a)	The annual meeting of stockholders of F&M Bancorp was held April 21, 
1998.

(b) Proxies for the annual meeting were solicited pursuant to Regulation 14A  
under the Securities and Exchange Act of 1934. There was no solicitation in 
opposition to management's nominees as listed in the proxy statement, and all 
such nominees were re-elected.

(c) (1) Election of Directors

Elected to serve as directors until the 2001 annual meeting of stockholders:

<TABLE>
<CAPTION>

Name                            For          	Withheld      	Against
------------------------------------------------------------------------------
<S>                          <C>                   <C>            <C>
Howard B. Bowen              4,856,593              53,322          --
Martha E. Church             4,672,343             237,572          --
Albert H. Cohen              4,828,582              81,333          --
Charles W. Hoff, III         4,853,367              56,548          --
</TABLE>

Item 6	Exhibits and Reports on Form 8-K                           Page
         (a)  Exhibits                                               
         11  Statement Re:  Computation of per share earnings        28
         27  Financial Data Schedule                                 29

        (b) No reports on Form 8-K were filed by the Corporation during the 
quarter ended June 30, 1998.

Items 1 through 5 have been omitted since the item is either inapplicable or 
the answer is negative.


Signatures

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 BANCORP
                                             ---------------------
                                            (Registrant)


August 14, 1998                              /s/ David L. Spilman
-------------------                          ---------------------
Date                                         DAVID L. SPILMAN
                                             TREASURER

                                  Exhibit 11
                Statement re: Computation of Per Share Earnings

Earnings per share ("EPS") is calculated on a Basic EPS and Diluted EPS basis. 
Basic EPS excludes dilution and is computed by dividing income available to 
common shareholders (the numerator) by the weighted-average number of common 
shares outstanding (the denominator) during the period.  Income available to 
common shareholders is Net Income in the table below and as reported in 
Bancorp's income statement. No adjustments were required to net income for any 
EPS calculations.

Diluted EPS is calculated by adjusting the denominator for all dilutive 
potential common shares that were outstanding during the period.  Bancorp had 
stock options outstanding during the periods presented below which had a 
dilutive effect on EPS. Therefore, the number of additional common shares that 
would have been outstanding if the options had been exercised is added to the 
denominator to arrive at the dilutive number of shares.

The calculations of earnings per share below are based on the weighted average 
number of shares outstanding, adjusted for the 5% stock dividend paid July 29, 
1998, including all common stock and common stock equivalents in conformity 
with the instructions for Item 601 of Regulation S-K.


<TABLE>
<CAPTION>

                             Six Month Period Ended    Quarter Ended June 30,
(Dollars in thousands)       1998         1997         1998         1997
------------------------------------------------------------------------------ 
<S>                          <C>          <C>          <C>          <C>
Net income                   $    6,288   $    5,609   $    3,133   $    2,915
------------------------------------------------------------------------------ 
Basic EPS 
 Shares                       6,377,345    6,329,008    6,383,042    6,333,810
 EPS                         $     0.99   $     0.89   $     0.49   $     0.46

Dilutive shares
 Stock options                   72,735       41,425       75,042       40,448
 EPS                         $     0.02   $     0.01   $     0.01           --

Diluted EPS
 Shares including options     6,450,080    6,370,433    6,458,084    6,374,258
 EPS                         $     0.97   $     0.88   $     0.48   $     0.46
</TABLE>

                               Exhibit 27

         Article 9 Financial Data Schedule for the Second Quarter

[MULTIPLIER]                          1000
[PERIOD-TYPE]                        6-MOS
[FISCAL-YEAR-END]              DEC-31-1998
[PERIOD-START]                 JAN-01-1998
[PERIOD-END]                  June-30-1998
[CASH]                              35,930
[INT-BEARING-DEPOSITS]              15,998
[FED-FUNDS-SOLD]                         0
[TRADING-ASSETS]                         0
[INVESTMENTS-HELD-FOR-SALE]        164,620
[INVESTMENTS-CARRYING]              89,876
[INVESTMENTS-MARKET]                91,361
[LOANS]                            716,518
[ALLOWANCE]                          9,797
[TOTAL-ASSETS]                   1,068,470
[DEPOSITS]                         845,218
[SHORT-TERM]                        59,502
[LIABILITIES-OTHER]                  9,925
[LONG-TERM]                         50,173
[PREFERRED-MANDATORY]                    0
[PREFERRED]                              0
[COMMON]                            31,937
[OTHER-SE]                          71,715
[TOTAL-LIABILITIES-AND-EQUITY]   1,068,470
[INTEREST-LOAN]                     31,049
[INTEREST-INVEST]                    6,944
[INTEREST-OTHER]                       485
[INTEREST-TOTAL]                    38,478
[INTEREST-DEPOSIT]                  14,414
[INTEREST-EXPENSE]                  17,334
[INTEREST-INCOME-NET]               21,144
[SECURITIES-GAINS]                      35
[LOAN-LOSSES]                        1,050
[EXPENSE-OTHER]                     19,359
[INCOME-PRETAX]                      8,875
[INCOME-PRE-EXTRAORDINARY]           6,288
[EXTRAORDINARY]                          0
[CHANGES]                                0
[NET-INCOME]                         6,288
[EPS-PRIMARY]                         0.99
[EPS-DILUTED]                         0.97
[YIELD-ACTUAL]                        4.45
[LOANS-NON]                          6,235
[LOANS-PAST]                           816
[LOANS-TROUBLED]                         0
[LOANS-PROBLEM]                      9,661
[ALLOWANCE-OPEN]                     9,530
[CHARGE-OFFS]                        2,251
[RECOVERIES]                         1,468
[ALLOWANCE-CLOSE]                    9,797
[ALLOWANCE-DOMESTIC]                 8,734
[ALLOWANCE-FOREIGN]                      0
[ALLOWANCE-UNALLOCATED]              1,063