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 September 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 of           (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, 6,401,264 shares outstanding as of November 9, 1998

                           Exhibit index located on page 30 

                                 F&M BANCORP
                              TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION                                          PAGE

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

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

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

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

     Consolidated Statements of Changes in Shareholders' Equity
     (Unaudited), Nine Months Ended September 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                                          17

     Quantitative and Qualitative Disclosures about Market Risk         28

PART II     OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K                          30

     Signatures                                                         30

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

                             September 30,   September 30,  December 31,
(Dollars in thousands,          1998            1997            1997
except per share amounts)    (Unaudited)     (Unaudited)
------------------------------------------------------------------------------
<S>                          <C>             <C>            <C>         
ASSETS
Cash and due from banks      $   34,447      $   30,206     $   30,200
Federal fund sold                    --              --          1,700
Interest-bearing deposits
 with banks                      18,064           6,209          9,073
------------------------------------------------------------------------------
Total cash and cash equivalents  52,511          36,415         40,973
------------------------------------------------------------------------------
Loans held for sale                 466              54            283
------------------------------------------------------------------------------
Investment securities
 Available-for-sale, at fair
  value                         195,016         141,073        136,065
 Held-to-maturity, fair value
  $102,687, $104,143, and
  $96,650, respectively         100,351         102,796         94,940
------------------------------------------------------------------------------
Total investment securities     295,367         243,869        231,005
------------------------------------------------------------------------------
Loans, net of unearned income   714,373         714,190        724,295
Less: Allowance for credit
  losses                         (9,865)         (9,837)        (9,530)
------------------------------------------------------------------------------
Net loans                       704,508         704,353        714,765
------------------------------------------------------------------------------
Bank premises and equipment,
 net                             23,595          25,404         24,956
Other real estate owned, net      1,522           6,388          5,055 
Interest receivable               7,022           7,644          7,393
Intangible assets                 3,488           3,636          3,664
Other assets                     18,092          18,721         17,500
------------------------------------------------------------------------------
Total assets                 $1,106,571      $1,046,484     $1,045,594
------------------------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
                             September 30,   September 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        $  109,674      $  108,704     $  113,215
  Interest-bearing              739,511         701,530        708,752
------------------------------------------------------------------------------
Total deposits                  849,185         810,234        821,967
------------------------------------------------------------------------------
Federal funds purchased
 and securities sold under
 agreements to repurchase        56,820         44,732          45,051
Other short-term borrowings       1,866         56,599          41,342
Long term borrowings             82,150         23,819          24,114
Accrued interest and other
 liabilities                     10,415         11,714          11,653
------------------------------------------------------------------------------
Total liabilities             1,000,436        947,098         944,127
------------------------------------------------------------------------------
Shareholders' equity
Common stock, par value $5 per
 share; authorized 50,000,000 
 shares; issued and outstanding
 6,398,497 shares(1), 6,041,581
 shares, and 6,056,586 shares,
 respectively                    31,993         30,208         30,283
Surplus                          48,648         36,409         36,739
Retained earnings                24,973         32,613         34,154
Accumulated other comprehensive
 income                             521            156            291
------------------------------------------------------------------------------
Total shareholders' equity      106,135         99,386        101,467
------------------------------------------------------------------------------
Total liabilities and
 shareholders' equity        $1,106,571     $1,046,484     $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     Nine months ended
                                    September 30         September 30
(Dollars in thousands,
except per share amounts)         1998       1997       1998        1997
------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>         <C>
Interest Income
 Interest and fees on loans       $15,516    $15,517    $46,565     $45,007
 Interest and dividends on
  investment securities
   Taxable                          2,698      2,979      7,975       8,263
   Tax-exempt                         942        828      2,609       2,555
 Interest on deposits with banks      231         95        482         193
 Interest on federal funds sold       109         13        343          37
------------------------------------------------------------------------------
 Total interest income             19,496     19,432     57,974      56,055
------------------------------------------------------------------------------
Interest Expense
 Interest on deposits               7,490      7,091     21,904      20,819
 Interest on federal funds 
  purchased and securities sold
  under agreements to repurchase      625        582      1,723       1,656
 Interest on Federal Home Loan Bank
  borrowings                          793      1,128      2,528       2,784
 Interest on other short-term
  borrowings                           23         38        110         112
------------------------------------------------------------------------------
 Total interest expense             8,931      8,839     26,265      25,371
------------------------------------------------------------------------------
 Net interest income               10,565     10,593     31,709      30,684
 Provision for credit losses          525        450      1,575       1,350
------------------------------------------------------------------------------
 Net interest income after
  provision  for credit losses     10,040     10,143     30,134      29,334
------------------------------------------------------------------------------
Noninterest Income
 Trust income                         678        654      1,999       1,834
 Service charges on deposit
  accounts                          1,251      1,330      3,938       3,890
 Gains on sales of securities          40          3         75           5
 Gains on sales of loans              117         81        570         185
 Gains (losses) on sales of property   27          3        422          18
 Other operating income             1,654      2,425      4,903       5,874
------------------------------------------------------------------------------
Total noninterest income            3,767      4,496     11,907      11,806
------------------------------------------------------------------------------
</TABLE>

                 CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                        F&M BANCORP and Subsidiaries (cont.)
<TABLE>
<CAPTION>
                                Three months ended     Nine months ended
                                    September 30         September 30
(Dollars in thousands,
except per share amounts)         1998       1997       1998        1997
------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>         <C>
Noninterest Expenses
 Salaries and employee benefits     5,040	  5,188	  15,414	    15,044
 Occupancy and equipment expense    1,569      1,645      4,794       4,695
 Other operating expense            2,349      2,788      8,109       8,403
------------------------------------------------------------------------------
 Total noninterest expenses         8,958      9,621     28,317      28,142
------------------------------------------------------------------------------
 Income before provision for income
  taxes                             4,849      5,018     13,724      12,998
 Provision for income taxes         1,446      1,588      4,033       3,959
------------------------------------------------------------------------------
Net Income                        $ 3,403    $ 3,430    $ 9,691     $ 9,039
------------------------------------------------------------------------------
Earnings per Common Share - Basic
 based on weighted average shares
 outstanding of 6,383,489 for 1998,
 6,332,750 for 1997 (1)           $  0.53    $  0.54    $  1.52     $  1.43
Earnings per Common Share - Diluted
 based on weighted average shares
 outstanding of 6,458,834 for 1998,
 6,381,899 for 1997 (1)           $  0.53    $  0.54    $  1.50     $  1.42
------------------------------------------------------------------------------
Dividends per Share (1)           $  0.25    $  0.21    $  0.97     $  0.60
------------------------------------------------------------------------------
(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     Nine months ended
                                    September 30         September 30
(Dollars in thousands,
except per share amounts)         1998       1997       1998        1997
------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>         <C>
Net income                        $ 3,403	$ 3,430	 $ 9,691     $ 9,039

Other comprehensive income,
 net of tax:
  Unrealized gains on securities:
  Unrealized holding gains arising
   during period                      472        298        169        345
  Less: reclassification adjustment
   for gains included in net income   (40)        (3)       (61)        (5)
------------------------------------------------------------------------------
Comprehensive income               $3,915     $3,731     $9,921     $9,389
------------------------------------------------------------------------------
</TABLE>


               CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                          F&M BANCORP and Subsidiaries
<TABLE>
<CAPTION>
                                               Nine months ended
                                                  September 30
(Dollars in thousands)                       1998            1997
------------------------------------------------------------------------------
<S>                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                 $  9,691         $  9,039
Adjustments to reconcile net income to
 net cash provided by operating activities
  Provision for credit losses                  1,575            1,350
  Depreciation and amortization                2,056            2,064
  Amortization of intangibles                    388              386
  Net premium amortization on investment
   securities                                    (23)             364
  Decrease (increase) in interest receivable     372             (943)
  Increase in interest payable                   296              239
  Deferred income tax benefit                     (7)              62
  Amortization (accretion) of net loan 
   origination cost (fees)                      (182)               6
  Gain on sales of property                     (422)             (18)
  (Gain)on sales/calls of securities             (75)              (5)
  (Increase) decrease in loans held for sale    (183)             255
  Increase in other assets                    (1,342)          (1,072)   
  Decrease in other liabilities                 (811)            (729)
------------------------------------------------------------------------------
 Net cash provided by operating activities    11,333           10,998
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of investment securities to be 
  held to maturity                           (18,613)          (6,251)
 Purchases of investment securities 
  available for sale                        (184,656)         (90,921)
 Proceeds from sales/calls of securities
  held to maturity                            10,541              250     
 Proceeds from sales/calls of securities
  available for sale                          23,539           11,879
 Proceeds from maturing securities available
  for sale                                   102,835           84,600
 Proceeds from maturing securities held 
  to maturity                                  2,459            2,590
 Net decrease (increase) in loans              8,854          (44,909)
 Purchases of premises and equipment          (1,036)          (2,134)
 Proceeds from sales of property               4,101              774
 Other investing activities                      121              345
------------------------------------------------------------------------------
 Net cash used in investing activities       (51,855)         (43,777)
------------------------------------------------------------------------------
</TABLE>

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                     F&M BANCORP and Subsidiaries (cont.)
<TABLE>
<CAPTION>
                                                     Nine months ended
                                                        September 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                  7,945            4,210
 Net increase in certificates of deposit            19,273           11,274
 Net increase in securities sold under
  agreements to repurchase                          11,768            2,856
 Net decrease in long-term borrowings              (37,398)          (1,732)
 Net increase in other short-term borrowings        55,932           17,133
 Cash dividends paid                                (6,208)          (3,819)
 Dividend reinvestment plan                            (96)             (72)
 Proceeds from issuance of common stock                844              554
------------------------------------------------------------------------------
 Net cash provided by financing activities          52,060           30,404
------------------------------------------------------------------------------
 Net increase (decrease) in cash and cash
  equivalents                                       11,538           (2,375)
 Cash and cash equivalents at beginning of period	  40,973           38,790
------------------------------------------------------------------------------
 Cash and cash equivalents at end of period        $52,511          $36,415
------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 Cash payments for interest                        $25,925          $25,087
 Cash payments for income tax                        3,396            3,754

NON-CASH INVESTING AND FINANCING ACTIVITIES
 Fair value adjustment for securities available
  for sale, net of deferred income taxes (benefits)
  payable                                              230              350
------------------------------------------------------------------------------
</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  $28,925  $35,914    $ (194)    $93,299
Comprehensive net income           --       --   12,108       485      12,593
Dividend reinvestment plan         --       --      (80)       --         (80)
5% Stock dividend (283,322
 shares)                        1,416    7,013   (8,429)       --          --
Stock options exercised
 (52,097 shares)                  260      861       --        --       1,121
Cash dividends paid
 ($.86 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  $36,739  $34,154    $  291   $101,467
Comprehensive net income           --       --    9,691       230      9,921
Dividend reinvestment plan         --	    --      (96)	   --        (96)
5% Stock dividend (302,819
 shares) (1)                    1,514   10,977  (12,491)       --         --
Cash dividends paid
 ($.97 per share)                  --       --   (6,208)       --     (6,208)
Stock options exercised
 (41,812 shares)                  209      949       --        --      1,158
Stock consideration for options
 exercised (2,720 shares)         (13)     (17)     (77)       --       (107)
------------------------------------------------------------------------------
Balance at September 30, 1998	$31,993  $48,648  $24,973    $  521   $106,135
------------------------------------------------------------------------------
(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. Pending Acquisition

On September 4, 1998, Bancorp announced it had reached a definitive agreement 
to acquire all of the outstanding capital stock of Monocacy Bancshares, Inc., 
Taneytown , Maryland, in a tax free transaction.  Under the terms of the 
agreement, Monocacy Bancshares will merge with and into Bancorp.  On the 
effective date of the merger, each share of Monocacy Bancshares common stock 
will be converted into a number of shares of Bancorp's common stock.  The 
number of shares of Bancorp common stock to be exchanged for each share of 
Monocacy Bancshares common stock will be determined by dividing 2,219,753 by 
the number of shares of Monocacy Bancshares common stock outstanding 
immediately prior to consummation of the merger subject to adjustment in 
certain circumstances.  The aggregate number of shares of Bancorp common stock 
to be delivered may be increased or decreased by up to 62,000 shares, 
depending on the average closing price of Bancorp common stock prior to 
merger.  The transaction is subject to the approval of federal regulatory 
authorities, Monocacy Bancshares stockholders, and Bancorp stockholders and is 
expected to be consummated during the fourth quarter of 1998.

Monocacy Bancshares had total assets at September 30, 1998 of approximately 
$303.2 million.  Taneytown Bank & Trust Company, the primary subsidiary of 
Monocacy Bancshares, currently operates eleven banking offices in central 
Maryland primarily Carroll County, and also in Columbia, Maryland and in south 
central Pennsylvania.


Note 3. Acquisition

On May 29, 1998, Bancorp consummated a merger with Keller-Stonebraker 
Insurance, Inc.  ("KSI"), a Hagerstown, MD-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 4. Investment Securities

Investment securities are summarized as follows:

<TABLE>
<CAPTION>
                                          September 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        $ 116,487 $   851      $  36      $ 117,302
 Obligations of states and
  political subdivisions                 410      --         --            410
 Mortgage-backed securities           63,113     242         42         63,313
------------------------------------------------------------------------------
 Total debt securities               180,010   1,093         78        181,025
 Equity securities                    14,115      --        124         13,991
------------------------------------------------------------------------------
Total securities available for sale: 194,125   1,093        202        195,016
------------------------------------------------------------------------------
Held-to-maturity:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies              991       9         --          1,000
 Obligations of states and political 
  subdivisions                        83,080   2,082         25         85,137
 Mortgage-backed securities           16,280     270         --         16,550
------------------------------------------------------------------------------
Total securities to be held 
 to maturity                         100,351   2,361         25        102,687
------------------------------------------------------------------------------
Total investment securities         $294,476  $3,454       $227       $297,703
------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                             September 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        $76,890   $   244      $   52     $  77,082
 Obligations of states and
  political subdivisions             2,563        14          --         2,577
 Mortgage-backed securities         51,751       268         112        51,907
------------------------------------------------------------------------------
 Total debt securities             131,204       526         164       131,566
 Equity securities                   9,507        --          --         9,507
------------------------------------------------------------------------------
Total securities available
 for sale:                         140,711       526         164       141,073
------------------------------------------------------------------------------
Held-to-maturity:
 U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies         11,958        36          24        11,970
 Obligations of states and
  political subdivisions            67,804     1,220          43        68,981
 Mortgage-backed securities         23,034       179          21        23,192
------------------------------------------------------------------------------
Total securities to be held
 to maturity                       102,796     1,435          88       104,143
------------------------------------------------------------------------------
Total investment securities       $243,507    $1,961       $ 252      $245,216
------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                             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 September 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                          $ 49,058             $ 49,055
 After 1 but within 5 years               36,893               37,298
 After 5 years but within 10 years        30,946               31,358
 Mortgage-backed securities               63,113               63,314
 Equity securities                        14,115               13,991
------------------------------------------------------------------------------
 Total securities available for sale     194,125              195,016
------------------------------------------------------------------------------
Held-to-maturity:
 Within 1 year                             9,006                9,086
 After 1 but within 5 years               29,515               30,326
 After 5 years but within 10 years        31,186               32,225
 After 10 years                           14,364               14,500
 Mortgage-backed securities               16,280               16,550
------------------------------------------------------------------------------
 Total securities to be held
  to maturity                           $100,351             $102,687
------------------------------------------------------------------------------
Total investment securities             $294,476             $297,703
------------------------------------------------------------------------------
</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 $109.0 
million at September 30, 1998.

Note 5. Loans

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

<TABLE>
<CAPTION>
                                        September 30,       December 31, 
------------------------------------------------------------------------------
(In thousands)                        1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Real Estate Loans:
 Construction and land development    $ 21,540      $ 30,537     $ 30,621
 Secured by farmland                     5,648         6,468        5,970
 Residential mortgage                  187,112       186,040      185,798
 Other mortgage                        159,334       138,310      146,197
Agricultural                               533           677          795
Commercial and industrial loans         80,529        77,081       79,984
Consumer                               257,391       270,868      271,882
Other loans                              2,286         4,209        3,048
------------------------------------------------------------------------------
Totals                                $714,373      $714,190     $724,295
------------------------------------------------------------------------------
</TABLE>

Loans to states and political subdivisions and industrial revenue bonds are 
included in  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 6. Bank Premises and Equipment

Investments in bank premises and equipment are as follows:

<TABLE>
<CAPTION>
                                        September 30,       December 31, 
------------------------------------------------------------------------------
(In thousands)                        1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Bank premises and land                $22,255      $22,814      $22,531
Furniture and equipment                18,885       18,536       18,358
Leasehold improvements                  1,806        1,805        1,784
------------------------------------------------------------------------------
                                       42,946       43,155       42,673
Less accumulated depreciation
 and amortization                     (19,351)     (17,751)     (17,717)
------------------------------------------------------------------------------
Net premises and equipment            $23,595      $25,404      $24,956
------------------------------------------------------------------------------
</TABLE>

Note 7.  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 September 30, 1998 interim reporting date, unrealized gains (losses) 
on securities is the only item included in other comprehensive income.

Note 8.  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>                                                          
------------------------------------------------------------------------------
                                                     September30,
(In thousands except per share amounts)         1998             1997        
------------------------------------------------------------------------------
<S>                                             <C>              <C>
Basic EPS:
 Net income available to common stockholders    $9,691           $9,039
 Average shares outstanding                      6,383            6,333
 Basic EPS:                                     $ 1.52           $ 1.43
Diluted EPS:
Net income available to common stockholders     $9,691           $9,039
 Average shares outstanding                      6,383            6,333
 Effect of dilutive securities (options)            76               49
 Average shares outstanding-diluted              6,459            6,382
 Diluted EPS                                    $ 1.50           $ 1.42
------------------------------------------------------------------------------
</TABLE>

Note 9.  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 earnings for the third quarter of 1998, before special items, 
were $3.403 million, or $0.53 basic earnings per share, an increase of 13% 
compared with earnings before special items of $3.019 million, or $0.47 basic 
earnings per share, for the third 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.  Including 
special items, net income for the third quarter of 1998 decreased by 1% to 
$3.403 million, or $0.53 basic earnings per share, from $3.430 million for the 
third quarter of 1997.  Special items increased prior-period earnings by $411 
thousand after tax, or $0.07 per share.  Returns on average assets and average 
equity were 1.27% and 12.90%, respectively, for the third quarter of 1998 
compared with 1.31% and 13.98%, respectively, for the third quarter of 1997 
based upon net income including special items.

For the nine months ended September 30, 1998 and 1997, net income including 
special items increased 7% to $9.691 million for the most recent period, or 
$1.52 basic earnings per share, from $9.039 million, or $1.43 basic earnings 
per share, one year earlier.  Returns on average assets and average equity 
were 1.23% and 12.56%, respectively, for the first nine months of 1998 
compared with 1.19% and 12.74%, respectively, for the first nine months of 
1997.

Earnings growth for the current quarter and nine-month period was largely 
attributed to loan growth, strong fee income and lower expenses. 


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 73% 
of gross revenue through the first nine months 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 third quarter and year-to-date 
periods are presented in Table 1.  Net interest income on a taxable-equivalent 
basis increased by 0.2% to $11.074 million for the third quarter of 1998, and 
increased by 3% to $33.119 million for the first nine months of 1998 compared 
with the 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 
continuing change in the mix of earning assets favoring short-term 
investments, which provided added liquidity intended to satisfy anticipated 
loan demand.  Average loan growth slowed to 2% in the third quarter of 1998 
compared with 4% growth between the comparable nine-month periods.

Average interest-bearing deposits increased by 5% for the comparable quarter 
and nine-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 30.6% and 30.7% 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)

                                             September 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     $   21,150	$   825  5.20%     $  6,994 $  230	4.38%
------------------------------------------------------------------------------
Total investment securities
 - Tax-exempt (1)        73,701      3,953  7.15        69,532  3,871 7.42
------------------------------------------------------------------------------
Total investment securities
 - Taxable              172,933      7,975  6.15       171,016  8,263 6.44
------------------------------------------------------------------------------
Total investment
 securities             246,634     11,928  6.45       240,548 12,134 6.73
------------------------------------------------------------------------------
Total loans             716,956     46,631  8.70       687,884 45,108	8.77
------------------------------------------------------------------------------
Total interest-earning
 assets                 984,740     59,384  8.06       935,426 57,472 8.21
------------------------------------------------------------------------------
Total noninterest-earning
 assets                  71,760                         78,578
------------------------------------------------------------------------------
TOTAL ASSETS         $1,056,500                     $1,014,004
------------------------------------------------------------------------------
LIABILITIES
Interest-bearing liabilities
  Interest-bearing deposits
  Savings            $  109,528    $ 2,000  2.44%     $115,260 $2,176 2.52%
  Interest checking     112,835      1,617  1.92       104,448  1,550 1.98
  Money market savings  132,780      3,315  3.34       113,755  2,576 3.03
  Total time deposits   371,407     14,972  5.39       359,853 14,517 5.39
------------------------------------------------------------------------------
Total interest-bearing
 deposits               726,550     21,904  4.03       693,316 20,819 4.01
------------------------------------------------------------------------------
Borrowed funds
 Federal funds purchased
  and securities sold
  under agreements to
  repurchase             45,665      1,723  5.04        43,246  1,656 5.12
 Other short-term
  borrowings             30,472      1,253  5.50        54,927  2,394 5.83
------------------------------------------------------------------------------
 Total short-term
  borrowings             76,137      2,976  5.23        98,173  4,050 5.52
------------------------------------------------------------------------------
Long-term borrowings     32,071      1,385  5.78        11,520    502 5.83
------------------------------------------------------------------------------
 Total borrowed funds   108,208      4,361  5.39       109,693  4,552 5.55
------------------------------------------------------------------------------
Total interest-bearing
 liabilities            834,758     26,265  4.21       803,009 25,371 4.22
------------------------------------------------------------------------------
Noninterest-bearing
  liabilities
 Demand deposits        107,773                        104,227
 Other liabilities       10,809                         11,872
 Shareholders' equity   103,160                         94,896
------------------------------------------------------------------------------
TOTAL LIABILITIES
 AND EQUITY          $1,056,500                     $1,014,004
------------------------------------------------------------------------------
NET INTEREST INCOME*               $33,119                    $32,101
------------------------------------------------------------------------------
NET INTEREST SPREAD                        3.85%                      3.99%
------------------------------------------------------------------------------
NET INTEREST MARGIN AS A
 PEPRCENT OF EARNING ASSETS                4.50%                      4.59%
------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                             September 30,
------------------------------------------------------------------------------
                                   1998                       1997
------------------------------------------------------------------------------
                       QTD Average          Average  QTD Average       Average
(Dollars in thousands)   Balance   Interest  Rate     Balance Interest Rate
------------------------------------------------------------------------------
<S>                  <C>           <C>      <C>       <C>     <C>     <C>
ASSETS
Short-term interest
 bearing deposits    $  24,374     $  340   5.53%     $  8,858 $ 108  4.84%
------------------------------------------------------------------------------
Total investment
 securities - 
 Tax-exempt (1)         79,776      1,428   7.16        68,176 1,255  7.36
------------------------------------------------------------------------------
Total investment
 securities - Taxable  178,964      2,698   6.03       182,111 2,979  6.54
------------------------------------------------------------------------------
Total investment
 securities            258,740      4,126   6.38       250,287 4,234  6.77
------------------------------------------------------------------------------
Total loans            711,216     15,539   8.67       700,662 15,548 8.80
------------------------------------------------------------------------------
Total interest- earning assets         994,330     20,005   7.98      959,807 
19,890 8.22
Total noninterest-
 earning assets          70,727                         77,924   	
------------------------------------------------------------------------------
TOTAL ASSETS         $1,065,057                     $1,037,731 
------------------------------------------------------------------------------
LIABILITIES
Interest-bearing
 liabilities
  Interest-bearing
   deposits
  Basic savings, 
   time open & clubs $  107,484    $   657  2.43%     $114,798 $  721 2.49%
  Interest checking     112,297        530  1.87       107,215    523	1.94
  Money market savings  139,144      1,188  3.39       112,701    859 3.02
  Total time deposits   377,296      5,115  5.38       364,982  4,988 5.42
------------------------------------------------------------------------------
Total interest-bearing
 deposits               736,221      7,490  4.04       699,696  7,091 4.02
------------------------------------------------------------------------------
Borrowed funds
 Federal funds purchased
 and repurchase
 accounts                49,417        625  5.02        44,189    582 5.23
 Other short-term
  borrowings              4,198         59  5.58        56,526    859 6.03
------------------------------------------------------------------------------
  Total short-term
   borrowings            53,615        684  5.06       100,715  1,441 5.68
------------------------------------------------------------------------------
 Long-term borrowings    54,792        757  5.48        22,437    307	5.43
------------------------------------------------------------------------------
  Total borrowed funds  108,407      1,441  5.27       123,152  1,748 5.63
------------------------------------------------------------------------------
Total interest-bearing
 liabilities            844,628      8,931  4.20       822,848  8,839 4.26
------------------------------------------------------------------------------
Non-interest bearing
  liabilities
 Demand deposits        106,460                        106,144
 Other liabilities        9,331                         11,385
 Shareholders' equity   104,638                         97,354
------------------------------------------------------------------------------
TOTAL LIABILITIES AND
 EQUITY              $1,065,057                     $1,037,731
------------------------------------------------------------------------------
NET INTEREST INCOME*               $11,074                     $11,051
------------------------------------------------------------------------------
NET INTEREST SPREAD                         3.78%                     3.96%
------------------------------------------------------------------------------
NET INTEREST MARGIN AS A
  PERCENT OF EARNING ASSETS                 4.42%                     4.57%
------------------------------------------------------------------------------
(1) Based on an effective federal tax rate of 34% for 1998 and 1997.
* Based on amortized cost (i.e. excludes mark-to-market adjustments).
</TABLE>

Lower 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 15 basis points to 4.42% for the third quarter of 1998 compared 
with 4.59% the third quarter of last year.  For the year-to-date periods, the 
net interest margin declined to 4.50% for 1998 from 4.59% for 1997.

Provision for Credit Losses. 

The provision for credit losses was increased by 17% for the three- and nine-
month periods, to $525 thousand and $1.575 million, respectively, for 1998 
compared with $450 thousand and $1.350 million, respectively, for 1997.  The 
increase was largely attributed to a 4% increase in year-to-date average total 
loans.

Noninterest Income.

Excluding a $900 thousand gain on the sale of credit card merchant processing 
recognized in the third quarter of 1997, total noninterest income increased 5% 
to $3.765 million for the third quarter of 1998 compared with $3.596 million 
for the third quarter of 1997.  Trust and investment management income 
increased 4% to $678 thousand for the third quarter of 1998 from $654 thousand 
for the third quarter of 1997.  Excluding an unusually large estate settlement 
fee accrual of $72 thousand recognized in the third quarter of 1997, the 
underlying rate of growth in trust fee income was 16%.  Trust assets under 
management reached $394 million at September 30, 1998, a 9% increase from $362 
million at September 30, 1997.  Service charges on deposit accounts decreased 
6% to $1.251 million attributed largely to lower transaction volume.  Gains on 
sales of loans, largely residential mortgages, increased to $117 thousand for 
the third quarter of 1998 compared with $81 thousand for the same quarter last 
year attributed to the favorable interest rate environment and high refinance 
activity.  Other operating income for the quarter ended September 30, 1998, 
excluding the $900 thousand nonrecurring gain described above, increased by 8% 
to $1.654 million.

For the comparable nine-month periods, total noninterest income advanced by 1% 
to $11.907 million for 1998 from $11.806 million for 1997.  Excluding, for 
purposes of comparison, merchant servicing income of $756 thousand and the 
$900 thousand nonrecurring gain described above which were recognized in the 
first nine months of 1997, and excluding a $467 thousand gain on the sale of 
real property recognized in the first nine months of 1998, the comparable 
increase in total noninterest income amounted to 13%.  Trust and investment 
management income increased by 9% related to growth in managed assets, but 
increased by 24% after excluding an unusually large estate settlement fee 
recognized in 1997; service charges on deposit accounts increased 1%; and 
other operating income, excluding the aforementioned merchant servicing income 
and nonrecurring gains, increased 24% compared with the first nine months of 
1997.

Noninterest Expense

Total noninterest expense decreased by 7% to $8.958 million for the third 
quarter of 1998 compared with $9.621 million for the third quarter of last 
year.  Excluding $231 thousand of expenses associated with the 1996 Home 
Federal merger agreement recognized in the third quarter of 1997, total 
noninterest expense declined by 5%.  The reduction primarily reflects 
stringent cost controls and significant efficiencies realized through the 
recent integration of Home Federal's core processing systems and 
administrative functions.  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 59.7% for the third 
quarter of 1998 from 62.9% for the third quarter of 1997 acknowledging 
improvement in the company's revenue related to its cost structure.

For the comparable nine-month periods, total noninterest expense increased 1% 
to $28.317 million for 1998, from $28.142 million one year earlier.  After 
excluding, for comparative purposes, merchant servicing expense of $500 
thousand recognized in the first nine months of 1997 and merger-related 
expenses described above, the resulting rate of increase in total noninterest 
expense was still just 1% attributed to ongoing cost controls and increased 
operating efficiencies.  For the year-to-date periods, the efficiency ratio 
declined to 61.1% for 1998 compared with 63.6% for 1997.

Income Taxes.

The provision for income taxes declined 9% to $1.446 million for the third 
quarter of 1998, from $1.588 million for the third 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. The effective tax rate for the third quarter 
of 1998 was 30% compared with 32% for the third quarter of 1997.  The decline 
in the effective tax rate between the comparable quarters was related to a 
higher proportion of tax-exempt securities income in the current period.  
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 nine months ended September 30, 1998, the effective tax rate was 29% 
compared with 30% for the comparable 1997 period.


NONPERFORMING ASSETS

Table 3 summarizes Bancorp's nonperforming assets and contractually past-due 
loans. Total nonperforming assets at September 30, 1998  declined $5.2 million 
compared with year earlier levels and declined $3.3 million since year-end 
1997. Loans past due 90 days or more as to interest or principal decreased 
$185,000 compared with prior year levels and increased $192,000 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 September 30, 1998, Bancorp had $11.9 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 September 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>
                                        September 30,       December 31, 
------------------------------------------------------------------------------
(Dollars in thousands)                1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Nonperforming assets:
 Nonaccrual loans (1)                 $  5,632     $ 5,929      $ 5,396
 Other real estate owned net of
  valuation allowance (2)                1,522       6,388        5,055
------------------------------------------------------------------------------
Total nonperforming assets            $  7,154     $12,317      $10,451
------------------------------------------------------------------------------
Loans past due 90 or more days as
 to interest or principal (3)         $    730     $   915      $   538
------------------------------------------------------------------------------
Nonperforming loans to total loans        0.79%       0.83%        0.75%
Nonperforming assets to total loans
 and other real estate owned              1.00%       1.71%        1.43%
Nonperforming assets to total assets      0.65%       1.18%        1.00%
Allowance for credit losses times
 nonperforming loans                      1.75x       1.66x        1.77x
Allowance for credit losses times 
 nonperforming assets                     1.38x       0.80x        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.

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

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at a level, which in 
management's judgement, 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 September 30, 1998, the estimate of 
losses and related allowance are subject to change due to economic and other 
uncertainties inherent in the estimation process.
	
Bancorp had loans amounting to approximately $4.6 million and $4.3 million at 
September 30, 1998 and September 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 nine and three months ended 
September 30, 1998 and 1997 amounted to $4.8 million and $5.0 million, and 
$5.6 million and $5.0 million, respectively. Cash receipts for these same 
periods were $318,000 and $105,000 for 1998 and $2.9 million and $1.7 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 $646,000 and $440,000 at 
September 30, 1998 and September 30, 1997, respectively.

TABLE 4.	ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
                                                        Period ended
------------------------------------------------------------------------------
                                        September 30,       December 31, 
------------------------------------------------------------------------------
(Dollars in thousands)                1998         1997         1997
------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
Average loans outstanding less
 average unearned income (1)          $716,956     $687,717     $695,070
------------------------------------------------------------------------------
Allowance for credit losses at
 beginning of year                    $  9,530     $  9,639     $  9,639
------------------------------------------------------------------------------
Charge-offs:
 Real estate                               437          134          371
 Commercial and industrial                  --           24           24
 Consumer                                2,978        3,126        4,345
------------------------------------------------------------------------------
Total loans charged-off                  3,415        3,284        4,740
------------------------------------------------------------------------------
Recoveries
 Real estate                               375          360          416
 Commercial and industrial                   9            1            7
 Consumer                                1,791        1,771        2,408
------------------------------------------------------------------------------
Total recoveries                         2,175        2,132        2,831
------------------------------------------------------------------------------
Net charge-offs                          1,240        1,152        1,909
------------------------------------------------------------------------------
Provision for credit losses              1,575        1,350        1,800
------------------------------------------------------------------------------
Allowance for credit losses at end of
 Period                                 $9,865     $  9,837     $  9,530
------------------------------------------------------------------------------
Ratio of net charge-offs to average
 loans outstanding                        0.17%        0.17%        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>
                               September 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    $1,440      3.0%     $1,679    4.3%    $1,479    4.2%
 Residential mortgage	481     26.2         595   26.0        600   25.7
 Other mortgage        2,163     22.3       1,402   19.4      1,795   20.2
 Commercial and 
  Industrial             881     11.3         588   10.8        714   11.0
 Consumer              3,919     36.0       3,944   37.9      4,084   37.6
 Unallocated             981      1.2       1,629    1.6        858    1.3
------------------------------------------------------------------------------
Total allowance for 
 credit losses        $9,865    100.0%     $9,837  100.0%    $9,530  100.0%
------------------------------------------------------------------------------
(1) Excludes loans held for sale.
</TABLE>


YEAR 2000 COMPUTER READINESS

This disclosure is provided pursuant to the Securities and Exchange 
Commission's Interpretation entitled "Disclosure of Year 2000 Issues and 
Consequences by Public Companies, Investment Advisors, Investment Companies 
and Municipal Securities Issuers" effective August 4, 1998.

The Year 2000 issue arose because many existing date-sensitive computer 
programs, hardware, software, and other devices relying on imbedded chip 
technology do not recognize a year that begins with "2" because traditional 
programming has been limited to utilization of a two-digit code for a year 
(such as "98" for the year 1998).  F&M Bancorp and its subsidiaries have 
undertaken to review their operating and information technology systems and 
other mechanical equipment such as elevators to identify systems in which the 
Year 2000 issue exists and to undertake the necessary renovation or 
replacement of these systems so that the companies will continue to operate 
unaffected by the Year 2000 issue after January 1, 2000.

In July 1997, F&M Bancorp established a Year 2000 issue task force comprised 
of representatives across functional lines representing all of its 
subsidiaries.  The Year 2000 issue task team developed a Year 2000 issue 
assurance plan to coordinate and direct its efforts.  The plan was approved by 
the board of directors on September 11, 1997.  The task force provides 
quarterly reports to the board outlining the status of its efforts and its 
anticipated work in the coming quarter.

The assurance plan is composed of five phases: 1) awareness; 2) assessment; 3) 
renovation; 4) validation; and, 5) implementation, which mirror guidelines 
developed by the Federal Financial Institutions Examination Council (FFIEC) to 
deal with the Year 2000 issue.  The assurance plan includes a timeline for 
completion of all tasks identified.  As of September 30, 1998, all tasks are 
current to the timeline.  Activities under each of the phases are ongoing as 
new vendor and customer relationships are created. 

The task team has undertaken the education of all associates regarding the 
Year 2000 issue both for internal systems and as the problem may affect 
customers.  Education of customers has begun through periodic information in 
the form of brochures and seminars.  The task team has also received guidance 
from various regulators including the Office of the Comptroller of the 
Currency (OCC), Securities and Exchange Commission (SEC), Office of Thrift 
Supervision (OTS), and FFIEC.

All vendors who supply hardware, software and/or services of any type have 
been identified and contractual.  A total of 522 products and services are 
represented by this vendor listing and have been categorized as either mission 
critical (those that directly impact daily operations), concern (those that 
can be replaced with manual processes), or low priority (little or no impact 
on daily operations).  Vendors have been surveyed as to their Year 2000 issue 
readiness.  The task team has confirmed vendor responses by testing products 
and services where possible to verify their readiness. 

Of the 132 products and services identified as mission critical, 81 are deemed 
Year 2000 issue ready.  Seventy-eight of these products and services can be 
tested internally and testing has been successfully completed on 34 of those 
78 products and services (44%).  Testing should be complete by December 31, 
1998 and all systems under our control are expected to be Year 2000 issue 
ready by March 31, 1999.  Of the remaining 54 mission critical products and 
services that cannot be internally tested, the progress of those service 
providers' efforts addressing the Year 2000 issue are being closely monitored.  
Examples of products and services that are not capable of internal testing 
include utilities and communication services.  At present, 49 of the 54 are 
anticipated to be ready by January 1, 1999, three (3) have indicated plans to 
be ready by December 31, 1999, and two (2) have been determined not to be 
ready.  Replacement products or services are being identified for these two 
(2) and should be in place by March 31, 1999.
 
The company relies on Kirchman Corporation's Dimension 3000 software for 
maintaining customer accounting records.  Kirchman is a provider of accounting 
systems for more than 1,000 banking clients worldwide.  Kirchman's internal 
methodologies addressing Year 2000 issues have been reviewed and have received 
ITAA*2000 certification by the Information Technology Association of America,  
an independent non-profit organization.  Further, Kirchman systems have passed 
all internal tests performed to date.  

The task team has developed procedures for assessing Year 2000 issue risk for 
its funds providers including, depositors, which are intended to manage and 
limit potential risks associated with large or significant concentrations of 
retail and commercial deposits.  The Year 2000 issue readiness of providers of 
lines of credit have been reviewed.

The task team has also established procedures for reviewing the Year 2000 
issue readiness of borrowers to manage credit risk. Loan relationships with 
balances exceeding $250,000 or which are particularly computer reliant have 
been reviewed and three (3) have been risk rated "watch" and one (1) has been 
risk rated "substandard" utilizing the standard risk classifications employed 
to manage credit risk.  The total value of these four (4) relationships is 
$2,675,598.

The internal audit department is performing progress audits of the work of the 
Year 2000 issue task force and reporting those results to the company's audit 
committee quarterly.

During the last quarter, efforts have been made to enhance the company's 
existing contingency plan for Year 2000 issues.  The contingency planning 
committee adopted the four phase model as recommended by the FFIEC and OCC 
advisory letter 98-7.  Phase1, organization and planning, and Phase 2, 
business impact analysis, were complete at September 30, 1998 as required by 
regulators.  Phase 3, the contingency plan itself, and Phase 4, designing a 
method of validation, are on track to be completed by December 31, 1998, also 
as required by the regulators.  

To date, the company has spent a total of $102,000 addressing Year 2000 issues 
and anticipates additional out-of-pocket expenses of $142,000 to complete.  
Work is done predominantly by existing associates as part of their normal work 
responsibilities.  The company has hired one additional associate whose 
primary responsibility is testing.  Costs for dealing with y2k issues are 
being provided from operating revenues.

The Company believes its efforts, and those of its third-party providers will 
effectively address Year 2000 issues before January 1, 2000.  Because the 
Company is so reliant on third-party providers (which products and services 
cannot be effectively tested) for support, our normal business operations 
could be disrupted in the event one or more third-party providers fail to 
provide products and services as contracted.  The most reasonably likely worst 
case Year 2000 issue scenario identified to date involves our inability, for 
short periods, to provide services to customers.  The worst case scenario is 
mitigated somewhat by our ability to manually process customer transactions, 
by the geographic penetration of our branch network, and by our service 
delivery methods which include both proprietary and network ATMs, PC banking, 
telephone banking, and Express Bank, our full-service mobile branch.  Power 
and telecommunication services are critical but might be interrupted for only 
a part of our branch network.  The company has a generator to provide power to 
operate computer systems and, by contract, has geographically-remote 
facilities served by alternative sources of power to process work, if needed.

Longer periods of disruption could affect the company's ability to develop new 
business and could increase costs of operation and decrease revenues.


CAPITAL RESOURCES

Shareholders' equity totaled $106.1 million at September 30, 1998, an increase 
of 4.5% compared with the 1997 year-end level of $101.5 million, and an 
increase of 6.7% from the year-earlier level of $99.4 million. The fair value 
of the available-for-sale portfolio increase $230,000 (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 September 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           13.00%    14.18%    9.64%
Minimum           4.00%     8.00%    3.00%
------------------------------------------------------------------------------
Excess            9.00%     6.18%    6.64%
------------------------------------------------------------------------------
</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 $67.5 million 
within the one-year timeframe at September 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 
September 30, 1998.


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

<TABLE>
<CAPTION>

(Dollars in thousands)
------------------------------------------------------------------------------
                                                        Percent Change
------------------------------------------------------------------------------
                                Hypothetical
 Change in     Market Value     Change             Hypothetical
 Interest      of Portfolio     Increase           Increase  	 Board
 Rates         Equity           (Decrease)         (Decrease)     Limit(1)
------------------------------------------------------------------------------
<S>            <C>              <C>                <C>            <C>
300 bp rise    $102,444         $(19,018)         (15.7)%         (30.0)%
200 bp rise     109,180          (12,282)         (10.1)          (20.0)
100 bp rise     115,193           (6,269)          (5.2)          (10.0)
Base scenario   121,462               --             --              --
100 bp decline  126,658            5,196            4.3           (10.0)
200 bp decline  132,165           10,703            8.8           (20.0)
300 bp decline  138,893           17,431           14.4           (30.0)

(1) Established by Bancorp's Board of Directors
</TABLE>

                      PART II - Other Information


Item 6    Exhibits and Reports on Form 8-K                           Page
    (a)   Exhibits
    11    Statement Re:  Computation of per share earnings            31 
    27    Financial Data Schedule                                     32

    (b) No reports on Form 8-K were filed by the Corporation during the 
quarter ended September 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)


November 16, 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>
------------------------------------------------------------------------------
                       Nine Month Period Ended   Quarter Ended September 30,
(Dollar in thousands)   1998          1997         1998           1997  
------------------------------------------------------------------------------
<S>                    <C>            <C>          <C>           <C>     
Net income             $   9,691      $    9,039   $    4,403    $     3,430
------------------------------------------------------------------------------


Basic EPS:
 Shares                 6,383,489      6,332,750    6,396,578      6,340,100
 EPS                  $      1.52     $     1.43   $     0.53     $     0.54

Dilutive shares:
 Stock options             75,345         49,149       75,036         65,547
 EPS                  $      0.02     $     0.01   $       --             --

Diluted EPS:
 Shares including 
  Options               6,458,834      6,381,899    6,471,614      6,405,657
 EPS                  $      1.50     $     1.42   $     0.53    $      0.54
------------------------------------------------------------------------------
</TABLE>

                                  Exhibit 27      

           Article 9 Financial Data Schedule for the Third Quarter

[MULTIPLIER]                           1000
[PERIOD-TYPE]	                       9-MOS
[FISCAL-YEAR-END]               DEC-31-1998
[PERIOD-START]                  JAN-01-1998
[PERIOD-END]                   SEPT-30-1998
[CASH]                               34,447
[INT-BEARING-DEPOSITS]               18,064
[FED-FUNDS-SOLD]                          0
[TRADING-ASSETS]                          0
[INVESTMENTS-HELD-FOR-SALE]         195,016
[INVESTMENTS-CARRYING]              100,351
[INVESTMENTS-MARKET]                102,687
[LOANS]                             714,373
[ALLOWANCE]                           9,865
[TOTAL-ASSETS]                    1,106,571
[DEPOSITS]                          849,185
[SHORT-TERM]                         58,686
[LIABILITIES-OTHER]                  10,415
[LONG-TERM]                          82,150
[PREFERRED-MANDATORY]                     0
[PREFERRED]                               0
[COMMON]                             31,993
[OTHER-SE]                           74,142
[TOTAL-LIABILITIES-AND-EQUITY]    1,106,571
[INTEREST-LOAN]                      46,565
[INTEREST-INVEST]                    10,584
[INTEREST-OTHER]                        825
[INTEREST-TOTAL]                     57,974
[INTEREST-DEPOSIT]                   21,904
[INTEREST-EXPENSE]                   26,265
[INTEREST-INCOME-NET]                31,709
[LOAN-LOSSES]                         1,575
[SECURITIES-GAINS]                       75
[EXPENSE-OTHER]                      28,317
[INCOME-PRETAX]                      13,724
[INCOME-PRE-EXTRAORDINARY]            9,691
[EXTRAORDINARY]                           0
[CHANGES]                                 0
[NET-INCOME]                          9,691
[EPS-PRIMARY]                          1.52
[EPS-DILUTED]                          1.50
[YIELD-ACTUAL]                         4.50
[LOANS-NON]                           5,632
[LOANS-PAST]                            730
[LOANS-TROUBLED]                          0
[LOANS-PROBLEM]                      11,847
[ALLOWANCE-OPEN]                      9,530
[CHARGE-OFFS]                         3,415
[RECOVERIES]                          2,175
[ALLOWANCE-CLOSE]                     9,865
[ALLOWANCE-DOMESTIC]                  8,884
[ALLOWANCE-FOREIGN]                       0
[ALLOWANCE-UNALLOCATED]                 981