UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2009.
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 000-13273
 F & M BANK CORP.
 Virginia
    
    54-1280811(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 
  
  þ o
 o o
  Large accelerated filero
    
    Accelerated filero
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting Companyþ
 o þ
  Class
    
    Outstanding at August 5, 2009Common
Stock, par value - $5
    
    2,294,140 shares




---



##### 



F & M BANK CORP.
  PagePART I
    
    FINANCIAL INFORMATION
    
    
    2Item 1.
    
    Financial StatementsConsolidated Statements of Income - Three Months
Ended June 30, 2009 and 2008
    
    
    2Consolidated Statements of Income - Six Months
Ended June 30, 2009 and 2008
    
    
    3Consolidated Balance Sheets - June 30, 2009
and December 31, 2008
    
    
    4Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2009 and 2008
    
    
    5Consolidated Statements of Changes in Stockholders
Equity - Six Months June 30, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4T.
    
    Controls and Procedures
    
    
    24PART II
    
    OTHER INFORMATION
    
    
    25Item 1.
    
    Legal Proceedings
    
    
    25Item 1a.
    
    Risk Factors
    
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3.
    
    Defaults upon Senior Securities
    
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    25SIGNATURES
    
    
    26CERTIFICATIONS
    
    
    27




---



##### 



Part I Financial Information
 
 Item 1 Financial Statements F
& M BANK CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
 Three Months EndedJune 30,2009
    
    
    2008Interest IncomeInterest and fees on loans held for investment
    
    $
    6,417
    
    
    $
    5,635Interest and fees on loans held for sale
    
    
    324
    
    
    
    99Interest on federal funds sold
    
    
    1
    
    
    
    13Interest on interest bearing deposits
    
    
    12
    
    
    
    22Dividends on equity securities
    
    
    58
    
    
    
    133Interest on debt securities
    
    
    207
    
    
    
    226Total Interest Income
    
    
    7,019
    
    
    
    6,128Interest ExpenseInterest on demand deposits
    
    
    281
    
    
    
    162Interest on savings accounts
    
    
    45
    
    
    
    72Interest on time deposits over $100,000
    
    
    544
    
    
    
    550Interest on time deposits
    
    
    1,099
    
    
    
    1,109Total interest on deposits
    
    
    1,969
    
    
    
    1,893Interest on short-term debt
    
    
    28
    
    
    
    109Interest on long-term debt
    
    
    551
    
    
    
    451Total Interest Expense
    
    
    2,548
    
    
    
    2,453Net Interest Income
    
    
    4,471
    
    
    
    3,675Provision for Loan Losses
    
    
    310
    
    
    
    175Net Interest Income after Provision for Loan Losses
    
    
    4,161
    
    
    
    3,500Noninterest IncomeService charges
    
    
    315
    
    
    
    336Insurance and other commissions
    
    
    113
    
    
    
    114Other
    
    
    432
    
    
    
    400Income on bank owned life insurance
    
    
    90
    
    
    
    75Security gains (losses) on investments sold
    
    
    (5
    )
    
    
    178Other than temporarily impaired (losses)
    
    
    (496
    )
    
    
    (207
    )Total Noninterest Income
    
    
    449
    
    
    
    896Noninterest ExpenseSalaries
    
    
    1,251
    
    
    
    1,246Employee benefits
    
    
    453
    
    
    
    374Occupancy expense
    
    
    144
    
    
    
    136Equipment expense
    
    
    136
    
    
    
    133Intangible amortization
    
    
    69
    
    
    
    69Other
    
    
    1,035
    
    
    
    803Total Noninterest Expense
    
    
    3,088
    
    
    
    2,761Income before Income Taxes
    
    
    1,522
    
    
    
    1,635Income Taxes
    
    
    402
    
    
    
    491Minority interest in consolidated subsidiary (earnings) losses
    
    
    (29
    )Net Income
    
    $
    1,091
    
    
    $
    1,144Per Share DataNet Income
    
    $
    .48
    
    
    $
    .49Cash Dividends
    
    $
    .23
    
    
    $
    .22Weighted Average Shares Outstanding
    
    
    2,289,675
    
    
    
    2,331,027
 The accompanying notes are an integral part of these statements.
 2




---



##### 



F
& M BANK CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Interest IncomeInterest and fees on loans held for investment
    
    $
    12,603
    
    
    $
    11,190Interest and fees on loans held for sale
    
    
    551
    
    
    
    120Interest on federal funds sold
    
    
    2
    
    
    
    29Interest on interest bearing deposits
    
    
    26
    
    
    
    75Dividends on equity securities
    
    
    104
    
    
    
    260Interest on debt securities
    
    
    434
    
    
    
    488Total Interest Income
    
    
    13,720
    
    
    
    12,162Interest ExpenseInterest on demand deposits
    
    
    515
    
    
    
    380Interest on savings accounts
    
    
    108
    
    
    
    145Interest on time deposits over $100,000
    
    
    1,103
    
    
    
    1,064Interest on time deposits
    
    
    2,312
    
    
    
    2,427Total interest on deposits
    
    
    4,038
    
    
    
    4,016Interest on short-term debt
    
    
    56
    
    
    
    186Interest on long-term debt
    
    
    1,155
    
    
    
    855Total Interest Expense
    
    
    5,249
    
    
    
    5,057Net Interest Income
    
    
    8,471
    
    
    
    7,105Provision for Loan Losses
    
    
    520
    
    
    
    265Net Interest Income after Provision for Loan Losses
    
    
    7,951
    
    
    
    6,840Noninterest IncomeService charges
    
    
    601
    
    
    
    640Insurance and other commissions
    
    
    215
    
    
    
    169Other
    
    
    621
    
    
    
    651Income on bank owned life insurance
    
    
    180
    
    
    
    148Security gains (losses) on investments sold
    
    
    (5
    )
    
    
    176Other than temporarily impaired (losses)
    
    
    (826
    )
    
    
    (207
    )Total Noninterest Income
    
    
    786
    
    
    
    1,577Noninterest ExpenseSalaries
    
    
    2,487
    
    
    
    2,494Employee benefits
    
    
    881
    
    
    
    726Occupancy expense
    
    
    283
    
    
    
    277Equipment expense
    
    
    268
    
    
    
    266Intangible amortization
    
    
    138
    
    
    
    138Other
    
    
    1,825
    
    
    
    1,513Total Noninterest Expense
    
    
    5,882
    
    
    
    5,414Income before Income Taxes
    
    
    2,855
    
    
    
    3,003Income Taxes
    
    
    834
    
    
    
    855Minority interest in consolidated subsidiary (earnings) losses
    
    
    (46
    )Net Income
    
    $
    1,975
    
    
    $
    2,148Per Share DataNet Income
    
    $
    .86
    
    
    $
    .92Cash Dividends
    
    $
    .46
    
    
    $
    .44Weighted Average Shares Outstanding
    
    
    2,289,122
    
    
    
    2,335,897
 The accompanying notes are an integral part of these statements.
 3




---



##### 



F & M BANK CORP.
 
 CONSOLIDATED BALANCE SHEETS
 (In Thousands of Dollars)
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)AssetsCash and due from banks
    
    $
    5,407
    
    
    $
    5,687Federal funds sold
    
    
    4,106
    
    
    
    8,979Cash and cash equivalents
    
    
    9,513
    
    
    
    14,666Interest bearing deposits in banks
    
    
    857
    
    
    
    1,162Securities:Held to
maturity  fair value of $110,000 in 2009
and 2008, respectively (note 2)
    
    
    110
    
    
    
    110Available for sale (note 2)
    
    
    16,762
    
    
    
    22,237Other investments
    
    
    9,127
    
    
    
    8,439Loans held for sale
    
    
    20,364
    
    
    
    3,780Loans held for investment (note 3)
    
    
    416,316
    
    
    
    399,233Less allowance for loan losses (note 4)
    
    
    (2,556
    )
    
    
    (2,189
    )Net loans held for investment
    
    
    413,760
    
    
    
    397,044Bank premises and equipment
    
    
    7,343
    
    
    
    7,457Interest receivable
    
    
    2,021
    
    
    
    2,056Core deposit intangible
    
    
    460
    
    
    
    598Goodwill
    
    
    2,670
    
    
    
    2,670Bank owned life insurance
    
    
    6,447
    
    
    
    6,304Other assets
    
    
    5,039
    
    
    
    5,535Total assets
    
    $
    494,473
    
    
    $
    472,058LiabilitiesDeposits:Noninterest bearing
    
    $
    51,620
    
    
    $
    49,786Interest bearing:Demand
    
    
    55,211
    
    
    
    39,773Money market accounts
    
    
    21,870
    
    
    
    22,779Savings
    
    
    33,531
    
    
    
    29,367Time deposits over $100,000
    
    
    76,578
    
    
    
    63,855All other time deposits
    
    
    137,624
    
    
    
    136,665Total deposits
    
    
    376,434
    
    
    
    342,225Short-term debt
    
    
    7,143
    
    
    
    20,510Accrued liabilities
    
    
    7,791
    
    
    
    7,687Long-term debt
    
    
    65,176
    
    
    
    65,331Total liabilities
    
    
    456,544
    
    
    
    435,753Minority interest in consolidated subsidiary
    
    
    93
    
    
    
    47Stockholders EquityCommon stock, $5 par value, 6,000,000 shares authorized,
2,294,140 and 2,289,497 shares issued and outstanding
in 2009 and 2008, respectively
    
    
    11,471
    
    
    
    11,447Retained earnings
    
    
    28,683
    
    
    
    27,687Accumulated other comprehensive income (loss)
    
    
    (2,318
    )
    
    
    (2,876
    )Total stockholders equity
    
    
    37,836
    
    
    
    36,258Total liabilities and stockholders equity
    
    $
    494,473
    
    
    $
    472,058
 The accompanying notes are an integral part of these statements.
 4




---



##### 



F & M BANK CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands of Dollars)
 (Unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Cash Flows from Operating ActivitiesNet income
    
    $
    1,975
    
    
    $
    2,148Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    315
    
    
    
    307Amortization (accretion) of security premiums (discounts)
    
    
    16
    
    
    
    (21
    )Net (increase) decrease in loans held for sale
    
    
    (16,584
    )
    
    
    (20,867
    )Provision for loan losses
    
    
    520
    
    
    
    265Intangible amortization
    
    
    138
    
    
    
    138(Increase) decrease in interest receivable
    
    
    35
    
    
    
    114(Increase) decrease in other assets
    
    
    527
    
    
    
    802Increase in accrued expenses
    
    
    (133
    )
    
    
    (989
    )(Gain) loss on security transactions
    
    
    831
    
    
    
    31Amortization of limited partnership investments
    
    
    182
    
    
    
    250Income from life insurance investment
    
    
    (143
    )
    
    
    (148
    )Net Adjustments
    
    
    (14,296
    )
    
    
    (20,118
    )Net Cash Provided by (Used in) Operating Activities
    
    
    (12,321
    )
    
    
    (17,970
    )Cash Flows from Investing ActivitiesPurchase of investments available for sale
    
    
    (924
    )
    
    
    (17,837
    )Proceeds from sales of investments available for sale
    
    
    16
    
    
    
    971Proceeds from maturity of investments available for sale
    
    
    5,481
    
    
    
    18,930Net increase in loans held for investment
    
    
    (17,237
    )
    
    
    (37,508
    )Purchase of property and equipment
    
    
    (200
    )
    
    
    (618
    )Change in federal funds sold
    
    
    4,873Net (increase) decrease in interest bearing bank deposits
    
    
    305
    
    
    
    906Net Cash Used in Investing Activities
    
    
    (7,686
    )
    
    
    (35,156
    )Cash Flows from Financing ActivitiesNet change in demand and savings deposits
    
    
    20,528
    
    
    
    5,026Net change in time deposits
    
    
    13,681
    
    
    
    (4,626
    )Net change in short-term debt
    
    
    (13,367
    )
    
    
    32,428Cash dividends paid
    
    
    (1,057
    )
    
    
    (1,041
    )Repurchase of common stock
    
    
    (54
    )
    
    
    (713
    )Change in federal funds purchased
    
    
    
    
    
    
    2,435Proceeds of long-term debt
    
    
    7,400
    
    
    
    27,500Proceeds from issuance of common stock
    
    
    152
    
    
    
    118Repayment of long-term debt
    
    
    (7,556
    )
    
    
    (6,786
    )Net Cash Provided (Used) by Financing Activities
    
    
    19,727
    
    
    
    54,341Net Decrease (Increase) in Cash and Cash Equivalents
    
    
    (280
    )
    
    
    1,215Cash and Cash Equivalents, Beginning of Period
    
    
    5,687
    
    
    
    8,705Cash and Cash Equivalents, End of Period
    
    $
    5,407
    
    
    $
    9,920Supplemental DisclosureCash paid for:Interest expense
    
    $
    5,420
    
    
    $
    5,169Income taxes
    
    
    520
    
    
    
    400
 The accompanying notes are an integral part of these statements.
 5




---



##### 



F & M BANK CORP.
 
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(In Thousands of Dollars)
(Unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Balance, beginning of period
    
    $
    36,258
    
    
    $
    39,165Comprehensive IncomeNet income
    
    
    1,975
    
    
    
    2,148Net change in unrealized appreciation on securities
available for sale, net of taxes (note 1)
    
    
    558
    
    
    
    (1,010
    )Total comprehensive income
    
    
    2,533
    
    
    
    1,138Repurchase of common stock
    
    
    (54
    )
    
    
    (713
    )Common stock sold
    
    
    152
    
    
    
    117Dividends declared
    
    
    (1,053
    )
    
    
    (1,027
    )Balance, end of period
    
    $
    37,836
    
    
    $
    38,680
 The accompanying notes are an integral part of these statements.
 6




---



##### 



F & M BANK CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1
    
    ACCOUNTING PRINCIPLES:
       June 30,
    
    
    December 31,2009
    
    
    2008Changes in:Adjustment for initial adoption of SFAS 158
    
    $
    
    
    
    $Funded Status Adjustment
    
    
    
    
    
    
    (1,835,082
    )Tax effect
    
    
    
    
    
    
    623,928Pension plan adjustment, net of tax
    
    
    
    
    
    
    (1,211,154
    )Unrealized holding gains (losses)
on available-for-sale securities:
    
    
    1,666,714
    
    
    
    (2,742,769
    )Other than temporary impairment losses
    
    
    825,707
    
    
    
    1,758,730Reclassification adjustment for
(gains) losses realized in income
    
    
    4,899
    
    
    
    (78,173
    )Net unrealized gains (losses)
    
    
    845,906
    
    
    
    (1,062,212
    )Tax effect
    
    
    287,608
    
    
    
    361,152Unrealized holding gain (losses), net of tax
    
    
    558,298
    
    
    
    (701,060
    )Net change in other comprehensive income
    
    $
    558,298
    
    
    $
    (1,912,214
    )
 Subsequent Events
  7




---



##### 



F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
 NOTE 2
    
    INVESTMENT SECURITIES:
  2009
    
    
    2008Market
    
    
    
    
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    ValueSecurities Held to MaturityU. S. Treasury and
agency obligations
    
    $
    110
    
    
    $
    110
    
    
    $
    110
    
    
    $
    110Total
    
    $
    110
    
    
    $
    110
    
    
    $
    110
    
    
    $
    110
 2009
    
    
    2008Market
    
    
    
    
    
    
    MarketValue
    
    
    Cost
    
    
    Value
    
    
    CostSecurities Available for SaleGovernment sponsored
enterprises
    
    $
    6,059
    
    
    $
    5,997
    
    
    $
    10,194
    
    
    $
    10,013Equity securities
    
    
    3,067
    
    
    
    4,639
    
    
    
    3,064
    
    
    
    5,430Mortgage-backed securities
    
    
    7,236
    
    
    
    7,034
    
    
    
    8,573
    
    
    
    8,391Corporate Bonds
    
    
    400
    
    
    
    281
    
    
    
    281
    
    
    
    281Municipals
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    125Total
    
    $
    16,762
    
    
    $
    17,951
    
    
    $
    22,237
    
    
    $
    24,240
  Securities Held to Maturity
    
    
    Securities Available for SaleAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    110
    
    
    $
    110
    
    
    $
    1,999
    
    
    $
    2,000Due after one year through five years
    
    
    
    
    
    
    
    
    
    
    3,998
    
    
    
    4,059Due after five years
    
    
    
    
    
    
    
    
    
    
    7,315
    
    
    
    7,636110
    
    
    
    110
    
    
    
    13,312
    
    
    
    13,695Marketable equities
    
    
    
    
    
    
    
    
    
    
    4,639
    
    
    
    3,067Total
    
    $
    110
    
    
    $
    110
    
    
    $
    17,951
    
    
    $
    16,762
  2009
    
    
    2008Gains
    
    $
    
    
    
    $
    244,181Losses
    
    
    (4,899
    )
    
    
    (166,008
    )Net Gains (Losses)
    
    $
    (4,899
    )
    
    $
    78,173
 8




---



##### 



F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
 NOTE 2
    
    INVESTMENT SECURITIES (CONTINUED):
   Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses2009Government sponsored
enterprises
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $Mortgage backed
obligations
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    (3
    )
    
    
    344
    
    
    
    (3
    )Marketable equities
    
    
    1,091
    
    
    
    (383
    )
    
    
    1,421
    
    
    
    (1,266
    )
    
    
    2,512
    
    
    
    (1,649
    )Total
    
    $
    1,091
    
    
    $
    (383
    )
    
    $
    1,765
    
    
    $
    (1,269
    )
    
    $
    (2,856
    )
    
    $
    (1,652
    )
 NOTE 3
    
    LOANS HELD FOR INVESTMENT:
  2009
    
    
    2008Real EstateConstruction
    
    $
    82,752
    
    
    $
    71,259Residential
    
    
    178,218
    
    
    
    169,122Commercial and agricultural
    
    
    133,137
    
    
    
    134,008Installment loans to individuals
    
    
    20,124
    
    
    
    22,792Credit cards
    
    
    1,956
    
    
    
    1,940Other
    
    
    129
    
    
    
    112Total
    
    $
    416,316
    
    
    $
    399,233
 9




---



##### 



F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
 NOTE 4
    
    ALLOWANCE FOR LOAN LOSSES:
  Six Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Balance, beginning of period
    
    $
    2,189
    
    
    $
    1,703
    
    
    $
    2,381
    
    
    $
    1,531Provisions charged to
operating expenses
    
    
    520
    
    
    
    265
    
    
    
    310
    
    
    
    175Net (charge-offs) recoveries:Loan recoveries
    
    
    29
    
    
    
    41
    
    
    
    18
    
    
    
    20Loan charge-offs
    
    
    (182
    )
    
    
    (302
    )
    
    
    (153
    )
    
    
    (19
    )Total Net Charge-Offs *
    
    
    (153
    )
    
    
    (261
    )
    
    
    (135
    )
    
    
    1Balance, End of Period
    
    $
    2,556
    
    
    $
    1,707
    
    
    $
    2,556
    
    
    $
    1,707* Components of Net Charge-OffsReal Estate
    
    
    (87
    )
    
    
    1
    
    
    
    (87
    )
    
    
    1Commercial
    
    
    (44
    )
    
    
    (260
    )
    
    
    (44
    )
    
    
    (2
    )Installment
    
    
    (22
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    2Total
    
    $
    (153
    )
    
    $
    (261
    )
    
    $
    (135
    )
    
    $
    1
 NOTE 5
    
    EMPLOYEE BENEFIT PLAN
  2009
    
    
    2008Service cost
    
    $
    179,400
    
    
    $
    161,190Interest cost
    
    
    136,666
    
    
    
    128,108Expected return on plan assets
    
    
    (156,856
    )
    
    
    (188,356
    )Amortization of net obligation at transitionAmortization of prior service cost
    
    
    (2,650
    )
    
    
    (2,650
    )Amortization of net (gain) or loss
    
    
    62,102
    
    
    
    5,894Net periodic benefit cost
    
    $
    218,662
    
    
    $
    104,186
 10




---



##### 



F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 6
    
    FAIR VALUE
        Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  June 30, 2009
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities available-for-sale
    
    $
    16,762
    
    
    $
    3,607
    
    
    $
    13,155Loans held for sale
    
    
    20,364
    
    
    
    
    
    
    
    20,364Impaired loans
    
    
    1,644
    
    
    
    
    
    
    
    1,644Total assets at fair value
    
    
    38,770
    
    
    
    3,607
    
    
    
    35,163Total liabilities at fair value
  11




---



##### 



F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 7  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
  June 30, 2009
    
    
    December 31, 2008Estimated
    
    
    Carrying
    
    
    Estimated
    
    
    CarryingFair Value
    
    
    Value
    
    
    Fair Value
    
    
    ValueFinancial AssetsCash
    
    $
    5,407
    
    
    $
    5,407
    
    
    $
    5,687
    
    
    $
    5,687Interest bearing deposits
    
    
    857
    
    
    
    857
    
    
    
    1,164
    
    
    
    1,162Federal funds sold
    
    
    4,106
    
    
    
    4,106
    
    
    
    8,979
    
    
    
    8,979Securities available for sale
    
    
    16,762
    
    
    
    16,762
    
    
    
    22,237
    
    
    
    22,237Securities held to maturity
    
    
    110
    
    
    
    110
    
    
    
    110
    
    
    
    110Other investments
    
    
    9,127
    
    
    
    9,127
    
    
    
    8,439
    
    
    
    8,439Loans
    
    
    447,205
    
    
    
    416,316
    
    
    
    418,630
    
    
    
    399,233Loan held for sale
    
    
    20,364
    
    
    
    20,364
    
    
    
    3,780
    
    
    
    3,780Bank owned life insurance
    
    
    6,447
    
    
    
    6,447
    
    
    
    6,304
    
    
    
    6,304Accrued interest receivable
    
    
    2,021
    
    
    
    2,021
    
    
    
    2,056
    
    
    
    2,056Financial LiabilitiesDemand Deposits:Non-interest bearing
    
    
    51,620
    
    
    
    51,620
    
    
    
    49,786
    
    
    
    49,786Interest bearing
    
    
    77,081
    
    
    
    77,081
    
    
    
    62,552
    
    
    
    62,552Savings deposits
    
    
    33,531
    
    
    
    33,531
    
    
    
    29,367
    
    
    
    29,367Time deposits
    
    
    217,067
    
    
    
    214,202
    
    
    
    202,082
    
    
    
    200,521Accrued liabilities
    
    
    7,791
    
    
    
    7,791
    
    
    
    7,687
    
    
    
    7,687Short-term debt
    
    
    7,143
    
    
    
    7,143
    
    
    
    20,569
    
    
    
    20,510Long-term debt
    
    
    65,138
    
    
    
    65,176
    
    
    
    68,846
    
    
    
    65,331
  12




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
     Forward-Looking Statements
    13




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
 Critical Accounting Policies
 General
  Allowance for Loan Losses
 , ,
 Goodwill and Intangibles
 Business Combinations Goodwill and Other Intangible
Assets
  Securities Impairment
 Accounting for Certain Investments in Debt and Equity
Securities.
 14




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
 Overview
   2009
    
    
    2008Net Income from Bank Operations
    
    $
    2,391
    
    
    $
    2,131Income or loss from Parent Company Activities
    
    
    (416
    )
    
    
    17Net Income for the year
    
    
    1,975
    
    
    
    2,148
 Results of Operations
       15




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
 Financial Condition
 Federal Funds Sold and Interest Bearing Bank Deposits
  Securities
       16




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
 Loan Portfolio
      June 30,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans
    
    $
    1,949
    
    
    $
    1,374Loans past due 90 days or more
and still accruing interest
    
    
    4,512
    
    
    
    3,392$
    6,461
    
    
    $
    4,766As a percentage of loans held for investment
    
    
    1.55
    %
    
    
    1.19
    %
 17




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
 Allowance for Loan Losses
        18




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
 Deposits and Other Borrowings
  Short-term debt
  Long-term debt
   Capital
  Liquidity
  19




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
  Interest Rate Sensitivity
    Stock Repurchase
  Effect of Newly Issued Accounting Standards
 FASB Accounting Standards Codification TM FASB Accounting Standards Codification TM Accounting Standards Codification
 20




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
    Existence of Securities and Exchange Commission Web Site
  21




---



##### 



TABLE 1
 F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(ON A FULLY TAXABLE EQUIVALENT BASIS)
(Dollar Amounts in Thousands)
 Six Months Ended
    
    
    Six Months Ended
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Average
    
    
    Income/
    
    
    
    
    
    
    Average
    
    
    Income/
    
    
    
    
    
    
    Average
    
    
    Income/
    
    
    
    
    
    
    Average
    
    
    Income/Balance
    
    
    Expense
    
    
    Rates
    
    
    Balance
    
    
    Expense
    
    
    Rates
    
    
    Balance
    
    
    Expense
    
    
    Rates
    
    
    Balance
    
    
    Expense
    
    
    RatesRate related incomeLoans held for investment1,2,3
    
    $
    409,421
    
    
    $
    12,670
    
    
    
    6.19
    %
    
    $
    330,486
    
    
    $
    11,253
    
    
    
    6.81
    %
    
    $
    418,967
    
    
    $
    6,451
    
    
    
    6.16
    %
    
    $
    338,466
    
    
    $
    5,668
    
    
    
    6.70
    %Loans held for sale
    
    
    28,003
    
    
    
    551
    
    
    
    3.94
    %
    
    
    5,838
    
    
    
    120
    
    
    
    4.11
    %
    
    
    32,750
    
    
    
    324
    
    
    
    3.96
    %
    
    
    9,951
    
    
    
    99
    
    
    
    3.98
    %Federal funds sold
    
    
    2,316
    
    
    
    2
    
    
    
    .17
    %
    
    
    2,513
    
    
    
    29
    
    
    
    2.31
    %
    
    
    2,541
    
    
    
    1
    
    
    
    .16
    %
    
    
    2,607
    
    
    
    13
    
    
    
    1.99
    %Bank deposits
    
    
    1,181
    
    
    
    26
    
    
    
    4.40
    %
    
    
    3,017
    
    
    
    75
    
    
    
    4.97
    %
    
    
    1,076
    
    
    
    13
    
    
    
    4.83
    %
    
    
    1,746
    
    
    
    22
    
    
    
    5.04
    %InvestmentsTaxable
    
    
    17,888
    
    
    
    436
    
    
    
    4.87
    %
    
    
    20,130
    
    
    
    557
    
    
    
    5.53
    %
    
    
    17,113
    
    
    
    211
    
    
    
    4.93
    %
    
    
    19,085
    
    
    
    270
    
    
    
    5.66
    %Partially taxable2
    
    
    3,406
    
    
    
    119
    
    
    
    6.99
    %
    
    
    5,611
    
    
    
    244
    
    
    
    8.70
    %
    
    
    5,162
    
    
    
    60
    
    
    
    4.65
    %
    
    
    5,252
    
    
    
    112
    
    
    
    8.53
    %Tax exempt 2
    
    
    77
    
    
    
    3
    
    
    
    7.87
    %
    
    
    214
    
    
    
    5
    
    
    
    4.67
    %
    
    
    30
    
    
    
    
    
    
    
    .40
    %
    
    
    177
    
    
    
    2
    
    
    
    4.52
    %Total earning assets
    
    
    462,292
    
    
    
    13,807
    
    
    
    5.97
    %
    
    
    367,809
    
    
    
    12,283
    
    
    
    6.68
    %
    
    
    477,639
    
    
    
    7,060
    
    
    
    5.91
    %
    
    
    377,284
    
    
    
    6,186
    
    
    
    6.56
    %Interest ExpenseDemand deposits
    
    
    68,698
    
    
    
    515
    
    
    
    1.50
    %
    
    
    57,762
    
    
    
    380
    
    
    
    1.32
    %
    
    
    73,223
    
    
    
    281
    
    
    
    1.54
    %
    
    
    59,127
    
    
    
    162
    
    
    
    1.10
    %Savings
    
    
    31,532
    
    
    
    108
    
    
    
    .69
    %
    
    
    29,114
    
    
    
    145
    
    
    
    1.00
    %
    
    
    32,882
    
    
    
    45
    
    
    
    .55
    %
    
    
    29,538
    
    
    
    72
    
    
    
    .98
    %Time deposits
    
    
    213,872
    
    
    
    3,416
    
    
    
    3.19
    %
    
    
    163,108
    
    
    
    3,490
    
    
    
    4.28
    %
    
    
    218,360
    
    
    
    1,644
    
    
    
    3.01
    %
    
    
    161,172
    
    
    
    1,659
    
    
    
    4.12
    %Short-term debt
    
    
    21,816
    
    
    
    56
    
    
    
    .51
    %
    
    
    16,458
    
    
    
    186
    
    
    
    2.26
    %
    
    
    23,616
    
    
    
    28
    
    
    
    .47
    %
    
    
    22,186
    
    
    
    109
    
    
    
    1.97
    %Long-term debt
    
    
    68,395
    
    
    
    1,155
    
    
    
    3.38
    %
    
    
    43,789
    
    
    
    856
    
    
    
    3.91
    %
    
    
    66,032
    
    
    
    551
    
    
    
    3.34
    %
    
    
    47,131
    
    
    
    452
    
    
    
    3.84
    %Total interest bearing liabilities
    
    
    404,313
    
    
    
    5,250
    
    
    
    2.60
    %
    
    
    310,231
    
    
    
    5,057
    
    
    
    3.26
    %
    
    
    414,113
    
    
    
    2,549
    
    
    
    2.46
    %
    
    
    319,154
    
    
    
    2,454
    
    
    
    3.08
    %Net interest income 2
    
    
    
    
    
    $
    8,557
    
    
    
    
    
    
    
    
    
    
    $
    7,226
    
    
    
    
    
    
    
    
    
    
    $
    4,511
    
    
    
    
    
    
    
    
    
    
    $
    3,732Net yield on interest earning assets 2
    
    
    
    
    
    
    
    
    
    
    3.70
    %
    
    
    
    
    
    
    
    
    
    
    3.93
    %
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.96
    %
 
 1
    
    Interest income on loans includes loan fees.2
    
    An incremental tax rate of 34% was used to calculate the tax equivalent income on nontaxable and partially taxable loans and investments.3
    
    Average balances include non-accrual loans. 22




---



##### 



TABLE II
 F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
June 30, 2009
(In Thousands of Dollars)
  0 - 3
    
    
    4 - 12
    
    
    1 - 5
    
    
    Over 5
    
    
    NotMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    Classified
    
    
    TotalUses of FundsLoansCommercial
    
    $
    103,173
    
    
    $
    18,169
    
    
    $
    79,727
    
    
    $
    6,484
    
    
    $
    
    
    
    $
    207,553Installment
    
    
    11,113
    
    
    
    915
    
    
    
    9,656
    
    
    
    3,338
    
    
    
    
    
    
    
    25,022Real estate for
investment
    
    
    33,002
    
    
    
    13,257
    
    
    
    111,017
    
    
    
    24,509
    
    
    
    
    
    
    
    181,785Real estate for sale
    
    
    20,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,364Credit cards
    
    
    1,956
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,956Federal funds sold
    
    
    4,106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,106Interest bearing
bank deposits
    
    
    856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    856Investment securities
    
    
    2,138
    
    
    
    316
    
    
    
    4,059
    
    
    
    6,892
    
    
    
    3,467
    
    
    
    16,872Total
    
    
    176,708
    
    
    
    32,657
    
    
    
    204,459
    
    
    
    41,223
    
    
    
    3,467
    
    
    
    458,514Sources of FundsInterest bearing
demand deposits
    
    
    
    
    
    
    21,977
    
    
    
    44,062
    
    
    
    11,042
    
    
    
    
    
    
    
    77,081Savings deposits
    
    
    
    
    
    
    6,706
    
    
    
    20,119
    
    
    
    6,706
    
    
    
    
    
    
    
    33,531Certificates of deposit
$100,000 and over
    
    
    28,074
    
    
    
    25,571
    
    
    
    22,933
    
    
    
    
    
    
    
    
    
    
    
    76,578Other certificates
of deposit
    
    
    21,595
    
    
    
    59,977
    
    
    
    56,052
    
    
    
    
    
    
    
    
    
    
    
    137,624Short-term borrowings
    
    
    7,143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,143Long-term borrowings
    
    
    15,024
    
    
    
    19,795
    
    
    
    30,357
    
    
    
    
    
    
    
    
    
    
    
    65,176Total
    
    
    71,836
    
    
    
    134,026
    
    
    
    173,523
    
    
    
    17,748
    
    
    
    
    
    
    
    397,133Discrete Gap
    
    
    104,872
    
    
    
    (101,369
    )
    
    
    30,936
    
    
    
    23,475
    
    
    
    3,467
    
    
    
    61,381Cumulative Gap
    
    
    104,872
    
    
    
    3,503
    
    
    
    34,439
    
    
    
    57,914
    
    
    
    61,381Ratio of Cumulative
Gap to Total Earning Assets
    
    
    22.87
    %
    
    
    .76
    %
    
    
    7.51
    %
    
    
    12.63
    %
    
    
    13.39
    %
  23




---



##### 



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Controls
  24




---



##### 



Part II Other Information
 
 Item 1.
    

Legal Proceedings 
    
    Not Applicable
 
 Item 1a.
    

Risk Factors  There have been no material changes from the risk factors previously
disclosed in Item 1a of the Corporations Form 10k filed on March 20, 2008.
 
 Item 2.
    

Unregistered Sales of Equity Securities and Use of Proceeds 
    
    Not Applicable
 
 Item 3.
    

Defaults Upon Senior Securities 
    
    Not Applicable
 
 Item 4.
    

Submission of Matters to a Vote of Security HoldersOn May 9, 2009, the shareholders held their annual meeting. The following items
were approved by the shareholders by the required majority:1) Election of the Board of Directors as proposed in the proxy
material without any additions or exceptions.
 Votes
    
    VotesForby
    
    WithheldProxy
    
    by ProxyEllen R. Fitzwater
    
    
    1,576,450
    
    
    
    10,389Richard S. Myers
    
    
    1,576,312
    
    
    
    10,527Ronald E. Wampler
    
    
    1,569,999
    
    
    
    16,840
 2) Appointment of Elliott Davis, LLC as independent auditors as
proposed in the Proxy materials; 1,572,628 votes for, 0 votes against and
14,211 abstained.
 
 Item 5.
    

Other Information 
    
    Not Applicable
 
 Item 6.
    
    Exhibits
 (a)
    Exhibits
 3 i
    
    
    Restated Articles of Incorporation of F & M
Bank Corp. as incorporated by reference to F & M Bank Corp.s 10-Q
filed August 13, 2007.3 ii
    
    
    Amended and Restated Bylaws of F & M Bank
Corp. are incorporated by reference to Exhibits to F & M Bank Corp.s
Form 10K filed March 1, 2002.31.1
    
    
    Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) (filed herewith).31.2
    
    

Certification
of Chief Financial Officer
pursuant to Rule 13a-14(a) (filed herewith).32
    
    
    Certifications of Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sabanes-Oxley Act of 2002 (filed
herewith).
 25




---



##### 



Signature
  F & M BANK CORP./s/ DEAN W. WITHERSDean W. WithersPresident and Chief Executive Officer/s/ NEIL W. HAYSLETTNeil W. HayslettExecutive Vice President and Chief Financial Officer  26