10-Q

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, 2011.

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	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

P. O. Box 1111

Timberville, Virginia 22853

(Address of Principal Executive Offices) (Zip Code)

(540) 896-8941

(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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes þ No o

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o    (Do not check if a smaller reporting company)	Smaller reporting Company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

State the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 1, 2011
Common Stock, par value - $5	2,489,034 shares

Financial Statements

F & M Bank Corp.

June 30, 2011

F & M BANK CORP.

Index

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements		2
	Consolidated Statements of Income – Three Months Ended June 30, 2011 and 2010		2
	Consolidated Statements of Income – Six Months Ended June 30, 2011 and 2010		3
	Consolidated Balance Sheets – June 30, 2011 and December 31, 2010		4
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2011 and 2010		5
	Consolidated Statements of Changes in Stockholders’ Equity – Six Months Ended June 30, 2011 and 2010		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32
Item 4.	Controls and Procedures		32
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		33
Item 1a.	Risk Factors		33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3.	Defaults upon Senior Securities		33
Item 4.	Removed and reserved		33
Item 5.	Other Information		33
Item 6.	Exhibits		33
Signatures			34
Certifications

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 Ended
	June 30,
Interest income	2011			2010
Interest and fees on loans held for investment	$	6,644		$	6,421
Interest and fees on loans held for sale		214			307
Interest on federal funds sold		8			4
Interest on interest bearing deposits		8			7
Dividends on equity securities		53			57
Interest on debt securities		67			106
Total interest income		6,994			6,902
Interest expense
Interest on demand deposits		430			505
Interest on savings accounts		48			50
Interest on time deposits over $100,000		296			372
Interest on time deposits		623			767
Total interest on deposits		1,397			1,694
Interest on short-term debt		4			6
Interest on long-term debt		585			552
Total Interest Expense		1,986			2,252
Net interest income		5,008			4,650
Provision for loan losses		1,100			900
Net interest income after provision for loan losses		3,908			3,750
Noninterest income
Service charges		279			309
Insurance and other commissions		162			115
Other		271			397
Income on bank owned life insurance		88			94
Other than temporary impairment losses		(57	)		-
Gain on the sale of securities		346			-
Total noninterest income		1,089			915
Noninterest expense
Salaries		1,370			1,261
Employee benefits		459			341
Occupancy expense		140			144
Equipment expense		148			152
Intangible amortization		-			69
FDIC insurance assessment		285			297
Other		937			979
Total noninterest expense		3,339			3,243
Income before income taxes		1,658			1,422
Income tax expense		406			422
Consolidated net income		1,252			1,000
Net income – Noncontrolling interest		(21	)		(20	)
Net Income – F & M Bank Corp	$	1,231		$	980
Per share data
Net income	$	.49		$	.43
Cash dividends	$	.15		$	.15
Weighted average shares outstanding		2,488,306			2,297,096

See notes to unaudited consolidated financial statements

2

F & M BANK CORP.

Consolidated Statements of Income

(In Thousands of Dollars Except per Share Amounts)

(Unaudited)

	Six Months Ended
	June 30,
Interest income	2011			2010
Interest and fees on loans held for investment	$	13,013		$	12,892
Interest and fees on loans held for sale		311			464
Interest on federal funds sold		26			17
Interest on interest bearing deposits		16			12
Dividends on equity securities		87			105
Interest on debt securities		134			219
Total interest income		13,587			13,709
Interest expense
Interest on demand deposits		861			963
Interest on savings accounts		95			96
Interest on time deposits over $100,000		596			788
Interest on time deposits		1,250			1,615
Total interest on deposits		2,802			3,462
Interest on short-term debt		9			13
Interest on long-term debt		1,207			1,181
Total Interest Expense		4,018			4,656
Net interest income		9,569			9,053
Provision for loan losses		2,200			1,800
Net interest income after provision for loan losses		7,369			7,253
Noninterest income
Service charges		519			614
Insurance and other commissions		234			196
Other		663			667
Income on bank owned life insurance		175			167
Other than temporary impairment losses		(57	)		-
Gain (loss) on the sale of securities		346			30
Total noninterest income		1,880			1,674
Noninterest expense
Salaries		2,695			2,578
Employee benefits		905			761
Occupancy expense		275			292
Equipment expense		297			298
Intangible amortization		46			138
FDIC insurance assessment		568			579
Other		1,825			1,743
Total noninterest expense		6,611			6,389
Income before income taxes		2,638			2,538
Income taxes		701			779
Consolidated net income		1,937			1,759
Net income – Noncontrolling interest		(20	)		(23	)
Net Income – F & M Bank Corp	$	1,917		$	1,736
Per share data
Net income	$	.80		$	.76
Cash dividends	$	.30		$	.30
Weighted average shares outstanding		2,408,023			2,296,374

See notes to unaudited consolidated financial statements

3

F & M BANK CORP.

Consolidated Balance Sheets

(In Thousands of Dollars Except per Share Amounts)

	June 30,			December 31,
	2011			2010
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	6,135		$	4,586
Federal funds sold		-			16,338
Cash and cash equivalents		6,135			20,924
Interest bearing deposits in banks		1,353			2,927
Securities: (note 2)
Held to maturity - fair value of $109,000 in 2011and 2010		109			109
Available for sale		15,757			15,247
Other investments		8,117			8,789
Loans held for sale		42,679			23,764
Loans held for investment (note 3)		458,930			445,147
Less allowance for loan losses (note 4)		(6,508	)		(5,786	)
Net loans held for investment		452,422			439,361
Other real estate owned		2,884			1,513
Bank premises and equipment, net		6,406			6,792
Interest receivable		1,653			2,001
Core deposit intangible		-			46
Goodwill		2,670			2,670
Bank owned life insurance		7,030			6,883
Other assets		8,301			7,829
Total assets	$	555,516		$	538,855
Liabilities
Deposits:
Noninterest bearing	$	64,788		$	58,497
Interest bearing:
Demand		94,696			94,091
Money market accounts		22,286			22,798
Savings		38,260			35,760
Time deposits over $100,000		78,645			80,060
All other time deposits		135,752			133,845
Total deposits		434,427			425,051
Short-term debt		11,814			5,355
Accrued liabilities		6,424			7,241
Subordinated debt		10,191			9,944
Long-term debt		46,988			49,035
Total liabilities		509,844			496,626
Stockholders’ Equity
Common stock, $5 par value, 6,000,000 shares authorized,
2,489,137 and 2,297,883 shares issued and outstanding
in 2011 and 2010, respectively		12,446			11,530
Retained earnings		33,496			30,837
Noncontrolling interest		174			186
Accumulated other comprehensive income (loss)		(444	)		(324	)
Total stockholders' equity		45,672			42,229
Total liabilities and stockholders’ equity	$	555,516		$	538,855

See notes to unaudited consolidated financial statements

4

F & M BANK CORP.

Consolidated Statements of Cash Flows

(In Thousands of Dollars)

(Unaudited)

	Six Months Ended
	June 30,
	2011			2010
Cash flows from operating activities
Net income	$	1,917		$	1,736
Net change – Noncontrolling interest		(12	)		(3	)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation		308			323
Amortization of security premiums (discounts), net		29			18
Net increase in loans held for sale		(18,915	)		(1,280	)
Provision for loan losses		2,200			1,800
Intangible amortization		46			138
(Increase) decrease in interest receivable		348			(7	)
Increase in other assets		(741	)		(325	)
Gain on sale of fixed assets		(85	)		-
Increase (decrease) in accrued expenses		(664	)		864
Gain on security transactions		(289	)		(30	)
Amortization of limited partnership investments		233			204
Income from life insurance investment		(146	)		(144	)
Net adjustments		(17,676	)		1,561
Net cash provided by (used in) operating activities		(15,771	)		3,294
Cash flows from investing activities
Purchase of investments available for sale		(12,077	)		(13,085	)
Proceeds from sales of investments available for sale		1,035			853
Proceeds from maturity of investments available for sale		11,137			13,110
Net increase in loans held for investment		(18,064	)		(12,574	)
Proceeds from the sale of other real estate owned		1,433			265
Proceeds from the sale of fixed assets		276			(162	)
Purchase of property and equipment		(113	)		-
Net (increase) decrease in interest bearing bank deposits		1,574			(2,920	)
Net cash used in investing activities		(14,799	)		(14,513	)
Cash flows from financing activities
Net change in demand and savings deposits		8,884			11,806
Net change in time deposits		492			(4,835	)
Net change in short-term debt		6,459			(3,688	)
Cash dividends paid		(682	)		(690	)
Proceeds from rights offering		2,381
Proceeds from issuance of common stock		47			60
Proceeds of long-term debt		247			7,250
Repayment of long-term debt		(2,047	)		(7,034	)
Net cash provided by financing activities		15,781			2,869
Net Increase (Decrease) in Cash and Cash Equivalents		(14,789	)		(8,350	)
Cash and cash equivalents, beginning of period		20,924			23,640
Cash and cash equivalents, end of period	$	6,135		$	15,290
Supplemental disclosure
Cash paid for:
Interest expense	$	3,989		$	4,643
Income taxes		500			250
Transfers from loans to Other Real Estate Owned		2,332			815

See notes to unaudited consolidated financial statements

5

F & M BANK CORP.

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands of Dollars)

(Unaudited)

	Six Months Ended
	June 30,
	2011			2010
Balance, beginning of period	$	42,229		$	39,002
Comprehensive income
Net income – F & M Bank Corp		1,917			1,736
Net income - Noncontrolling interest		20			23
Minority Interest Contributed Capital (Distributions)		(32	)		(26	)
Prepaid pension adjustment		(52	)		-
Net change in unrealized appreciation on securities available for sale, net of taxes		(120	)		231
Total comprehensive income		1,733			1,964
Issuance of common stock		2,428			60
Dividends declared		(718	)		(690	)
Balance, end of period	$	45,672		$	40,336

See notes to unaudited consolidated financial statements

6

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 1.   Accounting Principles

The consolidated financial statements include the accounts of F & M Bank Corp. and its subsidiaries (the “Company”).  Significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements conform to accounting principles generally accepted in the United States of America and to general industry practices.  In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 2011 and the results of operations for the three month periods ended June 30, 2011 and June 30, 2010.  The notes included herein should be read in conjunction with the notes to financial statements included in the 2010 annual report to stockholders of F & M Bank Corp.

The Company does not expect the anticipated adoption of any newly issued accounting standards to have a material impact on future operations or financial position.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and gains or losses on certain derivative contracts, are reported as a separate component of the equity section of the balance sheet. Such items, along with operating net income, are components of comprehensive income.

The components of comprehensive income and related tax effects are as follows:

	June 30,			June 30,
	2011			2010
Changes in:
Net Income:
Net Income – F & M Bank Corp	$	1,917		$	1,736
Net Income – Noncontrolling Interest		20			23
Minority Interest Contributed Capital (Distributions)		(32	)		(26	)
		1,905			1,733
Prepaid pension adjustment		(52	)
Unrealized holding gains (losses) on available-for-sale securities:		164			380
Reclassification adjustment for gains realized in income		(346	)		(30	)
Net unrealized gains (losses)		(182	)		350
Tax effect		62			(119	)
Unrealized holding gain (loss), net of tax		(120	)		231
Comprehensive income	$	1,733		$	1,964

Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

7

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 1.    Accounting Principles, continued

Loans

Loans are carried on the balance sheet net of any unearned interest and the allowance for loan losses.  Interest income on loans is determined using the effective interest method on the daily amount of principal outstanding except where serious doubt exists as to collectability of the loan, in which case the accrual of income is discontinued.

Allowance for Loan Losses

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance that management considers adequate to absorb potential losses in the portfolio.  Loans are charged against the allowance when management believes the collectability of the principal is unlikely.  Recoveries of amounts previously charged-off are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of the composition of the loan portfolio, the value and adequacy of collateral, current economic conditions, historical loan loss experience, and other risk factors.  Management believes that the allowance for loan losses is adequate.  While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly those affecting real estate values.  In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Nonaccrual Loans

Commercial loans are placed on nonaccrual status when they become ninety days or more past due, unless there is an expectation that the loan will either be brought current or paid in full in a reasonable period of time. Interest accruals are continued on past due, secured residential real estate loans and consumer purpose loans until the principal and accrued interest equal the value of the collateral and on unsecured loans until the financial condition of the borrower deteriorates to the point that any further accrued interest would be determined to be uncollectible.

8

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 2.  Investment Securities

The amounts at which investment securities are carried in the consolidated balance sheets and their approximate market values at June 30, 2011 and December 31, 2010 are as follows:

	2011				2010
			Market				Market
	Cost		Value		Cost		Value
Securities held to maturity
U. S. Treasury and agency obligations	$	109	$	109	$	109	$	109
Total	$	109	$	109	$	109	$	109
	June 30, 2011
			Unrealized				Market
	Cost		Gains		Losses		Value
Securities available for sale
Government sponsored enterprises	$	10,001	$	37	$	-	$	10,038
Equity securities		1,941		569		20		2,490
Mortgage-backed securities		3,027		205		3		3,229
Total	$	14,969	$	811	$	23	$	15,757
	December 31, 2010
			Unrealized				Market
	Cost		Gains		Losses		Value
Securities available for sale
Government sponsored enterprises	$	7,997	$	7	$	3	$	8,001
Equity securities		2,643		711		39		3,315
Mortgage-backed securities		3,724		209		2		3,931
Total	$	14,364	$	927	$	44	$	15,247

The amortized cost and fair value of securities at June 30, 2011, by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Held to Maturity				Securities Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	109	$	109	$	248	$	245
Due after one year through five years		-		-		10,001		10,038
Due after five years		-		-		2,779		2,984
		109		109		13,028		13,267
Marketable equities		-		-		1,941		2,490
Total	$	109	$	109	$	14,969	$	15,757

There were no sales of debt securities during the six month periods ending June 30, 2011 and 2010.  Following is a table reflecting gains and losses on sales of equity securities:

	Six Months Ended					Three Months Ended
	June 30, 2011		June 30, 2011			June 30, 2010		June 30, 2010
Gains	$	346	$	113		$	346	$	-
Losses		-		(83	)		-		-
Net Gains	$	346	$	30		$	346	$	-

9

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 2.   Investment Securities, continued

Securities Impairment

The Company follows the guidance in ASC 320-10 and Staff Accounting Bulletin (SAB) Topic 5M, Other Than Temporary Impairment in evaluating if these impairments are temporary or other than temporary in nature.  This determination is made on an investment by investment basis and includes all available evidence at the time of the determination including the following:

·   The length of time of impairment;

·   The extent of the impairment relative to the cost of the investment;

·   Recent volatility in the market value of the investment;

·   The financial condition and near-term prospects of the issuer, including any specific events which may impair the earnings potential of the issuer; or

·   The intent and ability of the Company to hold its investment for a period of time sufficient to allow for any anticipated recovery in market value.

The following description provides our policies/procedures for the evaluation for Other Than Temporary Impairment (OTTI):

·   We begin our evaluation using a default position that OTTI has occurred and then use all available evidence to determine whether prospects for the individual security are sufficient to support temporary impairment at the date of the SEC filing. This evaluation will be conducted at each filing date.

·   For purposes of determining OTTI, the security value recovery period will be projected for a maximum of a two year holding period. This will be the maximum; a shorter period may be used when there are particular conditions related to the individual security which make recovery unlikely.

·   The primary focus in determining whether a security is OTTI, and projecting potential recovery, is the prospects for the individual security, rather than broad market indices. All available evidentiary material is considered, including the Company’s public filings with the SEC, press releases, analyst reports, etc.

·   Secondary consideration is given to historic returns, but only to the extent that this evidence is instructive in determining whether the individual security has shown a history of outperforming (or underperforming) the market (or industry) in prior economic cycles. These factors are only considered when the declines in value are not limited to the individual security, but were prevalent over the broader market. This measure is considered to aid in determining whether OTTI should be recognized earlier, rather than later (i.e. a security which underperforms relative to the industry or market will result in early recognition of OTTI). In no event will OTTI recognition be delayed beyond the two year projection period.

·   OTTI may be recognized as early as quarter 1, regardless of holding period projections, when there are specific factors relative to the security which make recovery unlikely. These factors could include evidence contained in the aforementioned SEC filings, press releases, analyst reports, but may also be based on the severity of the impairment.

·   Situations where a security has declined in value more rapidly than the industry (or market), absent strong evidence supporting prospects for recovery, will result in OTTI being recognized in quarter 1 or quarter 2 rather than continuing to evaluate the security over several quarters, based on holding period projections.

·   Declines determined to be other than temporary are charged to operations; as of June 30, 2011 we determined that one financial institution equity security met the above definition of OTTI and the charge to operations totaled $57,000. There were no such charges at June 30, 2010.

·   The Bank also held several small dollar Mortgage Backed Securities that had estimated unrealized losses of $3,000 as of June 30, 2011. These losses have existed for over twelve months, but are considered immaterial. These securities were liquidated shortly after quarter end resulting in a realized gain of approximately $3,000.

10

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 2.    Investment Securities, continued

The fair value and gross unrealized losses for securities, segregated by the length of time that individual securities have been in a continuous gross unrealized loss position, at June 30, 2011 and December 31, 2010 were as follows (dollars in thousands):

	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2011
Government sponsored Enterprises	$	-	$	-		$	-	$	-		$	-	$	-
Mortgage backed Obligations		-		-			245		(3	)		245		(3	)
Marketable equities		208		(19	)		-		(1	)		208		(20	)
Total	$	208	$	(19	)	$	245	$	(4	)	$	453	$	(23	)
December 31, 2010
Government sponsored Enterprises	$	2,004	$	(4	)	$	-	$	-		$	2,004	$	(4	)
Mortgage backed Obligations		-		-			260		(2	)		260		(2	)
Marketable equities		-		-			575		(39	)		575		(39	)
Total	$	2,004	$	(4	)	$	835	$	(41	)	$	2,839	$	(45	)

Other investments, which consists of stock of correspondent banks and investments in low income housing projects, decreased since December 31, 2010.  This decrease is due to a stock repurchase by the FHLB and regular amortization of the carrying value of the investment in low income housing projects.

Note 3.  Loans Held for Investment

Loans outstanding at June 30, 2011 and December 31, 2010 are summarized as follows:

	2011		2010
Real Estate
Construction	$	73,509	$	79,337
Residential		203,214		202,420
Commercial and agricultural		164,137		141,253
Consumer loans to individuals		15,343		19,042
Credit cards		2,672		2,771
Other		55		324
Total	$	458,930	$	445,147

11

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 3.  Loans Held for Investment, continued

The following is a summary of information pertaining to impaired loans (in thousands):

			Unpaid				Average		Interest
June 30, 2011	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Impaired loans without a valuation allowance
Real Estate	$	3,683	$	3,683	$	-	$	3,579	$	97
Commercial		784		784		-		870		18
Home Equity		626		626		-		587		12
Other		159		159		-		247		5
		5,252		5,252		-		5,283		132
Impaired loans with a valuation allowance
Real Estate		5,915		5,915		997		4,944		129
Commercial		159		159		40		2,313		-
Home Equity		368		368		84		344		-
Other		806		806		325		374		-
		7,248		7,248		1,446		7,975		129
Total impaired loans	$	12,500	$	12,500	$	1,446	$	13,258	$	261

The Recorded Investment is defined as the principal balance, net of deferred fees, less principal payments and charge-offs.

			Unpaid				Average		Interest
December 31, 2010	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Impaired loans without a valuation allowance
Real Estate	$	5,680	$	5,680	$	-	$	2,015	$	84
Commercial		888		888		-		606		19
Home Equity		673		673		-		260		5
Other		247		247		-		292		-
		7,488		7,488		-		3,173		108
Impaired loans with a valuation allowance
Real Estate		6,942		6,942		1,003		2,881		211
Commercial		1,149		1,149		161		5,013		17
Home Equity		439		439		118		333		11
Other		7		7		1		5		12
		8,537		8,537		1,283		8,232		251
Total impaired loans	$	16,025	$	16,025	$	1,283	$	11,405	$	359

12

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 4.    Allowance for Loan Losses

A summary of transactions in the allowance for loan losses follows:

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Balance, beginning of period	$	5,786		$	3,836		$	6,095		$	4,510
Provisions charged to operating expenses		2,200			1,800			1,100			900
Loan losses:
Commercial		(453	)		(216	)		(143	)		(181	)
Consumer		(355	)		(101	)		(309	)		(32	)
Real Estate		(706	)		(450	)		(229	)		(320	)
Home Equity		(56	)		(19	)		(56	)		-
Total Loan Losses		(1,570	)		(786	)		(737	)		(533	)
Recoveries:
Commercial		32			-			16			-
Consumer		24			40			6			13
Real Estate		9			-			1			-
Home Equity		27			-			27			-
Total recoveries		92			40			50			13
Net loan losses		(1,478	)		(746	)		(687	)		(520	)
Balance, End of Period	$	6,508		$	4,890		$	6,508		$	4,890

Allowance for Loan Losses (in thousands)

Six Months Ended June 30, 2011	Commercial			Real Estate			Home Equity			Credit Cards			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	1,724		$	1,814		$	407		$	59		$	111		$	1,671	$	5,786
Charge-offs		(453	)		(706	)		(56	)		(45	)		(310	)		-		(1,570	)
Recoveries		32			9			27			14			10			-		92
Provision		509			667			3			29			624			368		2,200
Ending Balance	$	1,812		$	1,784		$	381		$	57		$	435		$	2,039	$	6,508
Individually evaluated for impairment (specific reserve)		40			997			84			-			325			-		1,446
Collectively evaluated for impairment		1,772			787			297			57			110			2,039		5,062
Three Months Ended June 30, 2011	Commercial			Real Estate			Home Equity			Credit Cards			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	1,696		$	1,490		$	425		$	64		$	649		$	1,771	$	6,095
Charge-offs		(143	)		(229	)		(56	)		(10	)		(299	)		-		(737	)
Recoveries		16			1			27			4			2			-		50
Provision		243			522			(15	)		(1	)		83			268		1,100
Ending Balance	$	1,812		$	1,784		$	381		$	57		$	435		$	2,039	$	6,508
Individually evaluated for impairment (specific reserve)		40			997			84			-			325			-		1,446
Collectively evaluated for impairment		1,772			787			297			57			110			2,039		5,062

13

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 4.   Allowance for Loan Losses, continued

Recorded Investment in Loan Receivables (in thousands)

June 30, 2011	Commercial		Real Estate		Home Equity		Credit Cards		Consumer		Unallocated		Total
Loan Receivable:	$	164,137	$	220,582	$	56,141	$	2,672	$	15,398	$	-	$	458,930
Individually evaluated for impairment	$	14,693	$	25,003	$	1,331	$	-	$	852	$	-	$	41,879
Collectively evaluated for impairment	$	149,444	$	195,579	$	54,810	$	2,672	$	14,546	$	-	$	417,051

Allowance for Loan Losses and Recorded Investment in Loan Receivables (in thousands)

December 31, 2010	Commercial		Real Estate		Home Equity		Credit Cards		Consumer		Unallocated		Total
Allowance for loan losses:
Ending Balance	$	1,724	$	1,814	$	407	$	59	$	111	$	1,671	$	5,786
Ending Balance:
Individually evaluated for impairment (specific reserve)		161		1,003		118		-		1		-		1,283
Collectively evaluated for impairment		1,563		811		289		59		110		1,671		4,503
Loans Receivable:	$	153,511	$	214,906	$	54,593	$	2,771	$	19,366	$	-	$	445,147
Individually evaluated for impairment	$	12,406	$	16,806	$	1,538	$	-	$	1,099	$	-	$	31,849
Collectively evaluated for impairment	$	141,105	$	198,100	$	53,055	$	2,771	$	18,267	$	-	$	413,298

Aging of Past Due Loans Receivable (in thousands) as of June 30, 2011

	30-59 Days Past due		60-89 Days Past Due		Greater than 90 Days (excluding non-accrual)		Total Past Due		Non-Accrual Loans		Current		Total Loans Receivable
Commercial	$	3,706	$	311	$	315	$	4,332	$	4,729	$	155,076	$	164,137
Real Estate		3,679		1,665		1,781		7,125		2,896		210,560		220,581
Home Equity		815		131		468		1,414		366		54,361		56,141
Credit Cards		27				3		30		-		2,642		2,672
Consumer		201		108		73		382		1,769		13,248		15,399
Total	$	8,428	$	2,215	$	2,640	$	13,283	$	9,760	$	435,887	$	458,930

14

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 4.   Allowance for Loan Losses, continued

Aging of Past Due Loans Receivable (in thousands) as of December 31, 2010

	30-59 Days Past due		60-89 Days Past Due		Greater than 90 Days (excluding non-accrual)		Total Past Due		Non-Accrual Loans		Current		Total Loans Receivable
Commercial	$	756	$	382	$	4,581	$	5,719	$	1,656	$	146,137	$	153,512
Real Estate		6,303		1,395		3,021		10,719		5,189		198,998		214,906
Home Equity		1,302		595		588		2,485		715		51,392		54,592
Credit Cards		19		6		-		25		-		2,746		2,771
Consumer		1,240		67		54		1,361		30		17,975		19,366
Total	$	9,620	$	2,445	$	8,244	$	20,309	$	7,590	$	417,248	$	445,147

Credit quality indicators as of June 30, 2011

Corporate Credit Exposure
Credit Risk Profile by Creditworthiness Category
	JUNE 30, 2011
	Real Estate		Commercial		Home Equity
Grade 1 - Minimal Risk	$	65	$	162	$	-
Grade 2 - Modest Risk		1,913		2,542		425
Grade 3 - Average Risk		24,211		16,650		7,768
Grade 4 - Acceptable Risk		98,329		90,222		38,744
Grade 5 - Marginally Acceptable		47,096		29,930		6,148
Grade 6 – Watch		19,763		9,829		1,192
Grade 7 – Substandard		29,120		14,669		1,864
Grade 8 – Doubtful		84		133		-
Total	$	220,581	$	164,137	$	56,141
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
			Credit Cards		Consumer
Performing			$	2,672	$	15,326
Non performing (past due 90 days or greater)				-		73
Total			$	2,672	$	15,399

See following page for description of loan grades.

15

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 4.   Allowance for Loan Losses, continued

Credit quality indicators as of December 31, 2010

Corporate Credit Exposure
Credit Risk Profile by Creditworthiness Category
	DECEMBER 31, 2010
	Real Estate		Commercial		Home Equity
Grade 1 - Minimal Risk	$	69	$	175	$	-
Grade 2 - Modest Risk		818		1,679		575
Grade 3 - Average Risk		30,042		16,254		7,943
Grade 4 - Acceptable Risk		107,028		77,472		37,848
Grade 5 - Marginally Acceptable		40,163		40,908		5,473
Grade 6 – Watch		16,785		7,781		905
Grade 7 – Substandard		19,719		8,640		1,849
Grade 8 – Doubtful		282		603		-
Total	$	214,906	$	153,512	$	54,593
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
			Credit Cards		Consumer
Performing			$	2,771	$	19,312
Non performing (past due 90 days or greater)				-		55
Total			$	2,771	$	19,367

Description of loan grades:

Grade 1 - Minimal Risk:   Excellent credit, superior asset quality, excellent debt capacity and coverage, and recognized management capabilities.

Grade 2 - Modest Risk:  Borrower consistently generates sufficient cash flow to fund debt service, excellent credit, above average asset quality and liquidity.

Grade 3 - Average Risk:  Borrower generates sufficient cash flow to fund debt service.  Employment (or business) is stable with good future trends.  Credit is very good.

Grade 4 - Acceptable Risk:  Borrower’s cash flow is adequate to cover debt service; however, unusual expenses or capital expenses must by covered through additional long term debt.  Employment (or business) stability is reasonable, but future trends may exhibit slight weakness. Credit history is good. No unpaid judgments or collection items appearing on credit report.

Grade 5 - Marginally acceptable:  Credit to borrowers who may exhibit declining earnings, may have leverage that is materially above industry averages, liquidity may be marginally acceptable.  Employment or business stability may be weak or deteriorating.  May be currently performing as agreed, but would be adversely affected by developing factors such as layoffs, illness, reduced hours or declining business prospects.  Credit history shows weaknesses, past dues, paid or disputed collections and judgments, but does not include borrowers that are currently past due on obligations or with unpaid, undisputed judgments.

16

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 4.   Allowance for Loan Losses, continued

Grade 6 - Watch:  Loans are currently protected, but are weak due to negative balance sheet or income statement trends.  There may be a lack of effective control over collateral or the existence of documentation deficiencies.  These loans have potential weaknesses that deserve managements close attention.  Other reasons supporting this classification include adverse economic or market conditions, pending litigation or any other material weakness.  Existing loans that become 60 or more days past due are placed in this category pending a return to current status.

Grade 7 - Substandard: Loans’ having well-defined weaknesses where a payment default and or loss is possible, but not yet probable.  Cash flow is inadequate to service the debt under the current payment, or terms, with prospects that the condition is permanent.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower and there is the likelihood that collateral will have to be liquidated and/or guarantor(s) called upon to repay the debt.  Generally, the loan is considered collectible as to both principal and interest, primarily because of collateral coverage, however, if the deficiencies are not corrected quickly; there is a probability of loss.

Grade 8 - Doubtful:  The loan has all the characteristics of a substandard credit, but available information indicates it is unlikely the loan will be repaid in its entirety.  Cash flow is insufficient to service the debt.  It may be difficult to project the exact amount of loss, but the probability of some loss is great.  Loans are to be placed on non-accrual status when any portion is classified doubtful.

Note 5.   Employee Benefit Plan

The Bank has a qualified noncontributory defined benefit pension plan that covers substantially all of its employees.  The benefits are primarily based on years of service and earnings.  The Bank contributed $1 million to the plan in the first quarter of 2011 and does not anticipate additional contributions for the 2011 plan year.  The following is a summary of net periodic pension costs for the six-month and three-month periods ended June 30, 2011 and 2010.

	Six Months Ended						Three Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Service cost	$	222,710		$	193,958		$	111,355		$	96,979
Interest cost		160,756			158,500			80,378			79,250
Expected return on plan assets		(252,218	)		(240,854	)		(126,109	)		(120,427	)
Amortization of net obligation at transition		-			-			-			-
Amortization of prior service cost		(3,886	)		(2,650	)		(1,943	)		(1,325	)
Amortization of net (gain) or loss		31,922			32,756			15,961			16,378
Net periodic benefit cost	$	159,284		$	141,710		$	79,642		$	70,855

17

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 6.   Fair Value

Accounting Standards Codification (ASC) 820, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement

The following sections provide a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Impaired Loans: ASC 820 applies to loans measured for impairment using the practical expedients permitted by ASC 310 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.

Other Real Estate Owned: Certain assets such as other real estate owned (OREO) are measured at the lower of carrying amount or fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of ASC 820.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

June 30, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	10,038	$	-	$	10,038
Mortgage-backed obligations of federal agencies		3,229		-		3,229
Marketable Equities		2,490		2,490		-
Investment securities available for sale	$	15,757	$	2,490	$	13,267
Total assets at fair value	$	15,757	$	2,490	$	13,267
Total liabilities at fair value	$	-	$	-	$	-

18

F & M BANK CORP.

Notes to Consolidated Financial Statements

Note 6.   Fair Value, continued

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

December 31, 2010	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	8,001	$	-	$	8,001
Mortgage-backed obligations of federal agencies		3,931		-		3,931
Marketable Equities		3,315		3,315		-
Investment securities available for sale	$	15,247	$	3,315	$	11,932
Total assets at fair value	$	15,247	$	3,315	$	11,932
Total liabilities at fair value	$	-	$	-	$	-

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a non-recurring basis.

June 30, 2011	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	42,679		$	42,679
Other Real Estate Owned		2,884			2,884
Real Estate		4,983			4,983
Commercial		119			119
Consumer		481			481
Home Equity		297			297
Impaired loans		5,880			5,880
Total assets at fair value	$	51,443		$	51,443
Total liabilities at fair value

December 31, 2010	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	23,764		$	23,764
Other Real Estate Owned		1,513			1,513
Real Estate		5,938			5,938
Commercial		988			988
Consumer		7			7
Home Equity		321			321
Impaired loans		7,254			7,254
Total assets at fair value	$	32,531		$	32,531
Total liabilities at fair value

There were no significant transfers between levels 1 and 2.

19

F & M BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7.   Disclosures About Fair Value of Financial Instruments

ASC 825 “Financial Instruments" defines the fair value of a financial instrument as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation or sale.  As the majority of the Bank's financial instruments lack an available trading market, significant estimates, assumptions and present value calculations are required to determine estimated fair value.  Estimated fair value and the carrying value of financial instruments at June 30, 2011 and December 31, 2010 are as follows (in thousands):

	June 30, 2011				December 31, 2010
	Estimated		Carrying		Estimated		Carrying
	Fair Value		Value		Fair Value		Value
Financial Assets
Cash	$	6,135	$	6,135	$	4,586	$	4,586
Interest bearing deposits		1,353		1,353		2,927		2,927
Federal funds sold		-		-		16,338		16,338
Securities available for sale		15,757		15,757		15,247		15,247
Securities held to maturity		109		109		109		109
Other investments		8,117		8,117		8,789		8,789
Loans		492,178		458,930		475,166		445,147
Loans held for sale		42,679		42,679		23,764		23,764
Bank owned life insurance		7,030		7,030		6,883		6,883
Accrued interest receivable		1,653		1,653		2,001		2,001
Financial Liabilities
Demand Deposits:
Non-interest bearing		64,788		64,788		58,497		58,497
Interest bearing		116,982		116,982		116,889		116,889
Savings deposits		38,260		38,260		35,760		35,760
Time deposits		216,252		214,397		216,199		213,905
Short-term debt		11,814		11,814		5,355		5,355
Subordinated debt		10,191		10,191		9,944		9,944
Long-term debt		50,092		46,988		51,566		49,035

The carrying value of cash and cash equivalents, other investments, deposits with no stated maturities, short-term borrowings, and accrued interest approximate fair value. The fair value of securities was calculated using the most recent transaction price or a pricing model, which takes into consideration maturity, yields and quality.  The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments entered into as of the end of each respective period shown above.

20

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F & M Bank Corp. (Company)  incorporated in Virginia in 1983, is a one-bank holding company pursuant to section 3(a)(1) of the Bank Holding Company Act of 1956, which provides financial services through its wholly-owned subsidiary Farmers & Merchants Bank (Bank). TEB Life Insurance Company (TEB) and Farmers & Merchants Financial Services (FMFS) are wholly-owned subsidiaries of the Bank. The Bank also holds a majority ownership in VBS Mortgage LLC (VBS).

The Bank is a full service commercial bank offering a wide range of banking and financial services through its nine branch offices. TEB reinsures credit life and accident and health insurance sold by the Bank in connection with its lending activities. FMFS provides title insurance, brokerage services and property/casualty insurance to customers of the Bank. VBS originates conventional and government sponsored mortgages through their offices in Harrisonburg and Woodstock.

The Company’s primary trade area services customers in Rockingham County, Shenandoah County, Page County and the northern part of Augusta County.

Management’s discussion and analysis is presented to assist the reader in understanding and evaluating the financial condition and results of operations of the Company.  The analysis focuses on the consolidated financial statements, footnotes, and other financial data presented.  The discussion highlights material changes from prior reporting periods and any identifiable trends which may affect the Company.  Amounts have been rounded for presentation purposes. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements presented in Item 1, Part 1 of this Form 10-Q.

Forward-Looking Statements

Certain statements in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise and not statements of historical fact.  Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” or other statements concerning opinions or judgment of the Company and its management about future events. 

Although the Company believes that its expectations with respect to certain forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of and changes in: general economic conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, changes in the stock and bond markets, technology, and consumer spending and savings habits.

We do not update any forward-looking statements that may be made from time to time by or on behalf of the Company.

21

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Critical Accounting Policies

General

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss factors as one factor in determining the inherent loss that may be present in its loan portfolio. Actual losses could differ significantly from the historical factors that are used. The fair value of the investment portfolio is based on period end valuations but changes daily with the market. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of these transactions would be the same, the timing of events that would impact these transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in the loan portfolio. The allowance is based on two basic principles of accounting: (i) ASC 450 “Contingencies”, which requires that losses be accrued when they are probable of occurring and estimable and (ii) ASC 310 “Receivables”, which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.  For further discussion refer to page 26 in the Management Discussion & Analysis.

Goodwill and Intangibles

ASC 805 “Business Combinations” and ASC 350 “Intangibles” require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Additionally, it further clarifies the criteria for the initial recognition and measurement of intangible assets separate from goodwill. ASC 350 prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisions of ASC 350 discontinue the amortization of goodwill and intangible assets with indefinite lives. Instead, these assets will be subject to at least an annual impairment review and more frequently if certain impairment indicators are in evidence. ASC 350 also requires that reporting units be identified for the purpose of assessing potential future impairments of goodwill.

Core deposit intangibles are amortized on a straight-line basis over ten years. The Company adopted ASC 350 on January 1, 2002 and determined that the core deposit intangible will continue to be amortized over the estimated useful life.

Securities Impairment

For a complete discussion of securities impairment see Note 2 of the Notes to Consolidated Financial Statements.

Overview

Net income for the six months ended June 30, 2011 was $1,917,000 or $.80 per share, compared to $1,736,000 or $.76 in the same period in 2010, an increase of 10.43%. During the six months ended June 30, 2011, noninterest income, exclusive of securities transactions, decreased 3.22% and noninterest expense increased 3.47% during the same period.  Net income from Bank operations adjusted for income or loss from Parent activities is as follows:

In thousands	2011			2010
Net Income from Bank Operations	$	2,084		$	1,848
Income or loss from Parent Company Activities		(167	)		(112	)
Net Income for the six months ended June 30	$	1,917			1,736

22

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Core operating earnings, (exclusive of gains or losses on the Parent’s equity portfolio and non-recurring historic rehabilitation credits related to the investment in low income housing projects) totaled $1,678,000 in 2011 and $1,746,000 in 2010, a decrease of 3.90%.  Income from core operations decreased in 2011 primarily due to the increase in the provision for loan losses and increased legal fees related to problem loans and the rights offering.  A reconciliation of core earnings follows:

In thousands	2011			2010
Net Income	$	1,917		$	1,736
Non-recurring Tax Items		20			29
Non-recurring Securities Transactions, net of tax		(259	)		(19	)
Core Earnings for the three months ended June 30	$	1,678		$	1,746

Management and the Board of Directors use Core Earnings (a non-GAAP financial measure) in a variety of ways, including comparing various operating units (branches) to prior periods, establishing goals and incentive plans that are based on Core Earnings.

Results of Operations

As shown in Table I, the 2011 year to date tax equivalent net interest income increased $499,000 or 5.46% compared to the same period in 2010.  The yield on earning assets decreased .18%, while the cost of funds decreased .28% compared to the same period in 2010.  For the three month period ending June 30, 2011, the tax equivalent net interest margin increased $352,000 compared to the same period in 2010.

Year to date, the combination of the decrease in both yield on assets and the decrease in cost of funds coupled with changes in balance sheet leverage has resulted in the net interest margin rising to 3.77%, an increase of .11% when compared to the same period in 2010. While, for the three month period ending June 30, 2011, the tax equivalent net interest margin increased from 3.74% in 2010 to 3.96% in 2011. A schedule of the net interest margin for the six month and three month periods ended June 30, 2011 and 2010 can be found in Table I on page 30.

The Interest Sensitivity Analysis on page 31 indicates the Company is in an asset sensitive position in the one year time horizon.

Noninterest income, exclusive of securities transactions, decreased $53,000 or 3.22% for the six month period ending June 30, 2011 and $115,000 or 12.57% for the three month period.  These decreases were primarily due to the reduction in service charge and overdraft fee income.

Noninterest expense increased $222,000 and $96,000, respectively for the six and three month periods of 2011 as compared to 2010. Salary and benefits expense increased $261,000 (7.82%) through June 2011. This increase is due to increases in professional personnel as well as salary increases and retirement plan expenses.   Exclusive of personnel expenses, other noninterest expenses decreased at an annualized rate of 1.28% in 2011 for the first six months of 2011 and 7.98% for the second quarter as compared to 2010. Operating costs continue to compare very favorably to the peer group. As stated in the most recently available (March  31, 2011) Bank Holding Company Performance Report, the Company’s and peer’s noninterest expenses averaged 2.40% and 3.08% of average assets, respectively.  The Company’s operating costs have always compared favorably to the peer group due to an excellent asset to employee ratio and below average facilities costs.

23

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

The Company’s subsidiary bank invests a portion of its excess liquidity in either federal funds sold or interest bearing bank deposits. Federal funds sold offer daily liquidity and pay market rates of interest that at quarter end were benchmarked at 0% to .25% by the Federal Reserve. Actual rates received vary slightly based upon money supply and demand among banks. Interest bearing bank deposits are held either in money market accounts or as short-term certificates of deposits. Combined balances in fed funds sold and interest bearing bank deposits have decreased due to growth in the loan portfolio.

Securities

The Company’s securities portfolio serves several purposes.  Portions of the portfolio are held to assist the Company with liquidity, asset liability management, as security for certain public funds and repurchase agreements and for long-term growth potential.

The securities portfolio consists of investment securities commonly referred to as securities held to maturity and securities available for sale.  Securities are classified as Held to Maturity investment securities when management has the intent and ability to hold the securities to maturity.  Held to Maturity Investment securities are carried at amortized cost.  Securities available for sale include securities that may be sold in response to general market fluctuations, liquidity needs and other similar factors.  Securities available for sale are recorded at market value.  Unrealized holding gains and losses on available for sale securities are excluded from earnings and reported (net of deferred income taxes) as a separate component of stockholders’ equity.

As of June 30, 2011, the market value of securities available for sale exceeded their cost by $788,000. This includes increases in value in the equity securities portfolio held by the Company and an increase in the value of government obligations held by the Bank.

Investments in debt securities have increased approximately $1,335,000 in 2011. The portfolio is made up of primarily agency and mortgage-backed securities with an average portfolio life of approximately two years. This short average life results in less portfolio volatility and positions the Bank to redeploy assets in response to rising rates. Scheduled maturities for the remainder of 2011 total $421,000 and these bonds have an average yield of approximately 4.96%. Based on current market rates, as these bonds mature, the funds will be reinvested at rates that are significantly lower.

In reviewing investments as of June 30, 2011, there was one security which met the definition for other than temporary impairment.  A write down of $57,000 was recognized on this security in the second quarter.  Management continues to re-evaluate the portfolio for impairment on a quarterly basis.

Loan Portfolio

The Company operates in a predominately rural area that includes the counties of Rockingham, Page and Shenandoah in the western portion of Virginia. The local economy benefits from a variety of businesses including agri-business, manufacturing, service businesses and several universities and colleges.  The Bank is an active residential mortgage and residential construction lender and generally makes commercial loans to small and mid size businesses and farms within its primary service area.

The allowance for loan losses (see subsequent section) provides for the risk that borrowers will be unable to repay their obligations and is reviewed quarterly for adequacy.  The risk associated with real estate and installment notes to individuals is based upon employment, the local and national economies and consumer confidence.  All of these affect the ability of borrowers to repay indebtedness.  The risk associated with commercial lending is substantially based on the strength of the local and national economies.

24

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

While lending is geographically diversified within the service area, the Company does have loan concentrations in agricultural (primarily poultry farming), construction/development, hotels, and multifamily housing.  Management and the Board of Directors review these concentrations quarterly. The first six months of 2011 resulted in an increase of $13.8 million in the Bank’s core loan portfolio.

Nonperforming loans include nonaccrual loans and loans 90 days or more past due.   Nonaccrual loans are loans on which interest accruals have been suspended or discontinued permanently.  Nonperforming loans totaled $12,400,000 at June 30, 2011 compared to $15,834,000 at December 31, 2010.  Although the potential exists for loan losses, management believes the bank is generally well secured and continues to actively work with its customers to effect payment.  As of June 30, 2011, the Company holds $2,884,000 of real estate which was acquired through foreclosure.

The following is a summary of information pertaining to risk elements and nonperforming loans (in thousands):

	June 30, 2011			December 31, 2010
Nonaccrual Loans
Real Estate	$	2,896		$	5,189
Commercial		4,729			1,656
Home Equity		366			715
Other		1,769			30
		9,760			7,590
Loans past due 90 days or more
Real Estate		1,781			3,021
Commercial		315			4,581
Home Equity		468			588
Other		76			54
		2,640			8,244
Total Nonperforming loans	$	12,400		$	15,834
Nonperforming loans as a percentage of loans held for investment		2.70	%		3.56	%
Net Charge Offs to Total Loans		.32	%		.53	%
Allowance for loan and lease losses to loans held for investment		1.42	%		1.30	%
Allowance for loan and lease losses to nonperforming loans		52.48	%		36.54	%

25

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Allowance for Loan Losses

Management evaluates the allowance for loan losses on a quarterly basis in light of national and local economic trends, changes in the nature and volume of the loan portfolio and trends in past due and criticized loans.  Specific factors evaluated include internally generated loan review reports, past due reports, historical loan loss experience and changes in the financial strength of individual borrowers that have been included on the Bank’s watch list or schedule of classified loans.

In evaluating the portfolio, loans are segregated into loans with identified potential losses and pools of loans by type (commercial, residential, consumer, credit cards). Loans with identified potential losses include examiner and bank classified loans. Classified relationships in excess of $200,000 are reviewed individually for impairment under ASC 310. A variety of factors are taken into account when reviewing these credits including borrower cash flow, payment history, fair value of collateral, company management, the industry in which the borrower is involved and economic factors. Loan relationships that are determined to have no impairment are placed back into the appropriate loan pool and reviewed under ASC 450.

Loan pools are further segmented into watch list, past due over 90 days and all other loans by type. Watch list loans include loans that are 60 days past due, and may include restructured loans, borrowers that are highly leveraged, loans that have been upgraded from classified or loans that contain policy exceptions (term, collateral coverage, etc.). Loss estimates on these loans reflect the increased risk associated with these assets due to any of the above factors. The past due pools contain loans that are currently 90 days or more past due. Loss rates assigned reflect the fact that these loans bear a significantly higher risk of charge-off. Loss rates vary by loan type to reflect the likelihood that collateral values will offset a portion of the anticipated losses.

The remainder of the portfolio falls into pools by type of homogenous loans that do not exhibit any of the above described weaknesses. Loss rates are assigned based on historical loss rates over the prior two years. A multiplier has been applied to these loss rates to reflect the time for loans to season within the portfolio and the inherent imprecision of these estimates.

All potential losses are evaluated within a range of low to high. An unallocated reserve has been established to reflect other unidentified losses within the portfolio. This helps to offset the increased risk of loss associated with fluctuations in past due trends, changes in the local and national economies, and other unusual events. The Board approves the loan loss provision for the following quarter based on this evaluation and an effort is made to keep the actual allowance at or above the midpoint of the range established by the evaluation process.

The allowance for loan losses of $6,508,000 at June 30, 2011 is equal to 1.42% of loans held for investment. This compares to an allowance of $5,786,000 (1.30%) at December 31, 2010.  Based on the evaluation of the loan portfolio described above management has funded the allowance a total of $2,200,000 in the first six months of 2011. Net charge-offs year to date totaled $1,478,000.

The overall level of the allowance is below its peer group average, but has been increasing in recent quarters. Management feels a lower reserve is appropriate based on its loan loss history and the composition of its loan portfolio.  Based on historical losses, delinquency rates, collateral values of delinquent loans and a thorough review of the loan portfolio, management is of the opinion that the allowance for loan losses fairly states the estimated losses in the current portfolio.

26

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Deposits and Other Borrowings

The Company's main source of funding is comprised of deposits received from individuals, governmental entities and businesses located within the Company's service area.  Deposit accounts include demand deposits, savings, money market and certificates of deposit.  Total deposits have increased $9,376,000 since December 31, 2010.  Time deposits increased $492,000 during this period while demand deposits and savings deposits increased $8,884,000.  The increase in certificates of deposits is a result of an increase in core time deposits. The Bank also participates in the CDARS program.  CDARS (Certificate of Deposit Account Registry Service) is a program that allows the bank to accept customer deposits in excess of FDIC limits and through reciprocal agreements with other network participating banks by offering FDIC insurance up to as much as $50 million in deposits. The CDARS program also allows the Bank to purchase funds through its One-Way Buy program. At quarter end the Bank had a total of $23.3 million in CDARS funding, a decrease of $1,132,000 since December 31, 2010.

Short-term debt

Short-term debt consists of federal funds purchased, commercial repurchase agreements (repos.) and daily rate credit from the Federal Home Loan Bank (FHLB). Commercial customers deposit operating funds into their checking account and by mutual agreement with the bank their excess funds are swept daily into the repurchase accounts.  These accounts are not considered deposits and are not insured by the FDIC.  The Bank pledges securities held in its investment portfolio as collateral for these short-term loans.  Federal funds purchased are overnight borrowings obtained from the Bank’s primary correspondent bank to manage short-term liquidity needs. Daily rate credit from the FHLB has been used to finance loans held for sale and also to finance the increase in short-term residential and commercial construction loans.

Long-term debt

Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) continue to be an important source of funding.  The Company’s subsidiary bank borrows funds on a fixed rate basis.  These borrowings are used to fund loan growth and also assist the Bank in matching the maturity of its fixed rate real estate loan portfolio with the maturity of its debt and thus reduce its exposure to interest rate changes.  Scheduled repayments totaled $773,000 through June 30, 2011.  There were no additional borrowings through June 30, 2011.

In November 2009, the Company entered into an agreement with Page Valley Bank (and several sub-participants) to refinance a line of credit previously owed to Silverton Bank as a five year, fixed rate, amortizing loan at 6%.  At June 30, 2011 the outstanding balance was $3,500,000.

In August 2009, the Company began to issue Subordinated debt agreements with local investors with terms of 7 to 10 years.  Interest rates are fixed on the notes for the full term but vary by maturity.  Rates range from 7.0% on the 7 year note to 8.05% on the 10 year note.  As of June 30, 2011 the balance outstanding was $10,191,000.

Capital

The Company seeks to maintain a strong capital base to expand facilities, promote public confidence, support current operations and grow at a manageable level.  As of June 30, 2011, the Company's total risk based capital and leverage ratios were 13.85% and 7.97%, respectively. For the same period, Bank only total risk based capital and leverage ratios were 13.65% and 7.83%, respectively. For both the Company and the Bank these ratios are in excess of regulatory minimums.

The Company completed a stock rights offering during the first quarter of 2011 that resulted in 179,699 shares and $2,381,000 in additional capital.

27

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity

Liquidity is the ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks, federal funds sold, investments and loans maturing within one year.  The Company's ability to obtain deposits and purchase funds at favorable rates determines its liquidity exposure.  As a result of the Company's management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors' requirements and meet its customers' credit needs.

Additional sources of liquidity available to the Company include, but are not limited to, loan repayments, the ability to obtain deposits through the adjustment of interest rates and the purchasing of federal funds.  To further meet its liquidity needs, the Company’s subsidiary bank also maintains a line of credit with its primary correspondent financial institution.  The Bank also has a line of credit with the Federal Home Loan Bank of Atlanta that allows for secured borrowings.

Interest Rate Sensitivity

In conjunction with maintaining a satisfactory level of liquidity, management must also control the degree of interest rate risk assumed on the balance sheet.  Managing this risk involves regular monitoring of interest sensitive assets relative to interest sensitive liabilities over specific time intervals. The Company monitors its interest rate sensitivity periodically and makes adjustments as needed. There are no off balance sheet items that will impair future liquidity.

As of June 30, 2011, the Company had a cumulative Gap Rate Sensitivity Ratio of 10.13% for the one year repricing period. This generally indicates that earnings would increase in an increasing interest rate environment as assets reprice more quickly than liabilities. However, in actual practice, this may not be the case as balance sheet leverage, funding needs and competitive factors within the market could dictate the need to raise deposit rates more quickly.  Management constantly monitors the Company’s interest rate risk and has decided the current position is acceptable for a well-capitalized community bank.

A summary of asset and liability repricing opportunities is shown in Table II, on page 31.

Stock Repurchase

On September 18, 2008, the Company’s Board of Directors approved an increase in the number of shares of common stock that the Company can repurchase under the share repurchase program from 150,000 to 200,000 shares. However, due to the impact on capital ratios resulting from the growth in the balance sheet, other than temporary impairment securities write downs in 2009 and increased funding of the allowance for loan losses, the stock repurchase plan has been suspended. There have been no stock repurchases in 2011.

Effect of Newly Issued Accounting Standards

The following is a summary of recent authoritative pronouncements:

On April 5, 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies the determination of TDRs and establishes the effective date of TDR disclosure requirements on credit quality and allowance for loan losses.  For public companies, this ASU is effective for the first interim or annual period beginning on or after June 15, 2011 and should be applied retrospectively to the beginning of the annual period of adoption.  The Company expects to disclose the required information when effective.

On April 29, 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.  This ASU amends guidance for asset transfers related effective control as well as to the use of collateral in a repo transaction.  Current guidance allows collateral to be utilized as a factor when determining whether a seller in a securities repurchase agreement is able to buy back the instruments as part of the deal (effective control).

28

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Effect of Newly Issued Accounting Standards (continued)

The amended guidance removes the requirement that a trading firm have a guarantee it can buy back an asset that has been transferred in a repurchase agreement and also removes the related guidance that calls for a trading firm to demonstrate that it holds enough collateral to buy replacement assets.  This amendment is in response to reports that Lehman Brothers used the guidance in a way that allowed it to reduce the assets reported on its balance sheet.  The ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date.  Early adoption is not permitted.  The Company does not expect the ASU to have a material impact on the financial statements.

On May 12, 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  This ASU establishes a global standard for applying fair value measurement.    The amendments in this ASU change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  The amendments in the ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  Early application by public entities is not permitted.  The Company expects to disclose the required information when effective.

On June 16, 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  This ASU gives businesses two options for presenting other comprehensive income.  This ASU eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity and requires that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  The amendments in the ASU are to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company does not expect the amendment to have a material impact on the financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material effect on the Company’s financial position, result of operations or cash flows.

Existence of Securities and Exchange Commission Web Site

The Securities and Exchange Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including F & M Bank Corp. and the address is (http: //www.sec.gov).

29

TABLE I

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 Ended
	June 30, 2011							June 30, 2010							June 30, 2011							June 30, 2010
Average			Income/		Average					Income/		Average					Income/		Average					Income/		Average
	Balance2,4		Expense		Rates5			Balance2,4		Expense		Rates5			Balance2,4		Expense		Rates5			Balance2,4		Expense		Rates5
Interest income
Loans held for investment1,2	$	452,618	$	13,060		5.77	%	$	441,329	$	12,947		5.87	%	$	451,869	$	6,668		5.90	%	$	444,346	$	6,447		5.80	%
Loans held for sale		16,198		311		3.84	%		23,207		464		3.99	%		23,415		214		3.66	%		30,460		307		4.03	%
Federal funds sold		23,837		26		.22	%		15,266		17		.22	%		15,718		8		.20	%		7,443		4		.21	%
Interest bearing deposits		2,454		16		1.30	%		2,950		12		.88	%		2,333		8		1.37	%		2,685		7		1.04	%
Investments
Taxable 3		12,978		168		2.59	%		12,687		230		3.63	%		13,449		94		2.80	%		12,448		123		3.95	%
Partially taxable		2,902		70		4.82	%		4,048		120		5.93	%		2,304		37		6.42	%		3,949		55		5.57	%
Total earning assets	$	510,987	$	13,651		5.34	%	$	499,487	$	13,790		5.52	%	$	509,088	$	7,029		5.52	%	$	501,331	$	6,943		5.54	%
Interest Expense
Demand deposits		118,448		861		1.45	%		105,344		963		1.83	%		118,863		430		1.45	%		107,312		505		1.88	%
Savings		37,464		95		.51	%		34,629		96		.55	%		38,028		48		.50	%		35,737		50		.56	%
Time deposits		214,549		1,846		1.72	%		227,775		2,403		2.11	%		214,071		919		1.72	%		225,272		1,139		2.02	%
Short-term debt		4,684		9		.38	%		5,604		13		.46	%		4,202		4		.38	%		5,561		6		.43	%
Long-term debt		58,218		1,207		4.15	%		63,242		1,181		3.73	%		57,748		585		4.05	%		63,245		552		3.49	%
Total interest bearing liabilities	$	433,363	$	4,018		1.85	%	$	436,594	$	4,656		2.13	%	$	432,912	$	1,986		1.84	%	$	437,127	$	2,252		2.06	%
Tax equivalent net interest income 1			$	9,633						$	9,134						$	5,043						$	4,691
Net interest margin						3.77	%						3.66	%						3.96	%						3.74	%

_______________________

1 Interest income on loans includes loan fees.

2 Loans held for investment include nonaccrual loans.

3 An incremental income tax rate of 34% was used to calculate the tax equivalent income on nontaxable and partially taxable investments and loans.

4 Average balance information is reflective of historical cost and has not been adjusted for changes in market value

5 Annualized.

30

 TABLE II

F & M BANK CORP.

Interest Sensitivity Analysis

June 30, 2011

(In Thousands of Dollars)

The following table presents the Company’s interest sensitivity.

		0 – 3			4 – 12			1 – 5		Over 5			Not
		Months			Months			Years		Years			Classified			Total
Uses of funds
Loans
Commercial	$	96,545		$	30,553		$	106,218		$	4,330		$	-		$	237,646
Installment		7,431			965			6,995			8			-			15,399
Real estate for investments		46,219			19,380			122,273			15,341			-			203,213
Real estate held for sale		42,679			-			-			-			-			42,679
Credit cards		2,672			-			-			-			-			2,672
Interest bearing bank deposits		358			747			248			-			-			1,353
Investment securities		98			147			10,148			2,983			2,490			15,866
Total	$	196,002		$	51,792		$	245,882		$	22,662		$	2,490		$	518,828
Sources of funds
Interest bearing demand deposits	$	-		$	30,082		$	67,961		$	18,939		$	-		$	116,982
Savings deposits		-			7,652			22,956			7,652			-			38,260
Certificates of deposit $100,000 and over		8,748			44,414			25,483			-			-			78,645
Other certificates of deposit		21,041			59,086			55,625			-			-			135,752
Short-term borrowings		11,814			-			-			-			-			11,814
Long-term borrowings		5,024			7,393			34,571			10,191			-			57,179
Total	$	46,627		$	148,627		$	206,596		$	36,782		$	-		$	438,632
Discrete Gap	$	149,375		$	(96,835	)	$	39,286		$	(14,120	)	$	2,490		$	80,196
Cumulative Gap	$	149,375		$	52,540		$	91,826		$	77,706		$	80,196
Ratio of Cumulative Gap to Total Earning Assets		28.79	%		10.13	%		17.70	%		14.98	%		15.46	%

Table II reflects the earlier of the maturity or repricing dates for various assets and liabilities as of June 30, 2011.  In preparing the above table, no assumptions were made with respect to loan prepayments. Loan principal payments are included in the earliest period in which the loan matures or can reprice.  Principal payments on installment loans scheduled prior to maturity are included in the period of maturity or repricing. Proceeds from the redemption of investments and deposits are included in the period of maturity.  Estimated maturities of deposits, which have no stated maturity dates, were derived from guidance contained in FDICIA 305.

31

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers such as F & M Bank Corp. that file periodic reports under the Securities Exchange Act of 1934 (the "Act") are required to include in those reports certain information concerning the issuer's controls and procedures for complying with the disclosure requirements of the federal securities laws.  These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports it files or submits under the Act, is communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We have established our disclosure controls and procedures to ensure that material information related to the Company is made known to our principal executive officers and principal financial officer on a regular basis, in particular during the periods in which our quarterly and annual reports are being prepared.  These disclosure controls and procedures consist principally of communications between and among the Chief Executive Officer and the Chief Financial Officer, and the other executive officers of the Company and its subsidiaries to identify any new transactions, events, trends, contingencies or other matters that may be material to the Company’s operations.  As required, we will evaluate the effectiveness of these disclosure controls and procedures on a quarterly basis, and most recently did so as of the end of the period covered by this report.

The Company’s Chief Executive Officer and Chief Financial Officer, based on their evaluation as of the end of the period covered by this quarterly report of the Company’s disclosure controls and procedures (as defined in Rule 13(a)-14(e) of the Securities Exchange Act of 1934), have concluded that the Company’s disclosure controls and procedures are adequate and effective for purposes of Rule 13(a)-14(e) and timely, alerting them to financial information relating to the Company required to be included in the Company’s filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Changes in Internal Controls

Due to the nature of the Company’s business as stewards of assets of customers; internal controls are of the utmost importance. The Company has established procedures during the normal course of business to reasonably ensure that fraudulent activity of either a material amount to these results or in any amount is not occurring. In addition to these controls and review by executive officers, the Company retains the services of an internal auditor to complete regular audits, which examine the processes and procedures of the Company and the Bank to ensure that these processes are reasonably effective to prevent internal or external fraud and that the processes comply with relevant regulatory guidelines of all relevant banking authorities. The findings of the internal auditor are presented to management of the Bank and to the Audit Committee of the Company.

32

PART II     OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS – Not Applicable

ITEM 1A.   RISK FACTORS – Not Applicable

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS – Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES – Not Applicable

ITEM 4.REMOVED AND RESERVED –

ITEM 5.  OTHER INFORMATION – Not Applicable

ITEM 6.   EXHIBITS

(a)           Exhibits

3 i Restated Articles of Incorporation of F & M Bank Corp. are incorporated by reference to Exhibits to F & M Bank Corp.’s 2001 Form 10K filed March 1, 2002.

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).

101 Interactive Data File

33

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 BANK CORP.
By:	/s/ DEAN W. WITHERS
	Dean W. Withers
	President and Chief Executive Officer

August 11, 2011	By:	/s/ NEIL W. HAYSLETT
		Neil W. Hayslett
		Executive Vice President and Chief Financial Officer

34

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(Chapter 63, Title 18 USC Section 1350 (A) and (B)

I, Dean W. Withers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of F & M Bank Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:  August 11, 2011	By:	/s/ DEAN W. WITHERS
		Dean W. Withers
		President and Chief Executive Officer

A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to F & M Bank Corp. and will be retained by F & M Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(Chapter 63, Title 18 USC Section 1350 (A) and (B)

I, Neil W. Hayslett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of F & M Bank Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:  August 11, 2011	By:	/s/ NEIL W. HAYSLETT
		Neil W. Hayslett
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to F & M Bank Corp. and will be retained by F & M Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request

EX-32.1

Exhibit 32

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER,

SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

The undersigned, as the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer of F & M Bank Corp., respectively, certify that, to the best of each such individual’s knowledge and belief, the Quarterly Report on Form 10-Q for the period ended June 30, 2011, which accompanies this certification fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of F & M Bank Corp. at the dates and for the periods indicated.  The foregoing certification is made pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and shall not be relied upon for any other purpose.  The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.

By:	/s/ DEAN W. WITHERS
	Dean W. Withers
	President and Chief Executive Officer

August 11, 2011	By:	/s/ NEIL W. HAYSLETT
		Neil W. Hayslett
		Executive Vice President and Chief Financial Officer

XML



Balance Sheets (Unaudited) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and due from banks	$ 6,135	$ 4,586
Federal funds sold	0	16,338
Cash and cash equivalents	6,135	20,924
Interest bearing deposits in banks	1,353	2,927
Securities: (note 2)
Held to maturity - fair value of $109,000 in 2011 and 2010	109	109
Available for sale	15,757	15,247
Other investments	8,117	8,789
Loans held for sale	42,679	23,764
Loans held for investment (note 3)	458,930	445,147
Less allowance for loan losses (note 4)	(6,508)	(5,786)
Net loans held for investment	452,422	439,361
Other real estate owned	2,884	1,513
Bank premises and equipment, net	6,406	6,792
Interest receivable	1,653	2,001
Core deposit intangible	0	46
Goodwill	2,670	2,670
Bank owned life insurance	7,030	6,883
Other assets	8,301	7,829
Total assets	555,516	538,855
Deposits:
Noninterest bearing	64,788	58,497
Interest bearing:
Demand	94,696	94,091
Money market accounts	22,286	22,798
Savings	38,260	35,760
Time deposits over $100,000	78,645	80,060
All other time deposits	135,752	133,845
Total deposits	434,427	425,051
Short-term debt	11,814	5,355
Accrued liabilities	6,424	7,241
Subordinated debt	10,191	9,944
Long-term debt	46,988	49,035
Total liabilities	509,844	496,626
Stockholders Equity
Common stock, $5 par value, 6,000,000 shares authorized, 2,489,137 and 2,297,883 shares issued and outstanding in 2011 and 2010, respectively	12,446	11,530
Retained earnings	33,496	30,837
Noncontrolling interest	174	186
Accumulated other comprehensive income (loss)	(444)	(324)
Total stockholders equity	45,672	42,229
Total liabilities and stockholders equity	$ 555,516	$ 538,855

XML



Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
STOCKHOLDERS EQUITY:
Common stock, par value	$ 5	$ 5
Common stock shares authorized	6,000,000	6,000,000
Common stock shares issued	2,489,137	2,297,883
Common stock shares outstanding	2,489,137	2,297,883

XML



Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2011	Aug. 12, 2011
Entity Registrant Name	F&M BANK CORP
Entity Central Index Key	0000740806
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 39,161,964
Entity Common Stock, Shares Outstanding		2,489,034
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011

XML



Fair Value

6 Months Ended

Jun. 30, 2011

Fair Value

Note 6.   Fair Value

Accounting Standards Codification (ASC) 820, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement

The following sections provide a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Impaired Loans: ASC 820 applies to loans measured for impairment using the practical expedients permitted by ASC 310 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.

Other Real Estate Owned: Certain assets such as other real estate owned (OREO) are measured at the lower of carrying amount or fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of ASC 820.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

June 30, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	10,038	$	-	$	10,038
Mortgage-backed obligations of federal agencies		3,229		-		3,229
Marketable Equities		2,490		2,490		-
Investment securities available for sale	$	15,757	$	2,490	$	13,267
Total assets at fair value	$	15,757	$	2,490	$	13,267
Total liabilities at fair value	$	-	$	-	$	-

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

December 31, 2010	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	8,001	$	-	$	8,001
Mortgage-backed obligations of federal agencies		3,931		-		3,931
Marketable Equities		3,315		3,315		-
Investment securities available for sale	$	15,247	$	3,315	$	11,932
Total assets at fair value	$	15,247	$	3,315	$	11,932
Total liabilities at fair value	$	-	$	-	$	-

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a non-recurring basis.

June 30, 2011	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	42,679		$	42,679
Other Real Estate Owned		2,884			2,884
Real Estate		4,983			4,983
Commercial		119			119
Consumer		481			481
Home Equity		297			297
Impaired loans		5,880			5,880
Total assets at fair value	$	51,443		$	51,443
Total liabilities at fair value

December 31, 2010	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	23,764		$	23,764
Other Real Estate Owned		1,513			1,513
Real Estate		5,938			5,938
Commercial		988			988
Consumer		7			7
Home Equity		321			321
Impaired loans		7,254			7,254
Total assets at fair value	$	32,531		$	32,531
Total liabilities at fair value

There were no significant transfers between levels 1 and 2.

XML



Investment Securities

6 Months Ended

Jun. 30, 2011

Investment Securities

Note 2. Investment Securities

The amounts at which investment securities are carried in the consolidated balance sheets and their approximate market values at June 30, 2011 and December 31, 2010 are as follows:

	2011				2010
				Market				Market
		Cost		Value		Cost		Value
Securities held to maturity
U. S. Treasury and agency obligations	$	109	$	109	$	109	$	109
Total	$	109	$	109	$	109	$	109
		June 30, 2011
		Unrealized
								Market
		Cost		Gains		Losses		Value
Securities available for sale
Government sponsored enterprises	$	10,001	$	37	$	—	$	10,038
Equity securities		1,941		569		20		2,490
Mortgage-backed securities		3,027		205		3		3,229
Total	$	14,969	$	811	$	23	$	15,757
		December 31, 2010
		Unrealized
								Market
		Cost		Gains		Losses		Value
Securities available for sale
Government sponsored enterprises	$	7,997	$	7	$	3	$	8,001
Equity securities		2,643		711		39		3,315
Mortgage-backed securities		3,724		209		2		3,931
Total	$	14,364	$	927	$	44	$	15,247

The amortized cost and fair value of securities at June 30, 2011, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Held to Maturity		Securities Available for Sale
	Amortized	Fair	Amortized	Fair
	Cost	Value	Cost	Value
Due in one year or less	$                        109	$                109	$                    248	$                  245
Due after one year through five years	-	-	10,001	10,038
Due after five years	-	-	2,779	2,984
	109	109	13,028	13,267
Marketable equities	-	-	1,941	2,490
Total	$                        109	$                109	$               14,969	$             15,757

There were no sales of debt securities during the six month periods ending June 30, 2011 and 2010. Following is a table reflecting gains and losses on sales of equity securities:

	Six Months Ended					Three Months Ended
	June 30,  2011		June 30,  2011			June 30, 2010		June 30, 2010
Gains	$	346	$	113		$	346	$	—
Losses		—		(83	)		—		—
Net Gains	$	346	$	30		$	346	$	—

Securities Impairment

The Company follows the guidance in ASC 320-10 and Staff Accounting Bulletin (SAB) Topic 5M, Other Than Temporary Impairment in evaluating if these impairments are temporary or other than temporary in nature. This determination is made on an investment by investment basis and includes all available evidence at the time of the determination including the following:

·         The length of time of impairment;

·         The extent of the impairment relative to the cost of the investment;

·         Recent volatility in the market value of the investment;

·         The financial condition and near-term prospects of the issuer, including any specific events which may impair the earnings potential of the issuer; or

·         The intent and ability of the Company to hold its investment for a period of time sufficient to allow for any anticipated recovery in market value.

The following description provides our policies/procedures for the evaluation for Other Than Temporary Impairment (OTTI):

·         We begin our evaluation using a default position that OTTI has occurred and then use all available evidence to determine whether prospects for the individual security are sufficient to support temporary impairment at the date of the SEC filing. This evaluation will be conducted at each filing date.

·         For purposes of determining OTTI, the security value recovery period will be projected for a maximum of a two year holding period. This will be the maximum; a shorter period may be used when there are particular conditions related to the individual security which make recovery unlikely.

·         The primary focus in determining whether a security is OTTI, and projecting potential recovery, is the prospects for the individual security, rather than broad market indices. All available evidentiary material is considered, including the Company’s public filings with the SEC, press releases, analyst reports, etc.

·         Secondary consideration is given to historic returns, but only to the extent that this evidence is instructive in determining whether the individual security has shown a history of outperforming (or underperforming) the market (or industry) in prior economic cycles. These factors are only considered when the declines in value are not limited to the individual security, but were prevalent over the broader market. This measure is considered to aid in determining whether OTTI should be recognized earlier, rather than later (i.e. a security which underperforms relative to the industry or market will result in early recognition of OTTI). In no event will OTTI recognition be delayed beyond the two year projection period.

·         OTTI may be recognized as early as quarter 1, regardless of holding period projections, when there are specific factors relative to the security which make recovery unlikely. These factors could include evidence contained in the aforementioned SEC filings, press releases, analyst reports, but may also be based on the severity of the impairment.

·         Situations where a security has declined in value more rapidly than the industry (or market), absent strong evidence supporting prospects for recovery, will result in OTTI being recognized in quarter 1 or quarter 2 rather than continuing to evaluate the security over several quarters, based on holding period projections.

·         Declines determined to be other than temporary are charged to operations; as of June 30, 2011 we determined that one financial institution equity security met the above definition of OTTI and the charge to operations totaled $57,000. There were no such charges at June 30, 2010.

·         The Bank also held several small dollar Mortgage Backed Securities that had estimated unrealized losses of $3,000 as of June 30, 2011. These losses have existed for over twelve months, but are considered immaterial. These securities were liquidated shortly after quarter end resulting in a realized gain of approximately $3,000. & M BANK CORP.

The fair value and gross unrealized losses for securities, segregated by the length of time that individual securities have been in a continuous gross unrealized loss position, at June 30, 2011 and December 31, 2010 were as follows (dollars in thousands):

	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2011
Government sponsored Enterprises	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage backed Obligations		—		—			245		(3	)		245		(3	)
Marketable equities		208		(19	)		—		(1	)		208		(20	)
Total	$	208	$	(19	)	$	245	$	(4	)	$	453	$	(23	)
December 31, 2010
Government sponsored Enterprises	$	2,004	$	(4	)	$	—	$	—		$	2,004	$	(4	)
Mortgage backed Obligations		—		—			260		(2	)		260		(2	)
Marketable equities		—		—			575		(39	)		575		(39	)
Total	$	2,004	$	(4	)	$	835	$	(41	)	$	2,839	$	(45	)

Other investments, which consists of stock of correspondent banks and investments in low income housing projects, decreased since December 31, 2010. This decrease is due to a stock repurchase by the FHLB and regular amortization of the carrying value of the investment in low income housing projects.

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Disclosures About Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2011

Disclosures About Fair Value of Financial Instruments

Note 7.   Disclosures About Fair Value of Financial Instruments

ASC 825 “Financial Instruments" defines the fair value of a financial instrument as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation or sale.  As the majority of the Bank's financial instruments lack an available trading market, significant estimates, assumptions and present value calculations are required to determine estimated fair value.  Estimated fair value and the carrying value of financial instruments at June 30, 2011 and December 31, 2010 are as follows (in thousands):

	June 30, 2011				December 31, 2010
	Estimated		Carrying		Estimated		Carrying
	Fair Value		Value		Fair Value		Value
Financial Assets
Cash	$	6,135	$	6,135	$	4,586	$	4,586
Interest bearing deposits		1,353		1,353		2,927		2,927
Federal funds sold		-		-		16,338		16,338
Securities available for sale		15,757		15,757		15,247		15,247
Securities held to maturity		109		109		109		109
Other investments		8,117		8,117		8,789		8,789
Loans		492,178		458,930		475,166		445,147
Loans held for sale		42,679		42,679		23,764		23,764
Bank owned life insurance		7,030		7,030		6,883		6,883
Accrued interest receivable		1,653		1,653		2,001		2,001
Financial Liabilities
Demand Deposits:
Non-interest bearing		64,788		64,788		58,497		58,497
Interest bearing		116,982		116,982		116,889		116,889
Savings deposits		38,260		38,260		35,760		35,760
Time deposits		216,252		214,397		216,199		213,905
Short-term debt		11,814		11,814		5,355		5,355
Subordinated debt		10,191		10,191		9,944		9,944
Long-term debt		50,092		46,988		51,566		49,035

The carrying value of cash and cash equivalents, other investments, deposits with no stated maturities, short-term borrowings, and accrued interest approximate fair value. The fair value of securities was calculated using the most recent transaction price or a pricing model, which takes into consideration maturity, yields and quality.  The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments entered into as of the end of each respective period shown above.

XML



Shareholders Equity (Unaudited) (USD $) In Thousands, except Share data	Common Stock	Retained Earnings	Noncontrolling Interest	Accumulated Other Comprehensive Income (Loss)	Total
Beginning Balance, Amount at Dec. 31, 2009	$ 11,475	$ 27,989	$ 123	$ (585)	$ 39,002
Beginning Balance, Shares at Dec. 31, 2009	2,295,053
Net Income - F & M Bank Corp		1,736			1,736
Net Income - Noncontrolling interest			23		23
Minority Interest Contributed Capital (Distributions)			(26)		(26)
Net change in unrealized appreciation on securities available for sale, net of taxes				231	231
Total comprehensive income		1,736	(3)	231	1,964
Issuance of Common Stock, Amount	60				60
Dividends declared		(690)			(690)
Ending Balance, Amount at Jun. 30, 2010	11,535	29,035	120	(354)	40,336
Ending Balance, shares at Jun. 30, 2010	2,297,883
Beginning Balance, Amount at Dec. 31, 2010	11,530	30,837	186	(324)	42,229
Beginning Balance, Shares at Dec. 31, 2010	2,306,086
Net Income - F & M Bank Corp		1,917			1,917
Net Income - Noncontrolling interest			20		20
Minority Interest Contributed Capital (Distributions)			(32)		(32)
Prepaid pension adjustment		(52)			(52)
Net change in unrealized appreciation on securities available for sale, net of taxes				(120)	(120)
Total comprehensive income		1,865	(12)	(120)	1,733
Issuance of Common Stock, Amount	2,428				2,428
Dividends declared		(718)			(718)
Ending Balance, Amount at Jun. 30, 2011	$ 12,446	$ 33,496	$ 174	$ (444)	$ 45,672
Ending Balance, shares at Jun. 30, 2011	2,487,197

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Loans Held for Investment

6 Months Ended

Jun. 30, 2011

Loans Held for Investment

Note 3. Loans Held for Investment

Loans outstanding at June 30, 2011 and December 31, 2010 are summarized as follows:

	2011		2010
Real Estate
Construction	$	73,509	$	79,337
Residential		203,214		202,420
Commercial and agricultural		164,137		141,253
Consumer loans to individuals		15,343		19,042
Credit cards		2,672		2,771
Other		55		324
Total	$	458,930	$	445,147

The following is a summary of information pertaining to impaired loans (in thousands):

			Unpaid				Average		Interest
June 30, 2011	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Impaired loans without a valuation allowance
Real Estate	$	3,683	$	3,683	$	—	$	3,579	$	97
Commercial		784		784		—		870		18
Home Equity		626		626		—		587		12
Other		159		159		—		247		5
		5,252		5,252		—		5,283		132
Impaired loans with a valuation allowance
Real Estate		5,915		5,915		997		4,944		129
Commercial		159		159		40		2,313		—
Home Equity		368		368		84		344		—
Other		806		806		325		374		—
		7,248		7,248		1,446		7,975		129
Total impaired loans	$	12,500	$	12,500	$	1,446	$	13,258	$	261

The Recorded Investment is defined as the principal balance, net of deferred fees, less principal payments and charge-offs.

			Unpaid				Average		Interest
December 31, 2010	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Impaired loans without a valuation allowance
Real Estate	$	5,680	$	5,680	$	—	$	2,015	$	84
Commercial		888		888		—		606		19
Home Equity		673		673		—		260		5
Other		247		247		—		292		—
		7,488		7,488		—		3,173		108
Impaired loans with a valuation allowance
Real Estate		6,942		6,942		1,003		2,881		211
Commercial		1,149		1,149		161		5,013		17
Home Equity		439		439		118		333		11
Other		7		7		1		5		12
		8,537		8,537		1,283		8,232		251
Total impaired loans	$	16,025	$	16,025	$	1,283	$	11,405	$	359

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Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Allowance for Loan Losses

Note 4. Allowance for Loan Losses

A summary of transactions in the allowance for loan losses follows:

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Balance, beginning of period	$	5,786		$	3,836		$	6,095		$	4,510
Provisions charged to operating expenses		2,200			1,800			1,100			900
Loan losses:
Commercial		(453	)		(216	)		(143	)		(181	)
Consumer		(355	)		(101	)		(309	)		(32	)
Real Estate		(706	)		(450	)		(229	)		(320	)
Home Equity		(56	)		(19	)		(56	)		—
Total Loan Losses		(1,570	)		(786	)		(737	)		(533	)
Recoveries:
Commercial		32			—			16			—
Consumer		24			40			6			13
Real Estate		9			—			1			—
Home Equity		27			—			27			—
Total recoveries		92			40			50			13
Net loan losses		(1,478	)		(746	)		(687	)		(520	)
Balance, End of Period	$	6,508		$	4,890		$	6,508		$	4,890

Allowance for Loan Losses (in thousands)

Six Months Ended June 30, 2011	Commercial			Real Estate			Home Equity			Credit Cards			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	1,724		$	1,814		$	407		$	59		$	111		$	1,671	$	5,786
Charge-offs		(453	)		(706	)		(56	)		(45	)		(310	)		—		(1,570	)
Recoveries		32			9			27			14			10			—		92
Provision		509			667			3			29			624			368		2,200
Ending Balance	$	1,812		$	1,784		$	381		$	57		$	435		$	2,039	$	6,508
Individually evaluated for impairment (specific reserve)		40			997			84			—			325			—		1,446
Collectively evaluated for impairment		1,772			787			297			57			110			2,039		5,062
Three Months Ended June 30, 2011		Commercial			Real Estate			Home Equity			Credit Cards			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	1,696		$	1,490		$	425		$	64		$	649		$	1,771	$	6,095
Charge-offs		(143	)		(229	)		(56	)		(10	)		(299	)		—		(737	)
Recoveries		16			1			27			4			2			—		50
Provision		243			522			(15	)		(1	)		83			268		1,100
Ending Balance	$	1,812		$	1,784		$	381		$	57		$	435		$	2,039	$	6,508
Individually evaluated for impairment (specific reserve)		40			997			84			—			325			—		1,446
Collectively evaluated for impairment		1,772			787			297			57			110			2,039		5,062

Recorded Investment in Loan Receivables (in thousands)

June 30, 2011	Commercial		Real Estate		Home Equity		Credit Cards		Consumer		Unallocated		Total
Loan Receivable:	$	164,137	$	220,582	$	56,141	$	2,672	$	15,398	$	—	$	458,930
Individually evaluated for impairment	$	14,693	$	25,003	$	1,331	$	—	$	852	$	—	$	41,879
Collectively evaluated for impairment	$	149,444	$	195,579	$	54,810	$	2,672	$	14,546	$	—	$	417,051

Allowance for Loan Losses and Recorded Investment in Loan Receivables (in thousands)

December 31, 2010	Commercial		Real Estate		Home Equity		Credit Cards		Consumer		Unallocated		Total
Allowance for loan losses:
Ending Balance	$	1,724	$	1,814	$	407	$	59	$	111	$	1,671	$	5,786
Ending Balance:
Individually evaluated for impairment (specific reserve)		161		1,003		118		—		1		—		1,283
Collectively evaluated for impairment		1,563		811		289		59		110		1,671		4,503
Loans Receivable:	$	153,511	$	214,906	$	54,593	$	2,771	$	19,366	$	—	$	445,147
Individually evaluated for impairment	$	12,406	$	16,806	$	1,538	$	—	$	1,099	$	—	$	31,849
Collectively evaluated for impairment	$	141,105	$	198,100	$	53,055	$	2,771	$	18,267	$	—	$	413,298

Aging of Past Due Loans Receivable (in thousands) as of June 30, 2011

	30-59 Days Past due		60-89 Days Past Due		Greater than 90 Days (excluding non-accrual)		Total Past Due		Non-Accrual Loans		Current		Total Loans Receivable
Commercial	$	3,706	$	311	$	315	$	4,332	$	4,729	$	155,076	$	164,137
Real Estate		3,679		1,665		1,781		7,125		2,896		210,560		220,581
Home Equity		815		131		468		1,414		366		54,361		56,141
Credit Cards		27				3		30		—		2,642		2,672
Consumer		201		108		73		382		1,769		13,248		15,399
Total	$	8,428	$	2,215	$	2,640	$	13,283	$	9,760	$	435,887	$	458,930

Aging of Past Due Loans Receivable (in thousands) as of December 31, 2010

	30-59 Days Past due		60-89 Days Past Due		Greater than 90 Days (excluding non-accrual)		Total Past Due		Non-Accrual Loans		Current		Total Loans Receivable
Commercial	$	756	$	382	$	4,581	$	5,719	$	1,656	$	146,137	$	153,512
Real Estate		6,303		1,395		3,021		10,719		5,189		198,998		214,906
Home Equity		1,302		595		588		2,485		715		51,392		54,592
Credit Cards		19		6		—		25		—		2,746		2,771
Consumer		1,240		67		54		1,361		30		17,975		19,366
Total	$	9,620	$	2,445	$	8,244	$	20,309	$	7,590	$	417,248	$	445,147

Credit quality indicators as of June 30, 2011

	JUNE 30, 2011
Corporate Credit Exposure
Credit Risk Profile by Creditworthiness Category
		Real Estate		Commercial		Home Equity
Grade 1 - Minimal Risk	$	65	$	162	$	—
Grade 2 - Modest Risk		1,913		2,542		425
Grade 3 - Average Risk		24,211		16,650		7,768
Grade 4 - Acceptable Risk		98,329		90,222		38,744
Grade 5 - Marginally Acceptable		47,096		29,930		6,148
Grade 6 – Watch		19,763		9,829		1,192
Grade 7 – Substandard		29,120		14,669		1,864
Grade 8 – Doubtful		84		133		—
Total	$	220,581	$	164,137	$	56,141
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
				Credit Cards		Consumer
Performing			$	2,672	$	15,326
Non performing (past due 90 days or greater)				—		73
Total			$	2,672	$	15,399

See following page for description of loan grades.

	DECEMBER 31, 2010
Corporate Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Real Estate	Commercial	Home Equity
Grade 1 - Minimal Risk	$                         69	$                       175	$                         -
Grade 2 - Modest Risk	818	1,679	575
Grade 3 - Average Risk	30,042	16,254	7,943
Grade 4 - Acceptable Risk	107,028	77,472	37,848
Grade 5 - Marginally Acceptable	40,163	40,908	5,473
Grade 6 – Watch	16,785	7,781	905
Grade 7 – Substandard	19,719	8,640	1,849
Grade 8 – Doubtful	282	603	-
Total	$                214,906	$                153,512	$               54,593
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
		Credit Cards	Consumer
Performing		$             2,771	$                19,312
Non performing (past due 90 days or greater)		-	55
Total		$                    2,771	$               19,367

Credit quality indicators as of December 31, 2010

Description of loan grades:

Grade 1 - Minimal Risk: Excellent credit, superior asset quality, excellent debt capacity and coverage, and recognized management capabilities.

Grade 2 - Modest Risk: Borrower consistently generates sufficient cash flow to fund debt service, excellent credit, above average asset quality and liquidity.

Grade 3 - Average Risk: Borrower generates sufficient cash flow to fund debt service. Employment (or business) is stable with good future trends. Credit is very good.

Grade 4 - Acceptable Risk: Borrower’s cash flow is adequate to cover debt service; however, unusual expenses or capital expenses must by covered through additional long term debt. Employment (or business) stability is reasonable, but future trends may exhibit slight weakness. Credit history is good. No unpaid judgments or collection items appearing on credit report.

Grade 5 - Marginally acceptable: Credit to borrowers who may exhibit declining earnings, may have leverage that is materially above industry averages, liquidity may be marginally acceptable. Employment or business stability may be weak or deteriorating. May be currently performing as agreed, but would be adversely affected by developing factors such as layoffs, illness, reduced hours or declining business prospects. Credit history shows weaknesses, past dues, paid or disputed collections and judgments, but does not include borrowers that are currently past due on obligations or with unpaid, undisputed judgments.

Grade 6 - Watch: Loans are currently protected, but are weak due to negative balance sheet or income statement trends. There may be a lack of effective control over collateral or the existence of documentation deficiencies. These loans have potential weaknesses that deserve managements close attention. Other reasons supporting this classification include adverse economic or market conditions, pending litigation or any other material weakness. Existing loans that become 60 or more days past due are placed in this category pending a return to current status.

Grade 7 - Substandard: Loans’ having well-defined weaknesses where a payment default and or loss is possible, but not yet probable. Cash flow is inadequate to service the debt under the current payment, or terms, with prospects that the condition is permanent. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower and there is the likelihood that collateral will have to be liquidated and/or guarantor(s) called upon to repay the debt. Generally, the loan is considered collectible as to both principal and interest, primarily because of collateral coverage, however, if the deficiencies are not corrected quickly; there is a probability of loss.

Grade 8 - Doubtful: The loan has all the characteristics of a substandard credit, but available information indicates it is unlikely the loan will be repaid in its entirety. Cash flow is insufficient to service the debt. It may be difficult to project the exact amount of loss, but the probability of some loss is great. Loans are to be placed on non-accrual status when any portion is classified doubtful

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Employee Benefit Plan

6 Months Ended

Jun. 30, 2011

Employee Benefit Plan

Note 5. Employee Benefit Plan

The Bank has a qualified noncontributory defined benefit pension plan that covers substantially all of its employees. The benefits are primarily based on years of service and earnings. The Bank contributed $1 million to the plan in the first quarter of 2011 and does not anticipate additional contributions for the 2011 plan year. The following is a summary of net periodic pension costs for the six-month and three-month periods ended June 30, 2011 and 2010.

	Six Months Ended						Three Months Ended
	June 30, 2011			June 30, 2010			June 30,  2011			June 30, 2010
Service cost	$	222,710		$	193,958		$	111,355		$	96,979
Interest cost		160,756			158,500			80,378			79,250
Expected return on plan assets		(252,218	)		(240,854	)		(126,109	)		(120,427	)
Amortization of net obligation at transition		—			—			—			—
Amortization of prior service cost		(3,886	)		(2,650	)		(1,943	)		(1,325	)
Amortization of net (gain) or loss		31,922			32,756			15,961			16,378
Net periodic benefit cost	$	159,284		$	141,710		$	79,642		$	70,855

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Statements of Cash Flows (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net income	$ 1,917	$ 1,736
Net change - Noncontrolling interest	(12)	(3)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	308	323
Amortization (accretion) of security premiums (discounts), net	29	18
Net (increase) decrease in loans held for sale	(18,915)	(1,280)
Provision for loan losses	2,200	1,800
Intangible amortization	46	138
(Increase) decrease in interest receivable	348	(7)
(Increase) decrease in other assets	(741)	(325)
Gain on sale of fixed assets	(85)	0
Increase (decrease) in accrued expenses	(664)	864
Gain on security transactions	(289)	(30)
Amortization of limited partnership investments	233	204
Income from life insurance investment	(146)	(144)
Net adjustments	(17,676)	1,561
Net cash provided by (used in) operating activities	(15,771)	3,294
Cash flows from investing activities
Purchase of investments available for sale	(12,077)	(13,085)
Proceeds from sales of investments available for sale	1,035	853
Proceeds from maturity of investments available for sale	11,137	13,110
Net increase in loans held for investment	(18,064)	(12,574)
Proceeds from the sale of other real estate owned	1,433	265
Proceeds from the sale of fixed assets	276	(162)
Purchase of property and equipment	(113)	0
Net (increase) decrease in interest bearing bank deposits	1,574	(2,920)
Net cash used in investing activities	(14,799)	(14,513)
Cash flows from financing activities
Net change in demand and savings deposits	8,884	11,806
Net change in time deposits	492	(4,835)
Net change in short-term debt	6,459	(3,688)
Cash dividends paid	(682)	(690)
Proceeds from rights offering	2,381	0
Proceeds from issuance of common stock	47	60
Proceeds of long-term debt	247	7,250
Repayment of long-term debt	(2,047)	(7,034)
Net cash provided (used) by financing activities	15,781	2,869
Net Increase (Decrease) in Cash and Cash Equivalents	(14,789)	(8,350)
Cash and cash equivalents, beginning of period	20,924	23,640
Cash and cash equivalents, end of period	6,135	15,290
Supplemental disclosure
Cash paid for Interest	3,989	4,643
Cash paid for Income taxes	500	250
Transfers from loans to Other Real Estate Owned	$ 2,332	$ 815

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Accounting Principles

6 Months Ended

Jun. 30, 2011

Accounting Principles

Note 1. Accounting Principles

The consolidated financial statements include the accounts of F & M Bank Corp. and its subsidiaries (the “Company”). Significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements conform to accounting principles generally accepted in the United States of America and to general industry practices. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 2011 and the results of operations for the three month periods ended June 30, 2011 and June 30, 2010. The notes included herein should be read in conjunction with the notes to financial statements included in the 2010 annual report to stockholders of F & M Bank Corp.

The Company does not expect the anticipated adoption of any newly issued accounting standards to have a material impact on future operations or financial position.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and gains or losses on certain derivative contracts, are reported as a separate component of the equity section of the balance sheet. Such items, along with operating net income, are components of comprehensive income.

The components of comprehensive income and related tax effects are as follows:

	June 30,			June 30,
	2011			2010
Changes in:
Net Income:
Net Income – F & M Bank Corp	$	1,917		$	1,736
Net Income – Noncontrolling Interest		20			23
Minority Interest Contributed Capital (Distributions)		(32	)		(26	)
		1,905			1,733
Prepaid pension adjustment		(52	)
Unrealized holding gains (losses) on available-for-sale securities:		164			380
Reclassification adjustment for gains realized in income		(346	)		(30	)
Net unrealized gains (losses)		(182	)		350
Tax effect		62			(119	)
Unrealized holding gain (loss), net of tax		(120	)		231
Comprehensive income	$	1,733		$	1,964

Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

Loans

Loans are carried on the balance sheet net of any unearned interest and the allowance for loan losses. Interest income on loans is determined using the effective interest method on the daily amount of principal outstanding except where serious doubt exists as to collectability of the loan, in which case the accrual of income is discontinued.

Allowance for Loan Losses

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance that management considers adequate to absorb potential losses in the portfolio. Loans are charged against the allowance when management believes the collectability of the principal is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of the composition of the loan portfolio, the value and adequacy of collateral, current economic conditions, historical loan loss experience, and other risk factors. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly those affecting real estate values. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Nonaccrual Loans

Commercial loans are placed on nonaccrual status when they become ninety days or more past due, unless there is an expectation that the loan will either be brought current or paid in full in a reasonable period of time. Interest accruals are continued on past due, secured residential real estate loans and consumer purpose loans until the principal and accrued interest equal the value of the collateral and on unsecured loans until the financial condition of the borrower deteriorates to the point that any further accrued interest would be determined to be uncollectible.

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Statements of Operations (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Interest income
Interest and fees on loans held for investment	$ 6,644	$ 6,421	$ 13,013	$ 12,892
Interest and fees on loans held for sale	214	307	311	464
Interest on federal funds sold	8	4	26	17
Interest on interest bearing deposits	8	7	16	12
Dividends on equity securities	53	57	87	105
Interest on debt securities	67	106	134	219
Total interest income	6,994	6,902	13,587	13,709
Interest expense
Interest on demand deposits	430	505	861	963
Interest on savings accounts	48	50	95	96
Interest on time deposits over $100,000	296	372	596	788
Interest on time deposits	623	767	1,250	1,615
Total interest on deposits	1,397	1,694	2,802	3,462
Interest on short-term debt	4	6	9	13
Interest on long-term debt	585	552	1,207	1,181
Total Interest Expense	1,986	2,252	4,018	4,656
Net interest income	5,008	4,650	9,569	9,053
Provision for loan losses	1,100	900	2,200	1,800
Net interest income after provision for loan losses	3,908	3,750	7,369	7,253
Noninterest income
Service charges	279	309	519	614
Insurance and other commissions	162	115	234	196
Other	271	397	663	667
Income on bank owned life insurance	88	94	175	167
Other than temporary impairment losses	(57)	0	(57)	0
Gain on the sale of securities	346	0	346	30
Total noninterest income	1,089	915	1,880	1,674
Noninterest expense
Salaries	1,370	1,261	2,695	2,578
Employee benefits	459	341	905	761
Occupancy expense	140	144	275	292
Equipment expense	148	152	297	298
Intangible amortization	0	69	46	138
FDIC insurance assessment	285	297	568	579
Other	937	979	1,825	1,743
Total noninterest expense	3,339	3,243	6,611	6,389
Income before income taxes	1,658	1,422	2,638	2,538
Income tax expense	406	422	701	779
Consolidated net income	1,252	1,000	1,937	1,759
Net (income) loss - Noncontrolling interest	(21)	(20)	(20)	(23)
Net Income - F & M Bank Corp	$ 1,231	$ 980	$ 1,917	$ 1,736
Per share data
Net income	$ 0.49	$ 0.43	$ 0.80	$ 0.76
Cash dividends	$ 0.15	$ 0.15	$ 0.30	$ 0.30
Weighted average shares outstanding	2,488,306	2,297,096	2,408,023	2,296,374