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F&M Bank Corp. (FMBM) boosts 2025 profit with higher margin and loan growth

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10-K

Rhea-AI Filing Summary

F&M Bank Corp. reports significantly stronger 2025 results, with net income rising to $11.2 million from $7.3 million and earnings per share increasing to $3.16 from $2.07. Higher net interest income, driven by a wider net interest margin of 3.35% versus 2.77%, more than offset increased operating costs.

Total assets reached $1.37 billion as of December 31, 2025, with loans of $886.3 million and deposits of $1.25 billion. Credit quality remained solid, as nonperforming loans declined to 0.68% of total loans and the allowance covered over 129% of nonperforming assets.

The Bank remains well capitalized, with total risk-based capital at 14.04% and common equity tier 1 at 13.11%. Management continued returning capital through quarterly dividends totaling $1.04 per share and share repurchases under a $2.2 million buyback plan while maintaining robust regulatory capital and detailed risk, cybersecurity, and compliance frameworks.

Positive

  • Profitability improved sharply, with 2025 net income rising to $11.2 million (up 54.14%) and return on average equity increasing to 11.76%, supported by a net interest margin expansion to 3.35%.

Negative

  • None.

Insights

F&M delivered stronger profitability in 2025 on wider margins and controlled credit costs.

F&M Bank Corp. grew net income to $11.2 million, up 54.14%, as net interest income increased $7.6 million. The net interest margin expanded from 2.77% to 3.35%, helped by higher loan yields, better securities returns, and lower funding costs, especially from reduced time-deposit and borrowing expense.

Asset quality stayed resilient: nonperforming assets fell to $6.0 million, just 0.44% of total assets, while the allowance for credit losses was 0.88% of loans and covered roughly 129% of nonperforming loans. Loan growth of 5.51% was concentrated in farmland, residential, and commercial real estate segments.

Capital remained comfortably above regulatory minimums, with total risk-based capital at 14.04% and CET1 at 13.11% at the Bank level. The company paid an annual dividend of $1.04 per share and repurchased 17,111 shares under a $2.2 million authorization, while continuing to invest in cybersecurity, CRA compliance, and human capital, which will shape performance discussed in future filings.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10‑K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2025

 

Commission file number: 0-13273

 

F&M BANK CORP.

(Exact name of registrant as specified in its charter)

 

Virginia

 

54-1280811

State or other jurisdiction of

incorporation or organization

 

I.R.S. Employer

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

 

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock - $5 Par value per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities  Act. Yes  ☐  No  ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐  No  ☒

 

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  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No  ☐

 

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

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

 

 

Emerging growth company

☐

                                               

         

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

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

 

The registrant’s Common Stock is quoted on the OTC Market’s OTCQX tier under the symbol FMBM. The aggregate market value of the 3,158,496 shares of Common Stock of the registrant issued and outstanding held by non-affiliates on June 30, 2025 was approximately $66,328,416 based on the closing sales price of $21.00 per share on that date. For purposes of this calculation, the term “affiliate” refers to all directors and executive officers of the registrant, plus the F&M Bank Corp. Stock Bonus Plan.

 

As of the close of business on March 20, 2026, there were 3,557,495 shares of the registrant's Common Stock outstanding.

 

 

 

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

Part III:  Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 16, 2026, which the registrant plans to file with the Securities and Exchange Commission subsequent to the date hereof.

 

 

 

 

 

 

Table of Contents

 

 

 

 

Page

 

 

PART I

 

 

 

 

 

 

 

 

Item 1

Business

 

3

 

 

 

 

 

 

Item 1A

Risk Factors

 

10

 

 

 

 

 

 

Item 1B

Unresolved Staff Comments

 

10

 

 

 

 

 

 

Item 1C

Cybersecurity

 

10

 

 

 

 

 

 

Item 2

Properties

 

12

 

 

 

 

 

 

Item 3

Legal Proceedings

 

12

 

 

 

 

 

 

Item 4

Mine Safety Disclosures

 

12

 

 

 

 

 

 

PART II 

 

 

 

 

 

 

 

 

Item 5

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

 

13

 

 

 

 

 

 

Item 6

[Reserved]

 

15

 

 

 

 

 

 

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

 

 

 

 

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

 

29

 

 

 

 

 

 

Item 8

Financial Statements and Supplementary Data

 

30

 

 

 

 

 

 

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

75

 

 

 

 

 

 

Item 9A

Controls and Procedures

 

75

 

 

 

 

 

 

Item 9B

Other Information

 

75

 

 

 

 

 

 

Item 9C

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

75

 

 

 

 

 

 

 

PART III 

 

 

 

 

 

 

 

 

Item 10

Directors, Executive Officers and Corporate Governance

 

76

 

 

 

 

 

 

Item 11

Executive Compensation

 

76

 

 

 

 

 

 

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

76

 

 

 

 

 

 

Item 13

Certain Relationships and Related Transactions, and Director Independence

 

76

 

 

 

 

 

 

Item 14

Principal Accountant Fees and Services

 

76

 

 

 

 

 

 

 

PART IV 

 

 

 

 

 

 

 

 

Item 15

Exhibit and Financial Statement Schedules

 

77

 

 

 

 

 

 

Item 16

Form 10-K Summary

 

78

 

 

 

 

 

 

Signatures

 

79

 

                      

 
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Table of Contents

 

PART I

 

Item 1. Business.

 

Business

 

F & M Bank Corp. (the “Company”), incorporated in Virginia in 1983, is a one-bank holding company under the Bank Holding Company Act of 1956 that has elected to become a financial holding company.  The Company owns 100% of the outstanding stock of its banking subsidiary, Farmers & Merchants Bank (“Bank”) and VSTitle, LLC (“VST”).  VBS Mortgage, LLC (“F&M Mortgage”), is a wholly owned subsidiary of the Bank. Effective on May 15, 2025, the operations, assets, and liabilities of VBS Mortgage, LLC (dba “F&M Mortgage”) were transferred to the Bank.  Farmers & Merchants Financial Services, Inc. (“FMFS”) was formerly a wholly owned subsidiary of the Bank. FMFS was dissolved effective April 25, 2024, and its legal existence was subsequently terminated on June 7, 2024. The operations, assets, and liabilities of FMFS were transferred to the Bank. The Company’s and the Bank’s headquarters are located in Timberville, Virginia, and its primary operations centers are located in the Shenandoah Valley of Virginia.

 

On April 15, 1908, the Bank was chartered as a state-chartered bank under the laws of the Commonwealth of Virginia. As a commercial bank, the Bank offers a wide range of banking services including commercial and individual demand and time deposit accounts, commercial and individual loans, internet and mobile banking, drive-in banking services, ATMs, as well as a courier service for its commercial banking customers. The Bank also makes various types of commercial and consumer loans, originates both conventional and government agency sponsored mortgages for sale in the secondary market, and has a large portfolio of residential mortgages and indirect auto loans. VST provides title insurance services to customers in our market area and the Bank.  The local economy is diverse with strong employment in the agricultural, manufacturing, service and governmental sectors.

 

Available Information

 

The Company files annual, quarterly and other reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission (“SEC”). The Company’s filings are available through the SEC’s website at www.sec.gov. More information about the Company can be found at www.fmbankva.com. Except as otherwise expressly stated, the information contained on our website or available by hyperlink from our website is not a part of this report and is not incorporated by reference into this report or any other documents we file with, or furnish to, the SEC.

 

Competition

 

The Bank's offices face strong competition in the markets it serves.  The Company competes with large national and regional financial institutions, other independent community banks, nationally chartered savings banks, credit unions, consumer finance companies, mortgage companies, loan production offices, marketplace lenders and other financial technology firms and mutual funds. Competition for loans and deposits is affected by a variety of factors including interest rates, types of products offered, the number and location of branch offices, marketing strategies and the reputation of the Bank within the communities served.

 

Human Capital

 

On December 31, 2025, the Bank had 173 full-time equivalent employees. None of the Company’s employees are represented by a union or covered under a collective bargaining agreement. No one employee devotes full-time services to F&M Bank Corp. As a financial institution, our ability to attract, develop and retain highly qualified employees is critical to our success. We believe our people provide significant value to our Company and its shareholders.

 

Regulation and Supervision

 

General. The operations of the Company and the Bank are subject to extensive federal and state laws and regulations, which apply to bank holding companies, financial holding companies and state member banks of the Federal Reserve System. The common stock of the Company is registered pursuant to and subject to the periodic reporting requirements of the Exchange Act. These include, but are not limited to, the filing of annual, quarterly, and other current reports with the SEC. As an Exchange Act reporting company, the Company is directly affected by the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). 

 

 
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Table of Contents

 

The Company, as a bank holding company and a financial holding company, is subject to the provisions of the Bank Holding Company Act of 1956, as amended (the "Act") and is supervised by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).  The Act generally requires the Company to secure the prior approval of the Federal Reserve Board before the Company acquires ownership or control of more than 5% of the voting shares or substantially all the assets of another financial institution, including another bank.

 

As a financial holding company, the Company is required to file with the Federal Reserve Board an annual report and such additional information as it may require pursuant to the Act.  The Federal Reserve Board may also conduct examinations of F & M Bank Corp. and any or all of its subsidiaries. Under the Act and the regulations of the Federal Reserve Board, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with an extension of credit, pro-vision of credit, sale or lease of property or furnishing of services.

 

The permitted activities of a bank holding company are limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve Board determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, bank holding companies that qualify and elect to be financial holding companies, such as the Company, may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve Board in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve Board). Activities that are financial in nature include but are not limited to securities underwriting and dealing, insurance underwriting, and making merchant banking investments. Since 1994, the Company has entered into agreements with the Virginia Community Development Corporation to purchase equity positions in several low-income housing funds; these funds provide housing for low-income individuals throughout Virginia.  Approval of the Federal Reserve Board is necessary to engage in certain of the activities described above or to acquire interests in companies engaging in these activities.

 

The Bank, as a state member bank, is supervised and regularly examined by the Virginia Bureau of Financial Institutions and the Federal Reserve Board; such supervision and examination by the Virginia Bureau of Financial Institutions and the Federal Reserve Board is intended primarily for the protection of depositors and not the shareholders of the Company.

 

Payment of Dividends. The Company is a legal entity, separate and distinct from its subsidiaries. A significant portion of the revenues of the Company result from dividends paid to it by the Bank. There are various legal limitations applicable to the payment of dividends by the Bank to the Company. Under the current regulatory guidelines, prior approval from the Federal Reserve Board is required if cash dividends declared in any given year exceed net income for that year, plus retained net profits of the two preceding years. A bank also may not declare a dividend out of or in excess of its net undivided profits without regulatory approval.  The payment of dividends by the Bank or the Company may also be limited by other factors, such as requirements to maintain capital above regulatory guidelines.

 

Bank regulatory agencies have the authority to prohibit the Bank or the Company from engaging in an unsafe or unsound practice in conducting their businesses. The payment of dividends, depending on the financial condition of the Bank, or the Company, could be deemed to constitute such an unsafe or unsound practice. Based on the Bank’s current financial condition, the Company does not expect that any of these laws will have any impact on its ability to obtain dividends from the Bank.

 

The Company also is subject to regulatory restrictions on payment of dividends to its shareholders.  Regulators have indicated that bank holding companies should generally pay dividends only if the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality, and overall financial condition.  Further, a bank holding company should inform and consult with the Federal Reserve Board prior to declaring a dividend that exceeds earnings for the period (e.g., quarter) for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure.

 

Capital Requirements.  The Federal Reserve Board and other federal banking agencies have issued risk-based capital requirements for assessing bank capital adequacy. Virginia chartered banks must also satisfy the capital requirements adopted by the Virginia Bureau of Financial Institutions.

 

 
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At December 31, 2025, the "Basel III" capital and leverage ratios were as follows:

 

Ratio

 

F&M Bank

 

 

Minimum Capital Requirement (includes capital

conservation buffer)

 

 

Minimum To be Well Capitalized Under Prompt Corrective Action Regulations

 

Common equity Tier 1 (“CET1”)

 

 

13.11%

 

 

7.00%

 

 

6.50%

Tier 1 risk-based capital

 

 

13.11%

 

 

8.50%

 

 

8.00%

Total risk-based capital

 

 

14.04%

 

 

10.50%

 

 

10.00%

Tier 1 leverage

 

 

8.73%

 

 

4.00%

 

 

5.00%

 

An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such activities.

 

The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

 

In July 2023, the Federal Reserve Board and the FDIC issued proposed rules to implement the final components of the Basel III agreement, often known as the “Basel III endgame.” These proposed rules contain provisions that apply to banks with $100 billion or more in total assets and that will significantly alter how those banks calculate risk-based assets. These proposed rules do not apply to holding companies or banks with less than $100 billion in assets, such as the Company and the Bank, but the final impacts of these rules cannot yet be predicted.

 

As directed by the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”), the federal banking regulators in 2019 jointly issued a final rule that permits qualifying banks that have less than $10 billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio” (“CBLR”).  A qualifying bank that has chosen the proposed framework would not be required to calculate the existing risk-based and leverage capital requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under prompt corrective action rules, provided it has a community bank leverage ratio greater than 9%. On November 2, 2025, federal banking regulators issued a proposed rule that would lower the CBLR from 9% to 8%. No assurance can be made as to when and in what form a final rule will be adopted. The Bank has elected to not adopt the CBLR framework.  

 

Pursuant to the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are not subject to consolidated regulatory capital requirements.

 

Source of Strength.  Federal Reserve Board policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

 

Safety and Soundness.  There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance fund in the event of a depository institution default. For example, under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of an insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any subsidiary bank that may become "undercapitalized" with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal bank regulatory agency up to the lesser of (i) an amount equal to 5% of the institution's total assets at the time the institution became undercapitalized or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan. 

 

Under the Federal Deposit Insurance Act, the federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines.

 

 
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Transactions with Affiliates. Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W establish parameters for a bank to conduct “covered transactions” with its affiliates, with the objective of limiting risk to the insured bank. Generally, Sections 23A and 23B (i) limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and limit the aggregate of all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus and (ii) require that all such transactions be on terms substantially the same, or at least as favorable, to the bank or subsidiary as those that would be provided to a non-affiliate. The term “covered transaction” includes the making of loans to the affiliate, purchase of assets from the affiliate, issuance of a guaranty on behalf of the affiliate and several other types of transactions.

 

Under the Dodd-Frank Act, restrictions on transactions with affiliates are enhanced by (i) including among “covered transactions” transactions between bank and affiliate-advised investment funds; (ii) including among “covered transactions” transactions between a bank and an affiliate with respect to securities repurchase agreements and derivatives transactions; (iii) adopting stricter collateral rules; and (iv) imposing tighter restrictions on transactions between banks and their financial subsidiaries.

 

Transactions with Insiders. The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal shareholders of banks. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a principal shareholder of a bank, and some affiliated entities of any of the foregoing, may not exceed, together with all other outstanding loans to such person and affiliated entities, the bank’s loan-to-one borrower limit. Loans in the aggregate to insiders and their related interests as a class may not exceed two times the bank’s unimpaired capital and unimpaired surplus until the bank’s total deposits equal or exceed $100,000,000, at which time the aggregate is limited to the bank’s unimpaired capital and unimpaired surplus. Section 22(h) also prohibits loans, above amounts prescribed by the appropriate federal banking agency, to directors, executive officers and principal shareholders of a bank or bank holding company, and their respective affiliates, unless such loan is approved in advance by a majority of the Board of Directors of the bank with any “interested” director not participating in the voting. The FDIC has prescribed the loan amount, which includes all other outstanding loans to such person, as to which such prior board of directors approval is required, as being the greater of $25,000 or 5% of capital and surplus (up to $500,000). Section 22(h) requires that loans to directors, executive officers and principal shareholders be made on terms and underwriting standards substantially the same as offered in comparable transactions to other persons.

 

Limits on Incentive Compensation. The Federal Reserve reviews incentive compensation arrangements of bank holding companies such as the Company as part of its regular, risk-focused supervisory process. The federal banking agencies have also issued guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermine the safety and soundness of banking organizations. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide employees incentives that appropriately balance risk and reward and, thus, do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The guidance provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

 

Anti-Money Laundering Laws and Regulations.  The Bank is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated by U.S. authorities (“AML laws”). This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. 

 

The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. The Company believes it has implemented appropriate internal practices, procedures, and controls to comply with these obligations.

 

 
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Dodd-Frank Act. The Dodd-Frank Act was signed into law in 2010. Its wide-ranging provisions affect all federal financial regulatory agencies and nearly every aspect of the American financial services industry.

  

The Dodd-Frank Act contains provisions designed to reform mortgage lending, which includes the requirement of additional disclosures for consumer mortgages. In addition, the Federal Reserve has issued rules that have the effect of limiting the fees charged to merchants for debit card transactions. These rules limit the amount of interchange fee income available explicitly to larger banks and indirectly to us. The Dodd-Frank Act also contains provisions that affect corporate governance and executive compensation.

 

In 2018, the Economic Growth Act was enacted to modify or remove certain regulatory financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act. While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion, such as the Bank, and for large banks with assets of more than $50 billion.

 

Among other matters, the Economic Growth Act expanded the definition of qualified mortgages which may be held by a financial institution with total consolidated assets of less than $10 billion, exempts community banks from the Volcker Rule, and included additional regulatory relief regarding regulatory examination cycles, call reports, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

 

Consumer Financial Protection.  The Bank is subject to federal and state consumer protection laws that extensively govern its relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans and providing other services.

 

If the Bank fails to comply with these laws and regulations, it may be subject to various penalties. Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory approval for merger or acquisition transactions the Company may wish to pursue or being prohibited from engaging in such transactions even if approval is not required.

 

Community Reinvestment Act. The Community Reinvestment Act (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings. Banking regulators consider CRA ratings when considering approval of a proposed transaction. The Bank received a rating of “satisfactory” in its most recent CRA examination.

 

CRA regulations provide for certain disclosure obligations. Each institution must post a notice advising the public of its right to comment to the institution and its regulator on the institution’s CRA performance and to review the institution’s CRA public file. Each lending institution must maintain for public inspection a file that includes a listing of branch locations and services, a summary of lending activity, a map of its communities and any written comments from the public on its performance in meeting community credit needs. Applicable law requires public disclosure of a financial institution’s written CRA evaluations. This promotes enforcement of CRA requirements by providing the public with the status of a particular institution’s community reinvestment record.

 

Furthermore, if after becoming a financial holding company and undertaking activities not permissible for a bank holding company, the company fails to continue to meet any of the prerequisites for financial holding company status, the company must enter into an agreement with the Federal Reserve to comply with all applicable capital and management requirements. If the company does not return to compliance within 180 days, the Federal Reserve may order the company to divest its subsidiary banks or the company may discontinue or divest investments in companies engaged in activities permissible only for a bank holding company that has elected to be treated as a financial holding company.

 

 
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In 2023, the federal bank regulatory agencies jointly issued a final rule to modernize CRA regulations consistent with the following key goals: (i) to encourage banks to expand access to credit, investment, and banking services in low to moderate income communities; (ii) to adapt to changes in the banking industry, including internet and mobile banking and the growth of non-branch delivery systems; (iii) to provide greater clarity and consistency in the application of the CRA regulations, including adoption of a new metrics-based approach to evaluating bank retail lending and community development financing; and (iv) to tailor CRA evaluations and data collection to bank size and type, recognizing that differences in bank size and business models may impact CRA evaluations and qualifying activities. Most of the final CRA rule’s requirements were applicable beginning January 1, 2026, with certain requirements, including the data reporting requirements, applicable as of January 1, 2027. The Bank is evaluating the expected impact of the modified CRA regulations.

 

Cybersecurity. The federal banking agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s Board of Directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial products and services. The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack. If the Bank fails to meet the expectations set forth in this regulatory guidance, it could be subject to various regulatory actions and any remediation efforts may require significant resources of the Bank.

 

In 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system. The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cyber incident has occurred. Notification is required for incidents that have materially affected—or are reasonably likely to materially affect—the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization customers for four or more hours. The rule became effective in 2022. With increased focus on cybersecurity, we are continuing to monitor legislative, regulatory, and supervisory developments related thereto. We had no material cybersecurity incidents in 2025.  See “Item 1C. Cybersecurity” for more information.

 

Future Regulation.  Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the application of existing regulations. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner. Management expects that financial institutions will remain heavily regulated, and that additional laws or regulations may be adopted further regulating specific banking practices.

 

Effect of Governmental Monetary Policies.  The Company’s operations are affected not only by general economic conditions but also by the policies of various regulatory authorities. In particular, the Federal Reserve uses monetary policy tools to impact money market and credit market conditions and interest rates to influence general economic conditions. These policies have a significant impact on overall growth and distribution of loans, investments, and deposits; they affect market interest rates charged on loans or paid for deposits and can significantly influence employment and inflation rates. Federal Reserve monetary policies have had a significant effect on the operating results of commercial banks, including the Company, in the past and are expected to do so in the future.

 

 
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Operating Revenue

 

The following table displays components that contributed 15% or more of the Company’s total operating revenue for the years ended December 31, 2025 and 2024:

 

Period

 

Class of Service

 

Percentage of Total Revenues

December 31, 2025

 

Interest and fees on loans held for investment

 

70.70%

December 31, 2024

 

Interest and fees on loans held for investment

 

72.71%

 

Executive Officers of the Company

 

Aubrey Michael (Mike) Wilkerson, 67, has served as Chief Executive Officer of the Company and the Bank since April 2023. Prior to that he served as Executive Vice President/Chief Lending Officer from January 2022 to April 2023, and Executive Vice President/Chief Strategy Officer and Northern Shenandoah Valley Market Executive since January 2021.  Mr. Wilkerson began his banking career at Wachovia Bank on January 4, 1982.  Mr. Wilkerson’s banking career includes experience in Dealer Financial Services, Retail Banking, Private Banking, Commercial Banking and senior strategic leadership positions.  From 2012 to 2018, Mr. Wilkerson was the Business Banking Division Executive for Virginia, Maryland and Washington, DC at Wachovia.  Most recently, Mr. Wilkerson served as the Commercial Banking Market Executive from 2018 through 2020 for Western Mid-Atlantic Region at Wells Fargo.

 

Barton E. Black, 55, has served as President of the Company and Bank since April 2023. Prior to that he served as Executive Vice President/Chief Operating Officer from June 2020 to April 2023, and as Executive Vice President/Chief Strategy & Risk Officer from March 2019 to May 2020.  Prior to joining the Company, he served as Managing Director at Strategic Risk Associates, a financial services consulting company based in Virginia, from August 2012 through February 2019.

 

Lisa F. Campbell, 58, has served as Executive Vice President/Chief Financial Officer of the Company and the Bank since October 2022. Prior to joining the Company, she served as Group Vice President and Chief Financial Officer for Fidelity Bancshares N.C., Inc. in Fuquay-Varina, North Carolina from August 2014 to October 2022.  Previously, she served as Executive Vice President, Chief Operating Officer and Chief Financial Officer for New Century Bancorp, Inc. in Dunn, North Carolina from March 2000 to August 2014 and as Senior Vice President and Controller for Triangle Bancorp, Inc. in Raleigh, North Carolina from September 1997 to March 2000.  Ms. Campbell also worked in public accounting from September 1990 through September 1997. 

 

Charles C. Driest, 48, has served as Executive Vice President/Chief Operations Officer since June 2025. Prior to that, he served as Executive Vice President/Chief Experience Officer from April 2023 to June 2025 and as Senior Vice President/Director of Digital Banking from January 2022 to April 2023. Prior to joining the company, he served as Senior Vice President, Director of Digital Banking at Essex Bank from July 2017 to January 2022. Mr. Driest holds a Master of Business Administration (MBA) – Finance from St. John’s University.

 

Paul E. Eberly, 43, has served as Executive Vice President/Chief Lending Officer since June 2025, Executive Vice President/Chief Development Officer from September 2022 to June 2025, Executive Vice President/Chief Credit Officer from September 2020 until September 2022, Senior Vice President/Agricultural & Rural Programs Leader from January 2020 until September 2020, and Vice President/Agricultural & Rural Programs Leader from January 2019 until January 2020.  He also served in various sales, lending, credit, risk management and other leadership roles within the Farm Credit System from June 2005 until January 2019.  Mr. Eberly has been in the banking and finance industry since 2005.

 

Melody Emswiler, 52, has served as Executive Vice President/Chief Human Resources Officer since January 2022, Senior Vice President/Human Resources Director from January 2019 to December 2021, Vice President/Director of Human Resources from February 2015 to December 2018, and Assistant Vice President/Human Resources Manager from February 2011 to January 2015. Ms. Emswiler has been in the human resources profession since 1997.

 

Evan S. McHaffa, 40, has served as Executive Vice President/Chief Credit Officer since January 2026. Prior to joining the Company, he served as Senior Vice President/Senior Credit Officer for Blue Ridge Bank from April 2022 to December 2025. Previously, he served as Vice President, Commercial Real Estate for Atlantic Union Bank from  2019 to 2022, and Senior Portfolio Manager, Commercial Real Estate for Union Bank & Trust/Atlantic Union Bank from 2015 to 2019.  Mr. McHaffa holds a degree from Bridgewater College and is a graduate of the ABA Stonier Graduate School of Banking at the University of Pennsylvania. He has also completed the Virginia Bankers Association School of Bank Management and the Advanced Commercial Lending School.

 

 
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Item 1A. Risk Factors.

 

Item not required for smaller reporting companies.

 

Item 1B.  Unresolved Staff Comments.

 

Item not required for non-accelerated filers.

 

Item 1C. Cybersecurity.

 

Risk Management and Strategy

 

The Company recognizes the importance of a cybersecurity risk management program designed to assess, identify, and manage risk associated with cybersecurity threats. Our cybersecurity risk management program (the “Program”) is consistent with the Federal Financial Institutions Examination Council (“FFIEC”) Cybersecurity Assessment Tool, which incorporates bank regulatory guidance and principles from the National Institute of Standards and Technology Cybersecurity Framework and includes the following risk-based principles:

 

·

Identification, measurement, mitigation, monitoring and reporting of cybersecurity threats based on internal and external information sharing and resources;

·

Safeguards designed to protect against identified threats, including documented policies and procedures, controls, and employee education and awareness;

·

Processes to detect cybersecurity events and improve incident response, including routine testing of incident response, recovery and business continuity plans and processes; and

·

Third-party risk management process to manage cybersecurity risk with service providers, suppliers, and vendors.

 

The Program is designed to adapt to an evolving landscape of emerging cybersecurity threats and advancing technology to determine the Company’s cybersecurity preparedness. Through routine data gathering, emerging risks, internal incidents, technology investments and internal controls, our Program and overall cybersecurity risk strategy is adjusted as needed.

 

The Program is supported by regular training of information security employees and awareness training and activities for executives, directors, and employees through which we communicate our cybersecurity policies, standards, processes, and practices to foster a culture of cybersecurity risk management across the Company.

 

Integrated Risk Management

 

The Program is integrated into the Company’s enterprise risk management framework and functions to identify risk, form a strategy to manage risk, implement the strategy, test the implementation, and monitor our technology environment to control risk. The information technology team works closely with stakeholders across security, risk, compliance, operations, other business stakeholders, and senior leadership to conduct an annual cybersecurity risk assessment utilizing the FFIEC Cybersecurity Assessment Tool.

 

Engagement of Third Parties in Connection with Risk Management

 

The Company engages various third parties to evaluate the effectiveness and maturity of the Program. The Company engages an independent third party to audit the cybersecurity risk strategy and preparedness. The Company also maintains cybersecurity insurance, however, the costs related to cybersecurity threats or disruptions may not be fully insured. The Company also engages third parties to perform regular penetration tests, vulnerability scans, disaster recovery tests and cyber exercises to simulate threat actor attacks. Our relationships with third parties enable us to leverage their cybersecurity expertise and industry knowledge to assess our Program and adjust as needed.

 

 
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Oversight of Third-party Risks

 

Our third-party service providers, suppliers, and vendors face their own risks from cybersecurity threats that could impact the Company in certain circumstances. In response, we have implemented processes for overseeing and managing these risks. The processes include limiting the exposure of our information systems to external systems to the least practical amount, assessing the third parties’ information security practices before allowing them to access our information systems or data, requiring third parties to implement appropriate cybersecurity controls in our agreements with them, conducting ongoing monitoring of their compliance with those requirements, and requiring third parties to agree to contractual requirements designed to ensure cybersecurity concepts are appropriately addressed.

 

Risks from Cybersecurity Threats

 

As of the date of this report, we have not encountered any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.

 

Governance

 

Board of Directors Oversight

 

Our Board’s Operational Risk Committee oversees cybersecurity risk.

 

Management's Role in Cybersecurity Risk Management

 

Given the important role of technology in the Company’s operations and customer service, the Company has established an Information Technology Steering Committee, which consists of our IT Manager, President, Chief Financial Officer, Chief Experience Officer, Director of Risk Management and Information Security Officer. The Information Technology Steering Committee reviews, monitors, aligns, and prioritizes all significant strategic information technology initiatives and security risks. The Information Technology Steering Committee reports to the Operational Risk Committee and minutes of the committee’s meetings are subsequently reported by the Operational Risk Committee to the Company’s Board of Directors. Our IT Manager, in collaboration with our Information Security Officer, makes quarterly reports to the Information Technology Steering Committee. Such reports include updates related to key metrics, key risk indicators, key performance indicators, penetration test results, risk assessment results, project updates, incident reports, compliance matters, and operational issues.

 

Risk Management Personnel

 

The Information Security Officer has the primary responsibility for managing the Program to identify, assess, manage, and control cybersecurity risk. The Information Security Officer reports directly to the President. The Information Security Officer has approximately 17 years of experience in cybersecurity, information security risk management, identity and access management, security architecture, vulnerability management, threat intelligence, security operations and incident management and response.

 

 
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Monitoring Cybersecurity Incidents

 

The Information Security Officer is continually informed of and monitors cybersecurity risks and incidents. In the event of a cybersecurity incident, the Company has developed an incident response plan to timely report cybersecurity incidents to the executive management team, the Operational Risk Committee and Board of Directors, as necessary. In addition to facilitating timely evaluation, escalation and reporting of cybersecurity incidents, this plan also sets forth the process for identifying and assessing the severity of cybersecurity incidents, as well as monitoring post-incident mitigation and remediation.

 

Reporting to Board of Directors

 

The Operational Risk Committee receives reports from the President, Information Security Officer, and Director of Risk Management, and briefings on our information security and enterprise risk management programs at least quarterly, including the results of any external audits, bank regulatory examinations and evaluations, as well as maturity assessments of our information security program.

  

Item 2.  Properties.

 

The Company owns or leases buildings that are used in the normal course of business. The Company’s corporate headquarters are located at 205 South Main Street, Timberville, Virginia 22853.  At December 31, 2025, the Bank operated fourteen branches and a dealer finance division in the Shenandoah Valley of Virginia. See Note 1 “Nature of Banking Activities and Significant Accounting Policies” and Note 5 “Bank Premises and Equipment” and Note 6 “Leases” in Notes to the Consolidated Financial Statements for information with respect to the amounts at which bank premises and equipment are carried and commitments under long-term leases.

 

Item 3.  Legal Proceedings.

 

In the normal course of business, the Company may become involved in litigation arising from banking, financial, or other activities of the Company. Management, after consultation with legal counsel, does not anticipate that the ultimate outcome in such legal proceedings, in the aggregate, will have a material adverse effect on the Company’s business, financial condition, or results of operations.

 

Item 4.  Mine Safety Disclosures.

 

None.

 

 
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PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

 

Information on Common Stock, Market Prices and Dividends.

 

The Company’s Common Stock is quoted on the OTC Markets Group’s OTCQX Market under the symbol “FMBM.” As of March 20, 2026, the Company had approximately 1,005 shareholders of record.

 

During 2025 and 2024, the Company declared four quarterly dividends of $0.26 per share for an annual total of $1.04 per share. The Company’s Board of Directors determines the payment of dividends based on a number of factors, including the Company’s historic and projected financial condition, liquidity and results of operations, capital levels and needs, tax considerations, any acquisitions or potential acquisitions, statutory and regulatory prohibitions and other limitations, the terms of contractual arrangements that restrict the ability to pay cash dividends, general economic conditions, and other factors deemed relevant by our Board of Directors. The Company is not obligated to pay dividends on its common stock and is subject to certain regulatory restrictions on paying dividends.

 

Because the Company is a financial holding company and does not engage directly in business activities of a material nature, the ability to pay dividends to shareholders depends, in large part, upon the receipt of dividends from the Bank, which is also subject to numerous limitations on the payment of dividends under federal banking laws, regulations and policies. Regulatory restrictions on the ability of the Bank to transfer funds to the Company at December 31, 2025 are set forth in Note 19 “Parent Company Financial Information” in Notes to Consolidated Financial Statements.

 

See Item 12 of this Form 10-K for disclosure regarding securities authorized for issuance under equity compensation plans required by Item 201(d) of Regulation S-K.

 

In June 2025, the Company’s Board of Directors approved a repurchase plan to repurchase up to $2.2 million of the Company’s common stock (the “2025 Plan”). The timing, price and quantity of purchases under the 2025 Plan is at the discretion of management. The plan was effective June 4, 2025 and expires on May 31, 2026.

 

The following table provides information about the Company’s purchases of equity securities for the periods indicated:

 

Period

 

Total number of shares purchased

 

 

Average price paid per share

 

 

Total number of shares purchased as part of publicly announced plans or programs

 

 

Approximate dollar value of shares that may yet be purchased under the plans or programs

 

6/01 – 6/30/2025

 

 

-

 

 

$-

 

 

 

-

 

 

$2,200,000

 

7/01 – 7/31/2025

 

 

10,000

 

 

 

21.89

 

 

 

10,000

 

 

 

1,981,125

 

8/01 – 8/31/2025

 

 

2,111

 

 

 

23.75

 

 

 

2,111

 

 

 

1,930,989

 

9/01 – 9/30/2025

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

10/01 – 10/30/2025

 

 

2,500

 

 

 

26.61

 

 

 

2,500

 

 

 

1,864,464

 

11/01 – 11/30/2025

 

 

2,500

 

 

 

26.60

 

 

 

2,500

 

 

 

1,797,964

 

12/01 – 12/30/2025

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total

 

 

17,111

 

 

$23.47

 

 

 

17,111

 

 

$1,797,964

 

 

Transfer Agent and Registrar

Broadridge Corporate Issuer Solutions

PO Box 1342

Brentwood, NY 11717

 

 
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Stock Performance

The following graph compares the cumulative total return to the shareholders of the Company for the last five fiscal years with the total return of the Russell 2000 Index and the S&P U.S. BMI Banks Index, as reported by SNL Financial, LC, assuming an investment of $100 in the Company’s common stock on December 31, 2020, and the reinvestment of dividends.

 

 

fmbm_10kimg2.jpg

 

 
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Item 6. [Reserved]

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain information contained in this report may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.  These forward-looking statements are generally identified by phrases such as “we expect,” “we believe” or words of similar import. Such forward-looking statements are subject to known and unknown risks including, but not limited to:

 

·

Changes in the quality or composition of our loan or investment portfolios, including adverse developments in borrower industries, declines in real estate values in our markets, or in the repayment ability of individual borrowers or issuers;

·

The strength of the economy in our market area, as well as general economic, market, or business conditions;

·

An insufficient allowance for credit losses as a result of inaccurate assumptions;

·

Our ability to maintain our “well-capitalized” regulatory status;

·

Changes in the interest rates affecting our deposits, loans and investment portfolio;

·

Changes in our competitive position, competitive actions by other financial institutions, financial technology firms and others, the competitive nature of the financial services industry and our ability to compete effectively in our banking markets;

·

Our ability to manage growth;

·

Our potential growth, including our entrance or expansion into new markets, the need for sufficient capital to support that growth, difficulties or disruptions expanding into new markets or integrating the operations of acquired branches or business, and the inability to obtain the expected benefits of such growth;

·

Changing trends in customer profiles and behavior;

·

Our exposure to operational risk;

·

Reliance on our management team including our ability to attract and retain key personnel;

·

Our ability to raise capital as needed by our business;

·

Changes in laws, regulations and the policies of federal or state regulators and agencies;

·

The effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB, or other accounting standards setting bodies;

·

Geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;

·

The occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events;

·

The Company’s potential exposure to fraud, negligence, computer theft, and cyber-crime;

·

Other factors identified in reports the Company files with the SEC from time to time; and

·

Other circumstances, many of which are beyond our control.

  

Although the Company believes that our expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that our actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

The following discussion provides information about the major components of the results of operations and financial condition, liquidity and capital resources of F&M Bank Corp. and its subsidiaries. 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 8, Financial Statements and Supplementary Information, of this Form 10-K.

 

 
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Lending Policies

 

Credit Policies

 

The principal risk associated with each of the segments of loans in our portfolio is the creditworthiness of our borrowers. Within each segment, such risk is increased or decreased, depending on prevailing economic conditions. To manage the risk, the Bank’s Credit Administration Department ensures that the underwriting process follows the written policies and procedures approved by the Board of Directors. The loan policy gives loan amount approval limits to individual loan officers based on their position and level of experience and to our loan committees based on the size of the lending relationship. The risk associated with real estate and construction loans, commercial loans and consumer loans varies, based on market employment levels, fluctuations in the value of real estate and other conditions that affect the ability of borrowers to repay indebtedness. The risk associated with real estate construction loans varies, based on the supply and demand for the type of real estate under construction.

 

The Bank has a loan review process to monitor and manage the portfolio, identify concentrations and credit deterioration, establish loss exposure and assess compliance with the loan policy.

 

The Bank uses a management loan committee and a directors’ loan committee to approve loans. The management loan committee consists of members of senior management, credit administration and senior lenders; the directors’ loan committee consists of six directors appointed by the Board of Directors. Both committees approve new, renewed and or modified loans that exceed individual officer loan authorities. The directors’ loan committee also reviews any changes to the lending policies, which are then approved by the Board of Directors.

 

Construction and Development Lending

 

The Bank makes construction loans, primarily residential, and land acquisition and development loans. The residential construction loans are secured by residential houses under construction and the underlying land for which the loan was obtained. The land acquisition and development loans are secured by the land for which the loan was obtained. The average life of a construction loan is approximately 12 months, and it is typically re-priced as the prime rate of interest changes. Construction lending entails significant additional risks, compared with residential mortgage lending. Construction loans often involve larger loan balances concentrated with single borrowers or groups of related borrowers. Another risk involved in construction lending is attributable to the fact that loan funds are advanced upon the security of the land or home under construction, which value is estimated prior to the completion of construction. Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and related loan-to-value ratios. To mitigate the risks associated with construction lending, loan amounts are limited to 75% to 90% of appraised value, in addition to analyzing the creditworthiness of the borrower. In addition, a first lien on the property is obtained as security for construction loans and typically requires personal guarantees from the borrower’s principal owners. The Bank further mitigates risk by advancing funds for the construction in increments based on the progress of construction.

 

Commercial Real Estate Lending

 

Commercial real estate loans are secured by various types of commercial real estate in our market area, including multi-family residential buildings, commercial buildings and offices, shopping centers and churches. Commercial real estate lending entails significant additional risks compared with residential mortgage lending. Commercial real estate loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. Additionally, the payment experience on loans secured by income producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or in the economy in general. The Bank’s commercial real estate loan underwriting criteria require an examination of debt service coverage ratios and the borrower’s creditworthiness, prior credit history and reputation; as well as an evaluation of the location of the property securing the loan and personal guarantees or endorsements of the borrower’s principal owners.

 

Commercial & Industrial – Non-Real Estate

 

Business loans generally have a higher degree of risk than residential mortgage loans but have higher yields. To manage these risks, the Bank obtains appropriate collateral and personal guarantees from the borrower’s principal owners and monitors the financial condition of business borrowers. Residential mortgage loans generally are made based on the borrower’s ability to repay from employment and other income and are secured by real estate whose value tends to be readily ascertainable. In contrast, business loans typically are made based on the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of business loans is substantially dependent on the success of the business itself. Furthermore, the collateral for business loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate.

 

Consumer Lending

 

The Bank offers various consumer loans, including personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans.

 

 
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The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment and additionally from any verifiable secondary income. Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes an analysis of the value of the security in relation to the proposed loan amount. For home equity lines of credit and loans the Bank requires title insurance, hazard insurance and, if required, flood insurance.

 

Residential Mortgage Lending

 

The Bank makes residential mortgage loans for the purchase or refinance of existing loans with loan-to-value limits generally ranging between 80% and 90% depending on the age of the property, the borrower’s income, and the borrower’s credit worthiness. Loans that are retained in our portfolio generally carry adjustable rates that can change every one, three or five years, based on amortization periods of twenty to thirty years.

 

Loans Held for Sale

 

The Bank makes fixed rate mortgage loans with terms of typically fifteen or thirty years through its mortgage division.  These loans are funded by a line of credit at the Bank until sold to investors in the secondary market. 

 

Dealer Finance Division

 

The Dealer Finance Division specializes in providing automobile financing through a network of automobile dealers in the Shenandoah Valley.

 

Critical Accounting Policies

 

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“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 when earning income, recognizing an expense, recovering an asset or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the transactions would be the same, the timing of events that would impact the transactions could change.

 

Allowance for Credit Losses

 

The allowance for credit losses represents our estimate of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and projections including reasonable and supportable forecasts. It is a valuation account that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial asset. Financial assets are charged-off against the allowance when management believes the uncollectibility of a financial asset is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

 

The Company’s loan portfolio is the largest financial asset that is in scope of this critical accounting estimate. Determining the amount of the allowance for credit losses is considered a critical accounting estimate, because it is based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts, and prepayment experience as related to credit contractual terms. Management estimates the allowance balance using relevant available information from internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses; adjustments to historical loss information are made for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, and delinquency levels, as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The model methodology used for funded credits, along with taking into consideration the probability of drawdowns or funding on unfunded commitments and whether such commitments are irrevocable or not by the Company, is how the Company determines the allowance for credit losses for unfunded commitments. These evaluations are conducted at least quarterly and more frequently, if deemed necessary.

 

 
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The Company’s allowance model uses a remaining life or weighted average remaining maturity method with the portfolio segmented by federal call codes. Management considers the national unemployment rate as the external economic variable in developing the allowance and utilizes economic projections published by The Federal Reserve Bank of St. Louis for reasonable and supportable forecasts. The Company uses a reasonable and supportable period forecast period of 12 months. The qualitative estimate of the allowance for credit losses on loans (“ACLL”) is sensitive to these forecasts as economic conditions are the most influential qualitative factor. In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. See Note 1 “Nature of Banking Activities and Significant Accounting Policies” in Notes to the Consolidated Financial Statements for additional information concerning the determination of the allowance for credit losses on loans.

 

Summary of Selected Financial Data

(Dollars in thousands, except per share data)

 

 

2025

 

 

2024

 

Selected Income Statement Data:

 

 

 

 

 

 

Interest and dividend income

 

$67,750

 

 

$64,483

 

Interest expense

 

 

26,224

 

 

 

30,551

 

Net interest income

 

 

41,526

 

 

 

33,932

 

Provision for credit losses

 

 

2,701

 

 

 

2,343

 

Net interest income after provision for credit losses

 

 

38,825

 

 

 

31,589

 

Noninterest income

 

 

11,171

 

 

 

10,766

 

Noninterest expenses

 

 

37,019

 

 

 

34,432

 

Income before income taxes

 

 

12,977

 

 

 

7,923

 

Income tax expense

 

 

1,748

 

 

 

638

 

Net income

 

$11,229

 

 

$7,285

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios:

 

 

 

 

 

 

 

 

Return on average assets1

 

 

0.85%

 

 

0.55%

Return on average equity1

 

 

11.76%

 

 

8.86%

Net interest spread

 

 

3.31%

 

 

2.76%

Net interest margin

 

 

3.35%

 

 

2.77%

Non-interest income to average assets

 

 

0.84%

 

 

0.82%

Non-interest expense to average assets

 

 

2.79%

 

 

2.62%

 

 

 

 

 

 

 

 

 

Per Common Share Data:

 

 

 

 

 

 

 

 

Net income (basic and diluted)

 

$3.16

 

 

$2.07

 

Book value per common share

 

 

29.46

 

 

 

24.43

 

 

 

 

 

 

 

 

 

 

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

Assets

 

$1,373,757

 

 

$1,302,011

 

Loans held for sale

 

 

3,191

 

 

 

2,283

 

Loans held for investment

 

 

886,253

 

 

 

839,949

 

Allowance for credit losses

 

 

7,818

 

 

 

8,129

 

Deposits

 

 

1,245,212

 

 

 

1,195,105

 

Borrowings

 

 

9,917

 

 

 

6,975

 

Shareholders’ equity

 

 

104,788

 

 

 

86,138

 

Average common shares outstanding (basic and diluted)

 

 

3,552,822

 

 

 

3,512,427

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

Nonperforming loans to total loans3

 

 

0.68%

 

 

0.84%

Allowance for credit losses to loans2

 

 

0.88%

 

 

0.97%

Allowance for credit losses to nonperforming loans

 

 

129.35%

 

 

114.87%

Nonperforming assets to total assets4

 

 

0.44%

 

 

0.54%

Net charge-offs to average loans3

 

 

0.34%

 

 

0.31%

 

 

 

 

 

 

 

 

 

Capital Ratios (Bank only):

 

 

 

 

 

 

 

 

Leverage

 

 

8.73%

 

 

8.23%

Risk-based capital ratios:

 

 

 

 

 

 

 

 

Total capital

 

 

14.04%

 

 

13.39%

Tier 1 capital

 

 

13.11%

 

 

12.42%

Common equity tier 1 capital

 

 

13.11%

 

 

12.42%

 

1

Ratios are primarily based on daily average balances.

2

Calculated based on Loans Held for Investment, excludes Loans Held for Sale.

3

Calculated based on 90 day past due loans and non-accrual loans to Total Loans.

4

Calculated based on 90 day past due loans, non-accrual loans and OREO to Total Assets.

 

 
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Table of Contents

 

Results of Operations

 

Net Income

 

Net income for 2025 was $11.2 million, an increase of $3.9 million or 54.14% from 2024’s net income of $7.3 million. Basic and diluted earnings per share were $3.16 and $2.07 for 2025 and 2024, respectively. The increase in net income for 2025 was primarily the result of an increase in net interest income of $7.6 million partially offset by an increase in noninterest expenses of $2.6 million.

 

Return on average assets (“ROA”) measures how efficiently the Company uses its assets to produce net income. Some factors reflected within this measurement include the Company’s asset mix, funding sources, pricing, fee generation, and cost control. The ROA of the Company was 0.85% and 0.55% for 2025 and 2024, respectively.

 

Return on average equity (“ROE”) measures the utilization of shareholders’ equity in generating net income. This measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by the shareholders. The ROE for the Company was 11.76% and 8.86% for 2025 and 2024, respectively.

 

Net Interest Income and Net Interest Margin

 

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest income was $41.5 million for 2025 and $33.9 million for 2024, which represents an increase of $7.6 million or 22.39%. Total interest income was $67.8 million for 2025 and $64.5 million for 2024, which represents an increase of $3.3 million or 5.07% for 2025. Total interest expense was $26.2 million for 2025 and $30.6 million for 2024, which represents a decrease of $4.3 million or 14.16% in 2025. 

 

The net interest margin increased by 58 basis points from 2.77% for 2024 to 3.35% for 2025. The net interest margin is calculated by dividing net interest income by total average earning assets. Higher loan balances and the repricing of adjustable-rate loans contributed to an increase of $1.1 million in loan interest income, and interest on federal funds sold increased by $0.8 million due to higher average balances of federal funds sold in 2025. In addition, interest income from investment securities increased by $1.6 million, due to higher yields on investments purchased during 2025.  As a result, the yield on earning assets increased by 19 basis points to 5.46%.

 

A shift from time deposits to money market accounts was the primary driver of the decrease of $2.6 million in deposit interest expense.  Interest expense on time deposits and interest bearing demand accounts decreased $4.1 million and $0.2 million, respectively, and were partially offset by an increase of $1.7 million in interest expense on savings accounts. Interest expense was further reduced by lower interest expense on short-term borrowings, which declined by $1.9 million, due to no short-term advances from the Federal Home Loan Bank (“FHLB”) during the year. The cost of funds, which is calculated as the interest expense on interest bearing liabilities plus noninterest bearing deposits divided by the total deposits, for the year was 2.15%, which was 36 basis points lower than 2024.

 

 
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Table of Contents

 

The table titled “Consolidated Average Balances, Yields and Rates” displays the composition of interest earning assets and interest bearing liabilities and their respective yields and rates for the years ended December 31, 2025 and 2024.

 

Consolidated Average Balances, Yields and Rates (dollars in thousands)1

 

 

 

2025

 

 

2024

 

 

 

Balance

 

 

Interest

 

 

Rate

 

 

Balance

 

 

Interest

 

 

Rate

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment2,4

 

$852,357

 

 

$55,798

 

 

 

6.55%

 

$826,365

 

 

$54,715

 

 

 

6.62%

Loans held for sale

 

 

2,386

 

 

 

135

 

 

 

5.66%

 

 

3,057

 

 

 

162

 

 

 

5.30%

Federal funds sold

 

 

54,427

 

 

 

2,313

 

 

 

4.25%

 

 

29,213

 

 

 

1,513

 

 

 

5.18%

Interest bearing deposits in banks and other investments

 

 

2,924

 

 

 

238

 

 

 

8.14%

 

 

6,057

 

 

 

470

 

 

 

7.76%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

311,450

 

 

 

8,837

 

 

 

2.84%

 

 

341,909

 

 

 

7,205

 

 

 

2.11%

Tax exempt

 

 

16,413

 

 

 

429

 

 

 

2.61%

 

 

16,207

 

 

 

418

 

 

 

2.58%

Total investment securities

 

 

327,863

 

 

 

9,266

 

 

 

2.83%

 

 

358,116

 

 

 

7,623

 

 

 

2.13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total earning assets

 

 

1,239,957

 

 

 

67,750

 

 

 

5.46%

 

 

1,222,808

 

 

 

64,483

 

 

 

5.27%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(7,949)

 

 

 

 

 

 

 

 

 

 

(8,111)

 

 

 

 

 

 

 

 

Nonearning assets

 

 

96,394

 

 

 

 

 

 

 

 

 

 

 

99,497

 

 

 

 

 

 

 

 

 

Total assets

 

$1,328,402

 

 

 

 

 

 

 

 

 

 

$1,314,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand-interest bearing

 

$137,352

 

 

$2,268

 

 

 

1.65%

 

$136,894

 

 

$2,455

 

 

 

1.79%

Savings

 

 

554,377

 

 

 

14,693

 

 

 

2.65%

 

 

488,180

 

 

 

12,965

 

 

 

2.66%

Time deposits

 

 

245,951

 

 

 

8,661

 

 

 

3.52%

 

 

288,271

 

 

 

12,805

 

 

 

4.44%

Total interest-bearing deposits

 

 

937,680

 

 

 

25,622

 

 

 

2.73%

 

 

913,345

 

 

 

28,225

 

 

 

3.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased

 

 

-

 

 

 

1

 

 

 

-

 

 

 

207

 

 

 

8

 

 

 

3.86%

Short‑term debt

 

 

-

 

 

 

4

 

 

 

-

 

 

 

33,730

 

 

 

1,855

 

 

 

5.50%

Long-term debt

 

 

7,680

 

 

 

597

 

 

 

7.77%

 

 

6,953

 

 

 

463

 

 

 

6.66%

Total interest-bearing liabilities

 

 

945,360

 

 

 

26,224

 

 

 

2.77%

 

 

954,235

 

 

 

30,551

 

 

 

3.20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing deposits

 

 

273,497

 

 

 

 

 

 

 

 

 

 

 

263,002

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

14,062

 

 

 

 

 

 

 

 

 

 

 

14,689

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

1,232,919

 

 

 

 

 

 

 

 

 

 

 

1,231,926

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

95,483

 

 

 

 

 

 

 

 

 

 

 

82,268

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$1,328,402

 

 

 

 

 

 

 

 

 

 

$1,314,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest earnings

 

 

 

 

 

$41,526

 

 

 

 

 

 

 

 

 

 

$33,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net yield on interest earning assets (NIM)

 

 

 

 

 

 

 

 

 

 

3.35%

 

 

 

 

 

 

 

 

 

 

2.77%

     

1

Tax exempt income is not significant and has been treated as fully taxable.

2

Interest income on loans includes loan fees.

3

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

4

Includes nonaccrual loans.

 

 
20

Table of Contents

 

Volume and Rate Analysis

 

Changes in the cost of funds attributable to rate and volume variances are reflected in the following table (dollars in thousands), which illustrates the effect of changes in interest income and interest expense, and distinguishes between the changes resulting from the increases or decreases in the outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes resulting from increases or decreases in average interest rates on such assets and liabilities (rate). Changes related to both volume and rate have been allocated proportionally.

 

 

 

2025 Compared to 2024

 

 

 

Increase (Decrease) Due to Change in:

 

 

 

Average Volume

 

 

Average Rate

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

Loans held for investment

 

$1,721

 

 

$(638)

 

$1,083

 

Loans held for sale

 

 

(36)

 

 

9

 

 

 

(27)

Federal funds sold

 

 

1,306

 

 

 

(506)

 

 

800

 

Interest bearing deposits in banks and other investments

 

 

(243)

 

 

11

 

 

 

(232)

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

(643)

 

 

2,275

 

 

 

1,632

 

Tax exempt

 

 

5

 

 

 

6

 

 

 

11

 

Total Interest Income

 

 

2,110

 

 

 

1,157

 

 

 

3,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Demand - interest bearing

 

 

8

 

 

 

(195)

 

 

(187)

Savings

 

 

1,761

 

 

 

(33)

 

 

1,728

 

Time deposits

 

 

(1,879)

 

 

(2,265)

 

 

(4,144)

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds purchased

 

 

(8)

 

 

1

 

 

 

(7)

Short-term debt

 

 

(1,855)

 

 

4

 

 

 

(1,851)

Long-term debt

 

 

48

 

 

 

86

 

 

 

134

 

Total Interest Expense

 

 

(1,925)

 

 

(2,402)

 

 

(4,327)

Net Interest Income

 

$4,035

 

 

$3,559

 

 

$7,594

 

 

Provision for Credit Losses

 

The provision for credit losses totaled $2.7 million in 2025, compared to a provision for credit losses of $2.3 million for 2024. The provision comprised a $2.6 million provision for credit losses on loans and a $117 thousand provision for credit losses on unfunded commitments. The provision for credit losses in 2025 increased primarily due to higher net charge-offs, continued loan growth, and an increase in reserves on individually analyzed loans.

 

Noninterest Income

 

The following table sets forth the various components of our non-interest income for the periods indicated (in thousands):

 

 

 

Years Ended December 31,

 

 

Increase (Decrease)

 2025 vs. 2024

 

 

 

2025

 

 

2024

 

 

Amount

 

 

Percent

 

Service charges on deposit accounts

 

$1,292

 

 

$1,193

 

 

$99

 

 

 

8.30%

Wealth management income

 

 

2,243

 

 

 

2,181

 

 

 

62

 

 

 

2.84%

Mortgage banking income

 

 

1,937

 

 

 

2,490

 

 

 

(553)

 

 

(22.21)%

Title insurance income

 

 

1,864

 

 

 

1,489

 

 

 

375

 

 

 

25.18%

Income on bank owned life insurance

 

 

787

 

 

 

750

 

 

 

37

 

 

 

4.93%

Low-income housing partnership losses

 

 

(786)

 

 

(786)

 

 

-

 

 

 

0.00%

ATM and check card fees

 

 

3,350

 

 

 

3,101

 

 

 

249

 

 

 

8.03%

Gain on sale of limited partnership investment

 

 

98

 

 

 

-

 

 

 

98

 

 

 

100.00%

Other operating income

 

 

386

 

 

 

348

 

 

 

38

 

 

 

10.92%

Total

 

$11,171

 

 

$10,766

 

 

$405

 

 

 

3.76%

 

 
21

Table of Contents

 

Noninterest income increased by $405 thousand, or 3.76%, for the year ended December 31, 2025, compared to December 31, 2024. The increase was primarily driven by increases in title insurance income and ATM and check card fees. Title insurance income increased by $375 thousand due to increased title premium and loan closing volume.  ATM and check card fees increased by $249 thousand due to renegotiated interchange contracts.  These increases were partially offset by decreases in mortgage banking income of $553 thousand, due to a decrease in originations of loans held for sale.

 

Noninterest Expense

 

The following table sets forth the various components of our non-interest expense for the periods indicated (in thousands):

 

 

 

Years Ended December 31,

 

 

Increase (Decrease) 2025 vs. 2024

 

 

 

2025

 

 

2024

 

 

Amount

 

 

Percent

 

Salaries

 

$15,989

 

 

$15,393

 

 

$596

 

 

 

3.87%

Employee benefits

 

 

3,906

 

 

 

2,966

 

 

 

940

 

 

 

31.69%

Occupancy expense

 

 

1,543

 

 

 

1,544

 

 

 

(1)

 

 

(0.06)%

Equipment expense

 

 

1,203

 

 

 

1,310

 

 

 

(107)

 

 

(8.17)%

FDIC assessment

 

 

943

 

 

 

1,041

 

 

 

(98)

 

 

(9.41)%

Legal and professional fees

 

 

2,142

 

 

 

1,784

 

 

 

358

 

 

 

20.07%

ATM and check card fees

 

 

1,349

 

 

 

1,130

 

 

 

219

 

 

 

19.38%

Data processing fees

 

 

3,720

 

 

 

3,672

 

 

 

48

 

 

 

1.31%

Other operating expenses

 

 

6,224

 

 

 

5,592

 

 

 

632

 

 

 

11.30%

Total

 

$37,019

 

 

$34,432

 

 

$2,587

 

 

 

7.51%

 

Noninterest expense increased by $2.6 million, or 7.51%, for the year ended December 31, 2025, compared to December 31, 2024. The increase was primarily driven by salaries, employee benefits, legal and professional fees, and ATM and check card fees.  Salaries increased $596 thousand, or 3.87%, for the year ended December 31, 2025, due to increases in salaries, bonuses and incentives, and commissions. Employee benefits also increased by $940 thousand, or 31.69%, for the year ended December 31, 2025, due to a lower refund (rebate) of health insurance, increased stock compensation expense, and no pension settlement gains in 2025. Legal and professional fees increased by $358 thousand, or 20.07%, for the year ended December 31, 2025, compared to December 31, 2024, due to increased audit costs and increased federal examination assessment fees, as well as a recovery in legal fees in 2024, due to the payoff of a nonperforming loan. ATM and check card fees increased by $219 thousand, or 19.38%, for the year ended December 31, 2025, compared to December 31, 2024, due to increased processing fees due to an increased number of accounts. Other operating expenses increased primarily due to increases in franchise taxes, collections expense, and higher administrative software expenses.

 

Income Tax Expense

 

Income tax expense was $1.7 million for the year ended December 31, 2025, an increase of $1.1 million from the income tax expense for the year ended December 31, 2024. These amounts correspond to an effective tax rate of 13.47% and 8.05% for 2025 and 2024, respectively. The effective tax rate is below the statutory rate of 21%, due primarily to tax credits on qualified affordable housing project investments as discussed in Note 7 “Other Assets” in Notes to the Consolidated Financial Statements. The effective tax rate is also impacted by tax-exempt income on investment securities and bank owned life insurance. Note 17 “Income Taxes” in Notes to the Consolidated Financial Statements provides a reconciliation between income tax expense computed using the federal statutory income tax rate and the Company’s actual income tax expense during 2025 and 2024.

 

Analysis of Financial Condition

 

Assets increased by $71.7 million to $1.37 billion as of December 31, 2025, compared to $1.30 billion as of December 31, 2024. The increase in assets was primarily due to increases in loans of $46.3 million, federal funds sold of $11.0 million, and securities of $17.7 million, which was offset by decreases in deferred tax assets of $2.5 million and other assets of $3.6 million.  The securities portfolio totaled $345.3 million at December 31, 2025, compared to $327.7 million at December 31, 2024. Deposits increased by $50.1 million and totaled $1.25 billion at December 31, 2025, compared to $1.20 billion at December 31, 2024. Long-term debt increased by $2.94 million to $9.92 million as of December 31, 2025, compared to $6.98 million at December 31, 2024, due to the issuance of subordinated notes in 2025.

 

Investment Securities

 

Our investment policy is established and reviewed annually by the Board of Directors. We are permitted under federal law to invest in various types of liquid assets, including United States Government obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities, time deposits of federally insured institutions, subordinated debt of other financial institutions, equity securities, certain bankers’ acceptances and federal funds. Our securities are all classified as available-for-sale (“AFS”).

 

 
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Table of Contents

 

Our investments provide a source of liquidity because we can pledge them to support borrowed funds or can liquidate them to generate cash proceeds. Our investment portfolio is also a resource in managing interest rate risk because the maturity and interest rate characteristics of this asset class can be modified to match changes in the loan and deposit portfolios. The majority of our AFS investment portfolio consists of obligations of states and municipalities and residential mortgage-backed securities.

 

For the year ended December 31, 2025, unrealized losses on our holdings declined by $14.2 million compared to December 31, 2024, resulting in an increase in the fair value of the portfolio. Note 2 “Securities” in Notes to the Consolidated Financial Statements provides additional details about the Company’s securities portfolio as of December 31, 2025 and 2024.

 

The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. The Company did not sell any securities within the investment portfolio for the years ended December 31, 2025 or 2024. For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

 

Maturity Distribution and Yields of Securities

 

The investment maturity table below summarizes contractual maturities for our investment securities at December 31, 2025. The actual timing of principal payments may differ from remaining contractual maturities because obligors may have the right to repay certain obligations with or without penalties. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security (dollars in thousands). Interest on securities below excludes tax-equivalent adjustments.

 

 

 

One Year

 

 

One to

 

 

Five to

 

 

After

 

 

 

 

 

 

 

 

 

Or Less

 

 

Five Years

 

 

Ten Years

 

 

Ten Years

 

 

 

 

 

 

 

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Amount

 

 

Yield

 

 

Total

 

 

Yield

 

Securities AFS:

 

U.S. Treasuries

 

$124

 

 

 

0.86%

 

$14,210

 

 

 

1.00%

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$14,334

 

 

 

1.00%

U.S. Government agencies

 

 

9,857

 

 

 

1.03%

 

 

38,302

 

 

 

1.53%

 

 

6,993

 

 

 

1.84%

 

 

-

 

 

 

-

 

 

 

55,152

 

 

 

1.48%

Municipal securities

 

 

2,437

 

 

 

0.94%

 

 

5,095

 

 

 

2.84%

 

 

6,662

 

 

 

2.48%

 

 

11,764

 

 

 

2.73%

 

 

25,958

 

 

 

2.52%

Mortgage-backed securities

 

 

11,058

 

 

 

5.96%

 

 

18,034

 

 

 

3.65%

 

 

21,839

 

 

 

2.85%

 

 

175,380

 

 

 

3.44%

 

 

226,311

 

 

 

3.52%

Corporate debt securities

 

 

-

 

 

 

-

 

 

 

2,365

 

 

 

6.00%

 

 

21,219

 

 

 

4.25%

 

 

-

 

 

 

-

 

 

 

23,584

 

 

 

4.43%

Total

 

$23,476

 

 

 

3.34%

 

$78,006

 

 

 

2.14%

 

$56,713

 

 

 

3.21%

 

$187,144

 

 

 

3.39%

 

$345,339

 

 

 

2.83%

 

Loan Portfolio

 

The Bank is an active lender with a diverse loan portfolio that includes commercial and residential real estate loans, commercial loans, consumer loans, construction and land development loans, and home equity loans. The Bank’s lending activity is concentrated on individuals, and small and medium-sized businesses primarily in its market areas. Additional discussion on the segments of loans the Company originates and related risks is included in Note 1 “Nature of Banking Activities and Significant Accounting Policies,” Note 3 “Loans,” and Note 4 “Allowance for Credit Losses” in the Notes to the Consolidated Financial Statements.

 

Our primary source of income is derived from interest earned on loans. The loan portfolio, excluding the allowance for credit losses, or ACL, increased by $46.3 million, or 5.51%, from $839.9 million at December 31, 2024 to $886.3 million at December 31, 2025. Loan growth in 2025 was primarily driven by loans secured by farmland, residential mortgage loans, owner-occupied, and non-owner-occupied commercial real estate loans. The Bank continues to expand organically by serving customers within its market and has also strengthened its portfolio by purchasing consumer real estate loans originated by its mortgage subsidiary. This growth was partially offset by a decline in the automobile loan and construction and land development loan portfolios.

 

 
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Table of Contents

 

The following table shows the maturity distribution for total loans outstanding as of December 31, 2025.  The maturity distribution is grouped by remaining scheduled principal payments that are due in the following periods. The principal balances of loans are indicated by both fixed and floating rate categories in the table below (in thousands).

 

 

 

December 31, 2025

 

 

 

Within 1 Year

 

 

1 Year to 5 Years

 

 

5 Years to 15 Years

 

 

After 15 Years

 

 

 

 

 

 

Fixed Rates

 

 

Adjustable

Rates

 

 

Fixed Rates

 

 

Adjustable

Rates

 

 

Fixed Rates

 

 

Adjustable

Rates

 

 

Fixed Rates

 

 

Adjustable

Rates

 

 

Total

 

1-4 Family residential construction

 

$9,631

 

 

$1,775

 

 

$18,274

 

 

$1,100

 

 

$-

 

 

$-

 

 

$-

 

 

$338

 

 

$31,118

 

Other construction, land development and land

 

 

1,870

 

 

 

10,169

 

 

 

-

 

 

 

4,371

 

 

 

1,598

 

 

 

8,540

 

 

 

23

 

 

 

12,616

 

 

 

39,187

 

Secured by farmland

 

 

841

 

 

 

-

 

 

 

373

 

 

 

3,750

 

 

 

7,366

 

 

 

52,188

 

 

 

-

 

 

 

50,482

 

 

 

115,000

 

Home equity – open end

 

 

-

 

 

 

2,476

 

 

 

-

 

 

 

7,507

 

 

 

-

 

 

 

40,625

 

 

 

-

 

 

 

785

 

 

 

51,393

 

Real Estate

 

 

1,837

 

 

 

25

 

 

 

417

 

 

 

927

 

 

 

1,855

 

 

 

22,231

 

 

 

7,138

 

 

 

208,931

 

 

 

243,361

 

Home equity – closed end

 

 

-

 

 

 

2

 

 

 

247

 

 

 

30

 

 

 

2,201

 

 

 

1,630

 

 

 

-

 

 

 

1,870

 

 

 

5,980

 

Multifamily

 

 

-

 

 

 

11

 

 

 

582

 

 

 

90

 

 

 

4,100

 

 

 

5,706

 

 

 

-

 

 

 

8,365

 

 

 

18,854

 

Owner-occupied commercial real estate

 

 

1,081

 

 

 

1,031

 

 

 

364

 

 

 

4,222

 

 

 

19,827

 

 

 

28,529

 

 

 

-

 

 

 

41,597

 

 

 

96,651

 

Other commercial real estate

 

 

7,806

 

 

 

295

 

 

 

9

 

 

 

730

 

 

 

20,226

 

 

 

40,413

 

 

 

-

 

 

 

44,955

 

 

 

114,434

 

Agricultural loans

 

 

3,658

 

 

 

2,788

 

 

 

4,179

 

 

 

4,316

 

 

 

3,726

 

 

 

1,460

 

 

 

-

 

 

 

-

 

 

 

20,127

 

Commercial and industrial

 

 

474

 

 

 

3,698

 

 

 

8,554

 

 

 

13,749

 

 

 

17,086

 

 

 

6,352

 

 

 

6,500

 

 

 

472

 

 

 

56,885

 

Credit cards

 

 

3,387

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,387

 

Automobile loans

 

 

1,884

 

 

 

-

 

 

 

40,881

 

 

 

-

 

 

 

34,315

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

77,080

 

Other consumer loans

 

 

482

 

 

 

604

 

 

 

5,207

 

 

 

146

 

 

 

2,672

 

 

 

21

 

 

 

-

 

 

 

-

 

 

 

9,132

 

Municipal loans

 

 

-

 

 

 

-

 

 

 

324

 

 

 

-

 

 

 

500

 

 

 

2,286

 

 

 

-

 

 

 

1,109

 

 

 

4,219

 

Less: Deferred loan fees, net of costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(555)

Total

 

$32,951

 

 

$22,874

 

 

$79,411

 

 

$40,938

 

 

$115,472

 

 

$209,981

 

 

$13,661

 

 

$371,520

 

 

$886,253

 

 

Asset Quality

 

The Company maintains policies and procedures to promote sound underwriting and mitigate credit risk. These include underwriting standards for new originations and ongoing monitoring and reporting of asset quality and adequacy of the allowance for credit losses. Management classifies non-performing assets as non-accrual loans, loans 90 days or more past due and still accruing, and other real estate owned, or OREO. OREO represents real property taken by the Bank when its customers do not meet the contractual obligation of their loans, either through foreclosure or through a deed in lieu thereof from the borrower. OREO is recorded at the lower of cost or fair value, less estimated selling costs, and is marketed by the Bank through brokerage channels. The Bank had no assets classified as OREO at December 31, 2025, compared to $77 thousand in assets classified as OREO at December 31, 2024.

 

There were $6.0 million in total non-performing assets at December 31, 2025. This is a decrease of $1.2 million when compared to the December 31, 2024 balance of $7.2 million. This decrease resulted primarily from a decrease in nonaccrual loans. In 2025, fourteen loans were added to nonaccrual status due to delinquent payments in the following segments: secured by farmland, home equity – open end, real estate, owner occupied commercial real estate, agricultural loans, and commercial and industrial loans.  These additions were offset by a loan secured by farmland being paid in full, one loan in owner occupied commercial real estate paying off and another returning to accrual status, an other commercial real estate loan paying off, and a commercial and industrial loan paying off.

 

 
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Table of Contents

 

Nonperforming Assets and Credit Ratios

(dollars in thousands):

 

 

 

December 31,

 

 

 

2025

 

 

2024

 

Nonaccrual loans

 

$6,037

 

 

$7,045

 

Loans past due 90 days and accruing interest

 

 

7

 

 

 

32

 

Total nonperforming loans

 

 

6,044

 

 

 

7,077

 

 

 

 

 

 

 

 

 

 

Other real estate owned

 

 

-

 

 

 

77

 

Total nonperforming assets

 

$6,044

 

 

$7,154

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

$7,818

 

 

$8,129

 

 

 

 

 

 

 

 

 

 

Total Loans

 

$886,253

 

 

$839,949

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

Allowance for credit losses to Total Loans

 

 

0.88%

 

 

0.97%

Allowance for credit losses to Total nonperforming assets

 

 

129.35%

 

 

113.63%

Allowance for credit losses to Nonaccrual loans

 

 

129.50%

 

 

115.39%

Nonaccrual Loans to Total Loans

 

 

0.68%

 

 

0.84%

 

Analysis of Allowance for Credit Losses on Loans

 

Refer to the discussion in “Critical Accounting Policies” and Note 1 “Nature of Banking Activities and Significant Accounting Policies” in Notes to Consolidated Financial Statements for management’s methodology to estimate the allowance for credit losses.

 

The Company maintains the allowance for credit losses on loans at a level deemed adequate by management for expected credit losses. Management evaluates the adequacy of the allowance for credit losses on loans utilizing a defined methodology to determine if it properly addresses the current and expected risks in the loan portfolio, which considers the performance of borrowers and specific evaluation of individually evaluated loans, including historical loss experience, trends in delinquencies, non-performing loans and other risk assets, and other qualitative factors. Risk factors are continuously reviewed and adjusted, as needed, by management when conditions support a change. Management believes its approach properly addresses relevant accounting and bank regulatory guidance for loans both collectively and individually evaluated.

 

For the year ended December 31, 2025, net charge-offs of loans totaled $2.9 million or 0.34% of average loans held for investment, compared to net charge-offs of $2.6 million or 0.31% for the year ended December 31, 2024. A majority of the charge-offs in 2025 and 2024 related to the Company’s indirect automobile lending, due to deteriorating economic conditions and higher inflation.

 

The provision for credit losses, including the recovery for unfunded commitments, was $2.7 million and $2.3 million for the years ended December 31, 2025 and 2024, respectively. The provision for credit losses in 2025 reflects $46.9 million in loan growth, coupled with $2.0 million in net charge offs in the automobile segment.  The provision for credit losses in 2024 reflects $17.9 million in loan growth, coupled with $1.9 million in net charge offs in the automobile segment. Additionally, management adjusted qualitative factors in the model methodology for economic conditions based on changes in the economic forecast during 2025, changes in loan volume, and changes in past due trends.

 

The provision for credit losses includes a recovery of $117 thousand and $43 thousand on the reserve for unfunded commitments for the years ended December 31, 2025 and 2024, respectively. The provision for credit losses on loans and for unfunded commitments net together as reflected in the provision for credit losses on the consolidated statements of income.  See Note 4 “Allowance for Credit Losses” in Notes to Consolidated Financial Statements for a summary of the activity in the allowance for credit losses for years ended December 31, 2025 and 2024.

 

 
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Table of Contents

 

Analysis of Allowance for Credit Losses

(dollars in thousands)

 

 

 

Years Ended December 31,

 

 

 

2025

 

 

2024

 

 

 

Net charge-offs (recoveries)

 

 

Average loans outstanding (1)

 

 

Net charge-offs (recoveries) to average loans outstanding

 

 

Net charge-offs (recoveries)

 

 

Average loans outstanding (1)

 

 

Net charge-offs (recoveries) to average loans outstanding

 

1-4 Family residential construction

 

$-

 

 

$27,669

 

 

 

0.00%

 

$362

 

 

$27,378

 

 

 

1.32%

Other construction, land development and land

 

 

(1)

 

 

46,188

 

 

 

0.00%

 

 

(69)

 

 

56,184

 

 

 

(0.12)%

Secured by farmland

 

 

-

 

 

 

101,924

 

 

 

-

 

 

 

-

 

 

 

82,972

 

 

 

-

 

Home equity – open end

 

 

3

 

 

 

50,947

 

 

 

0.01%

 

 

(26)

 

 

46,649

 

 

 

(0.06)%

Real estate

 

 

(6)

 

 

227,800

 

 

 

0.00%

 

 

(5)

 

 

205,828

 

 

 

0.00%

Home Equity – closed end

 

 

-

 

 

 

6,304

 

 

 

-

 

 

 

-

 

 

 

6,222

 

 

 

-

 

Multifamily

 

 

-

 

 

 

13,014

 

 

 

-

 

 

 

-

 

 

 

10,859

 

 

 

-

 

Owner-occupied commercial real estate

 

 

288

 

 

 

90,807

 

 

 

0.32%

 

 

-

 

 

 

88,737

 

 

 

-

 

Other commercial real estate

 

 

-

 

 

 

107,062

 

 

 

-

 

 

 

-

 

 

 

100,127

 

 

 

-

 

Agricultural loans

 

 

171

 

 

 

17,932

 

 

 

0.95%

 

 

-

 

 

 

16,215

 

 

 

-

 

Commercial and industrial

 

 

329

 

 

 

58,093

 

 

 

0.57%

 

 

259

 

 

 

53,839

 

 

 

0.48%

Credit Cards

 

 

29

 

 

 

3,185

 

 

 

0.91%

 

 

-

 

 

 

3,210

 

 

 

0.00%

Automobile loans

 

 

2,015

 

 

 

89,158

 

 

 

2.26%

 

 

1,932

 

 

 

114,152

 

 

 

1.69%

Other consumer loans

 

 

67

 

 

 

9,783

 

 

 

0.68%

 

 

125

 

 

 

12,366

 

 

 

1.01%

Municipal loans

 

 

-

 

 

 

4,512

 

 

 

-

 

 

 

-

 

 

 

5,265

 

 

 

-

 

Total

 

$2,895

 

 

$854,378

 

 

 

0.34%

 

$2,578

 

 

$830,003

 

 

 

0.31%

 

(1) Averages as disclosed are based on the outstanding balances of the loans in each segment. These averages do not include net deferred costs and premiums.

 

Allocation of Allowance for Credit Losses on Loans

(dollars in thousands)

 

 

 

December 31, 2025

 

 

December 31, 2024

 

 

 

Allowance for Credit Losses on Loans

 

 

Percent of Loans in Segment to Total Loans

 

 

Allowance for Credit Losses on Loans

 

 

Percent of Loans in Segment to Total Loans

 

1-4 Family residential construction

 

$193

 

 

 

3.51%

 

$258

 

 

 

2.99%

Other construction, land development and land

 

 

641

 

 

 

4.42%

 

 

1,551

 

 

 

6.92%

Secured by farmland

 

 

1,458

 

 

 

12.97%

 

 

946

 

 

 

10.23%

Home equity – open end

 

 

177

 

 

 

5.80%

 

 

197

 

 

 

5.89%

Real estate

 

 

629

 

 

 

27.44%

 

 

606

 

 

 

25.35%

Home Equity – closed end

 

 

64

 

 

 

0.67%

 

 

99

 

 

 

0.73%

Multifamily

 

 

656

 

 

 

2.13%

 

 

190

 

 

 

1.29%

Owner-occupied commercial real estate

 

 

691

 

 

 

10.90%

 

 

809

 

 

 

10.25%

Other commercial real estate

 

 

246

 

 

 

12.90%

 

 

105

 

 

 

11.68%

Agricultural loans

 

 

130

 

 

 

2.27%

 

 

27

 

 

 

2.13%

Commercial and industrial

 

 

995

 

 

 

6.41%

 

 

982

 

 

 

7.72%

Credit Cards

 

 

90

 

 

 

0.38%

 

 

87

 

 

 

0.42%

Automobile loans

 

 

1,713

 

 

 

8.69%

 

 

1,956

 

 

 

12.40%

Other consumer loans

 

 

129

 

 

 

1.03%

 

 

301

 

 

 

1.42%

Municipal loans

 

 

6

 

 

 

0.48%

 

 

15

 

 

 

0.58%

Total

 

$7,818

 

 

 

100.00%

 

$8,129

 

 

 

100.00%

 

Deposits

 

Core deposits are the Company’s primary source of funding. Demand deposits, money market accounts, savings accounts, and time deposits provide a source of fee income and opportunities to build customer relationships. Total deposits were $1.25 billion and $1.20 billion at December 31, 2025 and 2024, respectively, which represents an increase of $50.1 million or 4.19% during 2025. There was a shift in deposit mix when comparing the periods. As of December 31, 2025, there were increases in noninterest bearing demand, interest checking, and savings accounts, coupled with a decrease in time deposits compared to December 31, 2024.

 

 
26

Table of Contents

 

The following table shows the deposit balances for 2025 and 2024 (dollars in thousands).

 

 

 

 December 31, 2025

 

 

December 31, 2024

 

 

 

Balance

 

 

% of total deposits

 

 

Balance

 

 

% of total deposits

 

Noninterest-bearing demand

 

$279,398

 

 

 

22.4%

 

$260,301

 

 

 

21.8%

Interest checking

 

 

148,624

 

 

 

11.9%

 

 

138,919

 

 

 

11.6%

Savings accounts

 

 

591,777

 

 

 

47.5%

 

 

497,577

 

 

 

41.6%

Time deposits

 

 

225,413

 

 

 

18.1%

 

 

298,308

 

 

 

25.0%

Total deposits

 

$1,245,212

 

 

 

 

 

 

$1,195,105

 

 

 

 

 

 

The following table includes the average deposits and average rates paid for 2025 and 2024 (dollars in thousands).

 

 

 

December 31, 2025

 

 

December 31, 2024

 

 

 

Average Balance

 

 

Rate

 

 

Average Balance

 

 

Rate

 

Noninterest-bearing demand

 

$273,497

 

 

 

-

 

 

$263,002

 

 

 

-

 

Interest-bearing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking

 

 

137,352

 

 

 

1.65%

 

 

136,894

 

 

 

1.79%

Savings accounts

 

 

554,377

 

 

 

2.65%

 

 

488,180

 

 

 

2.66%

Time deposits

 

 

245,951

 

 

 

3.52%

 

 

288,271

 

 

 

4.44%

Total interest-bearing deposits

 

 

937,680

 

 

 

2.73%

 

 

913,345

 

 

 

3.09%

Total average deposits

 

$1,211,177

 

 

 

2.12%

 

$1,176,347

 

 

 

2.40%

 

Total uninsured deposits in excess of $250 thousand were $167.4 million and $131.8 million at December 31, 2025 and 2024, respectively.

 

The following table sets forth maturity ranges of time deposits, as of December 31, 2025, that meet or exceed the FDIC insurance limit (in thousands).

 

Maturity period:

 

December 31, 2025

 

3 months or less

 

$23,180

 

Over 3 months through 6 months

 

 

11,048

 

Over 6 months through 12 months

 

 

6,329

 

Over 12 months

 

 

1,514

 

Total

 

$42,071

 

 

Borrowings

 

In October 2025, the Company entered into a Subordinated Note Purchase Agreement pursuant to which the Company issued and sold $10.0 million in aggregate principal amount of 7.55% fixed to floating rate subordinated notes due November 1, 2035. After the sale, the Company redeemed in full the $7.0 million subordinated note due July 31, 2030. See Note 9 “Short-Term Debt” and Note 10 “Long-Term Debt” in Notes to the Consolidated Financial Statements.

 

Shareholders’ Equity

 

Total Shareholders’ Equity increased by $18.7 million to $104.8 million due to net income of $11.2 million and other comprehensive income of $10.8 million, offset by dividends to shareholders of $3.7 million. Other comprehensive income includes an $11.2 million improvement in unrealized losses in the bond portfolio and a $434 thousand adjustment to the pension liability.

 

Market Risk Management

 

Market risk is the sensitivity of a financial institution’s earnings or the economic value of its capital to adverse changes in interest rates, exchange rates, and equity prices. The Company’s primary component of market risk is interest rate volatility. Interest rate fluctuations impact the amount of interest income and expense the Bank pays or receives on the majority of its assets. Rapid changes in short-term interest rates may lead to volatility in net interest income resulting in additional interest rate risk to the extent that imbalances exist between the maturities or repricing of interest-bearing liabilities and interest earning assets.

 

 
27

Table of Contents

 

The Company manages interest rate risk through an asset and liability committee (“ALCO”) composed of members of its Board of Directors and executive management. The ALCO is responsible for monitoring and managing the Company’s interest rate risk and establishing policies to monitor and limit exposure to this risk. The Company’s Board of Directors reviews and approves the guidelines established by ALCO.

 

Management uses simulation analysis to measure the sensitivity of net interest income to changes in interest rates. The model calculates an earnings estimate based on current and projected balances and rates. This method is subject to the accuracy of the assumptions that underlie the process, but it provides an additional analysis of the sensitivity of the earnings to changes in interest rates to static gap analysis. Assumptions used in the model rates are derived from historical trends,  peer analysis, and management’s outlook, and include loans and deposit growth rates and projected yields and rates. All maturities, calls, and prepayments in the securities portfolio are assumed to be reinvested in like instruments. Mortgage loans and mortgage-backed securities prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates. Interest rates on different assets and liability accounts move differently when the prime rate changes and is reflected in different rate scenarios.

 

The following table represents interest rate sensitivity on the Company’s net interest income using different rate scenarios:

 

Change in Prime Rate

 

% Change in Net Interest Income

 

+ 400 basis points

 

 

(9.31)%

+ 300 basis points

 

 

(6.75)%

+ 200 basis points

 

 

(4.45)%

+ 100 basis points

 

 

(2.18)%

- 100 basis points

 

 

1.78%

- 200 basis points

 

 

2.95%

- 300 basis points

 

 

3.21%

- 400 basis points

 

 

3.85%

 

Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Market values are calculated based on discounted cash flow analysis. The net economic value is the market value of all assets minus the market value of all liabilities. The change in net economic value over different rate environments is an indication of the longer- term repricing risk in the balance sheet. The same assumptions are used in the market value simulation as in the earnings simulation.

 

The following table reflects the change in net economic value over different rate environments:

 

Change in Prime Rate

 

% Change in Net Economic Value

 

+ 400 basis points

 

 

(22.76)%

+ 300 basis points

 

 

(17.78)%

+ 200 basis points

 

 

(12.52)%

+ 100 basis points

 

 

(7.34)%

- 100 basis points

 

 

2.83%

- 200 basis points

 

 

2.38%

- 300 basis points

 

 

(1.22)%

- 400 basis points

 

 

(2.89)%

 

Prudent balance sheet management requires processes that monitor and protect the Company against unanticipated or significant changes in the level of market interest rates. Net interest income stability should be maintained in changing rate environments by ensuring that interest rate risk is kept to an acceptable level. The ability to reprice our interest-sensitive assets and liabilities over various time intervals is of critical importance.

 

The Company uses a variety of traditional and on-balance-sheet tools to manage our interest rate risk. Gap analysis, which monitors the “gap” between interest-sensitive assets and liabilities, is one such tool. In addition, we use simulation modeling to forecast future balance sheet and income statement behavior. By studying the effects on net interest income of rising, stable, and falling interest rate scenarios, the Company can position itself to take advantage of anticipated interest rate movement, and protect itself from unanticipated rate movements, by understanding the dynamic nature of its balance sheet components.

 

 
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An asset-sensitive balance sheet structure implies that assets, such as loans and securities, will reprice faster than liabilities; consequently, net interest income should be positively affected in an increasing interest rate environment. Conversely, a liability-sensitive balance sheet structure implies that liabilities, such as deposits, will reprice faster than assets; consequently, net interest income should be positively affected in a decreasing interest rate environment. At December 31, 2025, the Company had $103.6 million more in liabilities repricing than assets subject to repricing in one year. This is a one-day position that is continually changing and is not necessarily indicative of our position at any other time.

 

Liquidity

 

Liquidity represents an institution’s 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, money market investments, federal funds sold, loans held for sale, and securities and loans maturing or re-pricing within one year. Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, credit availability at the Federal Reserve Bank, the purchase of brokered certificates of deposit, corporate line of credit with a large correspondent bank, and debt and capital issuances. Management believes the Company’s current overall liquidity is sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

 

The Company closely monitors changes in the industry and market conditions that may impact the Company’s liquidity. Deposits have remained a steady source of liquidity from 2024 to 2025. The Company may use other means of borrowings or other liquidity sources to fund any liquidity needs based on declines in deposit balances. The Company is also closely tracking the potential impacts on the Company’s liquidity of declines in fair value of the Company’s securities portfolio due to rising market interest rates.

 

As of December 31, 2025, liquid assets totaled $92.7 million, or 6.8% of total assets, and liquid earning assets totaled $73.4 million, or 5.7% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. The Bank is scheduled to receive $64.1 million from bond paydowns and maturities by the end of 2026 which can be used to fund future loan growth and for other purposes.

 

In 2025, the Bank pledged investment securities with a par value totaling $133.4 million to the Federal Reserve System’s Discount Window. The Discount Window provides access to funding to help depository institutions manage their liquidity risks. The Bank did not borrow from the Discount Window during 2025. In addition to the Discount Window, the Bank has access to off-balance sheet liquidity through unsecured Federal funds lines totaling $90.0 million at December 31, 2025, and December 31, 2024. The Bank also has a secured line of credit with the FHLB with available credit of $180.1 million and $172.7 million as of December 31, 2025, and December 31, 2024, respectively. The FHLB line of credit is secured by a blanket lien on qualifying loans in the residential, commercial, agricultural real estate, and home equity portfolios.

 

The Bank has a Funding and Liquidity Risk Management policy that limits the amount of short-term and long-term alternative funding to no more than 25% of total assets.

 

Capital Resources

 

The Company continues to maintain capital ratios intended to support its asset growth. The federal bank regulatory agencies have implemented regulatory capital rules known as “Basel III.” The Basel III rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. There is also a capital conservation buffer that requires banks to hold common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.50% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees. The Company’s accumulated other comprehensive income or loss, resulting from unrealized gains and losses, net of income tax, on investment securities available for sale, is excluded from regulatory capital.

 

Pursuant to the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company is not required to comply with Basel III on a parent-only basis. As of December 31, 2025, the Company and its subsidiary bank continue to exceed minimum capital standards and remain well-capitalized under applicable capital adequacy rules. The Company currently expects to continue to exceed required minimum capital ratios. See Note 14 “Regulatory Matters” in Notes to Consolidated Financial Statements for more information regarding the Company’s and its subsidiary bank’s capital ratios.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Item not required for smaller reporting companies.

 

 
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Item 8.  Financial Statements and Supplementary Data

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of F&M Bank Corp.

 

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of F&M Bank Corp. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Allowance for Credit Losses – Collectively Evaluated Loans

As more fully described in Notes 1 and 4 of the financial statements, the Company reported gross loans of $886.8 million and a related allowance for credit losses on loans (“ACLL”) of $7.8 million as of December 31, 2025. Expected credit losses are evaluated based on the composition of the loan portfolio, current economic conditions, historical loan loss experience, reasonable and supportable forecasts, and other risk factors. The weighted average remaining life ("WARM") method is the credit loss estimation methodology used by the Company and involves applying a loss rate to a given segment of loans over the estimated remaining life of the given segment. Quarterly expected loss rates based on historical information are applied to an expected remaining balance for each period to determine the unadjusted expected loss for each loan segment. Historical loss rates, which are adjusted for qualitative factors that involve significant management judgment, are applied to the collectively evaluated loan segments. For those loans that do not share similar risk characteristics, the Company evaluates the ACLL needs on an individual basis.

 

 
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Table of Contents

 

We identified the Company’s estimate of the ACLL, specifically the ACLL on loans collectively evaluated, as a critical audit matter. The principal considerations for our determination of the ACLL for collectively evaluated loans as a critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors, model assumptions, forecasts and forecasting periods. Auditing these complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed. 

 

The primary procedures we performed to address this critical audit matter included the following:

 

 

·

Obtained an understanding of how the Company developed the ACL, specifically the determination of the qualitative factors, model assumptions, and forecasts.

 

 

 

 

·

Tested the completeness and accuracy of significant model assumptions by verifying loan‑level data, model inputs, and macroeconomic variables used to generate expected loss rates and qualitative overlays.

 

 

 

 

·

Tested the mathematical accuracy of estimated losses by independently recalculating historical loss rates, weighted average remaining life figures, and attrition rates.

 

 

 

 

·

Evaluated the reasonableness of assumptions and data used by the Company in developing qualitative factors by comparing these data points to internally developed and third-party sources, as well as other audit evidence gathered.

 

 

 

 

·

Evaluated subsequent events and transactions and considered whether those events and transactions corroborated or contradicted the Company’s estimate of the ACL.

 

We have served as the Company's auditor since 2025.

 

/s/ Elliott Davis, PLLC

 

Raleigh, North Carolina

March 27, 2026

 

 
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Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of F&M Bank Corp.

 

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of F&M Bank Corp. and its subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows, for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Yount, Hyde & Barbour, P.C.

 

We served as the Company’s auditor from 2016 to 2024.

 

Roanoke, Virginia

March 28, 2025

 

 
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Table of Contents

 

F & M Bank Corp.

Consolidated Balance Sheets (dollars in thousands, except share data)

As of December 31, 2025 and 2024

 

 

 

2025

 

 

2024

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$19,311

 

 

$19,139

 

Money market funds and interest-bearing deposits in other banks

 

 

1,013

 

 

 

298

 

Federal funds sold

 

 

48,529

 

 

 

37,524

 

Cash and cash equivalents

 

 

68,853

 

 

 

56,961

 

 

 

 

 

 

 

 

 

 

Securities:

 

 

 

 

 

 

 

 

Available for sale, at fair value

 

 

345,339

 

 

 

327,670

 

Other investments, at cost

 

 

2,254

 

 

 

2,869

 

 

 

 

 

 

 

 

 

 

Loans held for sale, at fair value

 

 

3,191

 

 

 

2,283

 

 

 

 

 

 

 

 

 

 

Loans held for investment, net of deferred fees and costs

 

 

886,253

 

 

 

839,949

 

Less: allowance for credit losses

 

 

(7,818)

 

 

(8,129)

Net loans held for investment

 

 

878,435

 

 

 

831,820

 

 

 

 

 

 

 

 

 

 

Bank premises and equipment, net

 

 

21,629

 

 

 

22,192

 

Other real estate owned

 

 

-

 

 

 

77

 

Interest receivable

 

 

5,118

 

 

 

4,939

 

Goodwill

 

 

3,082

 

 

 

3,082

 

Bank owned life insurance

 

 

24,395

 

 

 

23,607

 

Deferred tax asset, net

 

 

6,979

 

 

 

9,465

 

Other assets

 

 

14,482

 

 

 

17,046

 

Total Assets

 

$1,373,757

 

 

$1,302,011

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest bearing

 

$279,398

 

 

$260,301

 

Interest bearing

 

 

965,814

 

 

 

934,804

 

Total deposits

 

 

1,245,212

 

 

 

1,195,105

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

9,917

 

 

 

6,975

 

Other liabilities

 

 

13,840

 

 

 

13,793

 

Total Liabilities

 

 

1,268,969

 

 

 

1,215,873

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Common stock $5 par value, 6,000,000 shares authorized, 3,557,060 (2025) and 3,525,649 (2024) shares issued and outstanding

 

 

17,444

 

 

 

17,383

 

Additional paid in capital

 

 

11,743

 

 

 

11,463

 

Retained earnings

 

 

92,205

 

 

 

84,669

 

Accumulated other comprehensive loss

 

 

(16,604)

 

 

(27,377)

Total Shareholders’ Equity

 

 

104,788

 

 

 

86,138

 

Total Liabilities and Shareholders’ Equity

 

$1,373,757

 

 

$1,302,011

 

 

See accompanying Notes to the Consolidated Financial Statements.

 

 
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Table of Contents

 

F & M Bank Corp.

Consolidated Statements of Income (dollars in thousands, except share data)

For the years ended 2025 and 2024

 

 

 

2025

 

 

2024

 

Interest and Dividend Income

 

 

 

 

 

 

Interest and fees on loans held for investment

 

$55,798

 

 

$54,715

 

Interest from loans held for sale

 

 

135

 

 

 

162

 

Interest from money market funds and federal funds sold

 

 

2,313

 

 

 

1,513

 

Interest and dividends on interest bearing deposits and other investments

 

 

238

 

 

 

470

 

Interest from debt securities

 

 

9,266

 

 

 

7,623

 

Total interest and dividend income

 

 

67,750

 

 

 

64,483

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

Total interest on deposits

 

 

25,622

 

 

 

28,225

 

Interest from short-term debt

 

 

5

 

 

 

1,863

 

Interest from long-term debt

 

 

597

 

 

 

463

 

Total interest expense

 

 

26,224

 

 

 

30,551

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

41,526

 

 

 

33,932

 

 

 

 

 

 

 

 

 

 

Provision for Credit Losses

 

 

2,701

 

 

 

2,343

 

Net Interest Income After Provision for Credit Losses

 

 

38,825

 

 

 

31,589

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

1,292

 

 

 

1,193

 

Wealth management income

 

 

2,243

 

 

 

2,181

 

Mortgage banking income

 

 

1,937

 

 

 

2,490

 

Title insurance income

 

 

1,864

 

 

 

1,489

 

Income on bank owned life insurance

 

 

787

 

 

 

750

 

Low-income housing partnership losses

 

 

(786)

 

 

(786)

ATM and check card fees

 

 

3,350

 

 

 

3,101

 

Gain on sale of limited partnership investment

 

 

98

 

 

 

-

 

Other operating income

 

 

386

 

 

 

348

 

Total noninterest income

 

 

11,171

 

 

 

10,766

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

Salaries

 

 

15,989

 

 

 

15,393

 

Employee benefits

 

 

3,906

 

 

 

2,966

 

Occupancy expense

 

 

1,543

 

 

 

1,544

 

Equipment expense

 

 

1,203

 

 

 

1,310

 

FDIC assessment

 

 

943

 

 

 

1,041

 

Legal and professional expense

 

 

2,142

 

 

 

1,784

 

ATM and check card fees

 

 

1,349

 

 

 

1,130

 

Data processing fees

 

 

3,720

 

 

 

3,672

 

Other operating expenses

 

 

6,224

 

 

 

5,592

 

Total noninterest expense

 

 

37,019

 

 

 

34,432

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

12,977

 

 

 

7,923

 

Income tax expense

 

 

1,748

 

 

 

638

 

Net income

 

$11,229

 

 

$7,285

 

 

 

 

 

 

 

 

 

 

Per Common Share Data

 

 

 

 

 

 

 

 

Net income (basic and diluted)

 

$3.16

 

 

$2.07

 

Cash dividends on common stock

 

$1.04

 

 

$1.04

 

Weighted average common shares outstanding (basic and diluted)

 

 

3,552,822

 

 

 

3,512,427

 

 

 See accompanying Notes to the Consolidated Financial Statements.

 

 
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Table of Contents

 

F & M Bank Corp.

Consolidated Statements of Comprehensive Income (dollars in thousands)

For the years ended 2025 and 2024

 

 

 

Years Ended December 31,

 

 

 

2025

 

 

2024

 

 

 

 

 

 

 

 

Net Income

 

$11,229

 

 

$7,285

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Changes in pension plan benefits, net of deferred income tax benefit of $(116) and $(84) for the years ended December 2025 and 2024, respectively

 

 

(434)

 

 

(315)

Unrealized gain on available-for-sale securities, net of deferred income tax of

 

 

 

 

 

 

 

 

$2,978 and $1,053 for the years ended December 2025 and 2024, respectively

 

 

11,207

 

 

 

3,955

 

Total other comprehensive income

 

 

10,773

 

 

 

3,640

 

Total comprehensive income

 

$22,002

 

 

$10,925

 

 

 See accompanying Notes to the Consolidated Financial Statements.

 

 
35

Table of Contents

 

F & M Bank Corp.

Consolidated Statements of Changes in Shareholders’ Equity (dollars in thousands, except per share data)

For the years ended December 31, 2025 and 2024    

 

 

 

Common Stock

 

 

Additional Paid in Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

Balance, December 31, 2023

 

 

3,485,570

 

 

$17,263

 

 

$11,043

 

 

$81,034

 

 

$(31,017)

 

$78,323

 

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,285

 

 

 

-

 

 

 

7,285

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,640

 

 

 

3,640

 

Dividends on common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,650)

 

 

-

 

 

 

(3,650)

Common stock issued

 

 

15,723

 

 

 

79

 

 

 

235

 

 

 

-

 

 

 

-

 

 

 

314

 

Net restricted common stock activity

 

 

24,356

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes

 

 

-

 

 

 

41

 

 

 

(41)

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

226

 

 

 

-

 

 

 

-

 

 

 

226

 

Balance, December 31, 2024

 

 

3,525,649

 

 

$17,383

 

 

$11,463

 

 

$84,669

 

 

$(27,377)

 

$86,138

 

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,229

 

 

 

-

 

 

 

11,229

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,773

 

 

 

10,773

 

Dividends on common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,693)

 

 

-

 

 

 

(3,693)

Common stock issued

 

 

17,721

 

 

 

89

 

 

 

311

 

 

 

-

 

 

 

-

 

 

 

400

 

Net restricted common stock activity

 

 

30,801

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes

 

 

-

 

 

 

58

 

 

 

(135)

 

 

-

 

 

 

-

 

 

 

(77)

Common stock repurchased

 

 

(17,111)

 

 

(86)

 

 

(316)

 

 

-

 

 

 

-

 

 

 

(402)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

420

 

 

 

-

 

 

 

-

 

 

 

420

 

Balance, December 31, 2025

 

 

3,557,060

 

 

$17,444

 

 

$11,743

 

 

$92,205

 

 

$(16,604)

 

$104,788

 

 

 See accompanying Notes to the Consolidated Financial Statements.

 

 
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F & M Bank Corp.

Consolidated Statements of Cash Flows (dollars in thousands)

For the years ended December 31, 2025 and 2024

 

 

 

2025

 

 

2024

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net income

 

$11,229

 

 

$7,285

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,287

 

 

 

1,375

 

Amortization of intangibles

 

 

31

 

 

 

29

 

Amortization of securities

 

 

598

 

 

 

756

 

Proceeds from loans held for sale

 

 

53,636

 

 

 

63,199

 

Gain on sale of loans held for sale

 

 

(1,354)

 

 

(1,506)

Loans held for sale originated

 

 

(53,190)

 

 

(62,857)

Provision for credit losses

 

 

2,701

 

 

 

2,343

 

Deferred tax benefit

 

 

(373)

 

 

(293)

(Increase) decrease in interest receivable

 

 

(179)

 

 

95

 

Increase (decrease) in other assets

 

 

2,507

 

 

 

(1,295)

Increase in accrued liabilities

 

 

(624)

 

 

(2,270)

Amortization of limited partnership investments

 

 

786

 

 

 

786

 

Amortization of debt issuance costs

 

 

29

 

 

 

43

 

Gain on sale of fixed assets, net

 

 

-

 

 

 

(12)

Gain on sale of assets held for sale

 

 

(43)

 

 

-

 

Gain on sale of OREO, net

 

 

(73)

 

 

(21)

Gain on sale of limited partnership investment

 

 

(98)

 

 

-

 

Income from life insurance investment

 

 

(787)

 

 

(750)

Stock-based compensation expense

 

 

420

 

 

 

226

 

Net Cash Provided by Operating Activities

 

 

16,503

 

 

 

7,133

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Proceeds from maturity of investments available for sale

 

 

39,970

 

 

 

76,000

 

Proceeds from paydowns of investments available for sale

 

 

26,609

 

 

 

14,932

 

Purchases of investments available for sale

 

 

(70,660)

 

 

(45,677)

Investment in restricted stock, net

 

 

(5)

 

 

2,817

 

Investment in limited partnership investment

 

 

-

 

 

 

(150)

Net increase in loans held for investment

 

 

(49,199)

 

 

(20,511)

Net purchase of property and equipment

 

 

(724)

 

 

(282)

Proceeds from sale of other real estate owned

 

 

150

 

 

 

76

 

Proceeds from the sale of fixed assets

 

 

-

 

 

 

373

 

Net Cash (Used in) Provided by Investing Activities

 

 

(53,859)

 

 

27,578

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net change in deposits

 

 

50,107

 

 

 

61,869

 

Net change in short-term debt

 

 

-

 

 

 

(60,000)

Issuance of subordinated notes

 

 

9,913

 

 

 

-

 

Redemption of subordinated notes

 

 

(7,000)

 

 

-

 

Dividends paid in cash

 

 

(3,693)

 

 

(3,650)

Proceeds from sale of common stock

 

 

176

 

 

 

194

 

Proceeds from issuance of common stock

 

 

147

 

 

 

120

 

Purchases of common stock

 

 

(402)

 

 

-

 

Net Cash Provided by (Used in) Financing Activities

 

 

49,248

 

 

 

(1,467)

 

 

 

 

 

 

 

 

 

Net Increase in Cash and Cash Equivalents

 

 

11,892

 

 

 

33,244

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Year

 

 

56,961

 

 

 

23,717

 

Cash and Cash Equivalents, End of Year

 

$68,853

 

 

$56,961

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$26,763

 

 

$30,243

 

Income taxes

 

$1,150

 

 

$608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental non-cash disclosures:

 

 

 

 

 

 

 

 

Change in unrealized loss on securities available for sale, pretax

 

$14,185

 

 

$5,008

 

Minimum pension asset adjustment, net

 

$434

 

 

$315

 

Transfer from loans to other real estate owned

 

$-

 

 

$77

 

Transfer from property and equipment to assets held for sale

 

$-

 

 

$356

 

 

See accompanying Notes to the Consolidated Financial Statements.

 

 
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F & M Bank Corp.

Notes to the Consolidated Financial Statements

December 31, 2025 and 2024

 

NOTE 1 NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations - F&M Bank Corp. (the “Company”), through its subsidiary Farmers & Merchants Bank (the “Bank”), operates under a charter issued by the Commonwealth of Virginia and provides financial products and services to consumers and businesses.  As a state-chartered bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions and the Federal Reserve Bank.  The Bank provides services to customers located primarily in the counties of Rockingham, Shenandoah, Augusta, and Frederick, and the cities of Harrisonburg, Staunton, Waynesboro and Winchester in Virginia.  Services are provided at fourteen branch offices and at mortgage and dealer finance loan production offices.  The Company offers title insurance through its subsidiary, VSTitle, LLC (“VST”).

 

Farmers & Merchants Financial Services, Inc. (“FMFS”), was dissolved effective April 25, 2024, and the operations, assets, and liabilities of FMFS were transferred to the Bank. Effective on May 15, 2025, the operations, assets, and liabilities of VBS Mortgage, LLC (dba “F&M Mortgage”) were transferred to the Bank.

 

Basis of Financial Information - The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America (“GAAP’) and to accepted practices within the banking industry. 

 

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for credit losses and the fair value of financial instruments.

 

Principles of Consolidation - The consolidated financial statements include the accounts of the Company, Bank, FMFS (through its termination on June 7, 2024), F&M Mortgage, and VST. Significant inter-company accounts and transactions have been eliminated.

 

Segment Reporting - The Company's revenue is primarily derived from the business of banking. The Company's financial performance is monitored on a consolidated basis by the Chief Executive Officer, who is designated the chief operating decision maker (“CODM”), based upon information provided about the Company’s products and services offered. The segments are also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are then aggregated if the operating performance of products and customers are similar. The CODM evaluates the financial performance of the Company’s business components such as revenue streams, significant expenses, and budget to actual results in assessing the Company’s segments and in determination of allocated resources. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's Consolidated Balance Sheets and Consolidated Statements of Income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the Consolidated Statements of Income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include salaries and employee benefits, occupancy expense, equipment expense, data processing fees and legal and professional expenses.

 

All of the Company's financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by region and business-line, the Company's CODM evaluates financial performance on a Company-wide basis. The majority of the Company's revenue is from the business of banking and the Company's assigned regions have similar economic characteristics, products, services and customers. Accordingly, all of the Company's operations are considered by management to be aggregated in one reportable operating segment.

 

 
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Significant Group Concentrations of Credit Risk

 

Most of the Company’s activities are with customers located within the Shenandoah Valley. The types of securities that the Company invests in are included in Note 2 “Securities.” The types of lending that the Company engages in are included in Note 3 “Loans.” The Company’s loan portfolio is diversified with no significant concentrations. The Company does not have any significant concentrations to any one customer.

 

At December 31, 2025 and 2024, there were $415.2 million and $364.5 million, or 46.8% and 43.4%, respectively, of total commercial real estate loans. Commercial real estate for purposes of this note includes all construction loans, loans secured by multifamily residential properties, loans secured by farmland and loans secured by nonfarm, nonresidential properties. Refer to Note 3 “Loans” for further detail.

 

Cash and Cash Equivalents - Cash and cash equivalents include cash, cash due from banks, money market funds and interest-bearing deposits in other banks, and federal funds sold.

 

Securities - At the time of purchase, debt securities are classified as held to maturity, available for sale or trading.  Debt securities that the Company has both the positive intent and ability to hold to maturity are classified as held to maturity.  Held to maturity securities are stated at amortized cost adjusted for amortization of premiums and accretion of discounts on purchase using a method that approximates the effective interest method.  Investments classified as trading or available for sale are stated at fair value.  Changes in the fair value of available for sale investments are excluded from current earnings and reported, net of taxes, as a separate component of other comprehensive income. 

 

Amortization of premiums and accretion of discounts on securities are reported as adjustments to interest income using the effective interest method. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold using the specific identification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to shareholders’ equity, whereas realized gains and losses flow through the Company’s current earnings.

 

The fair value of investment securities available for sale is estimated based on quoted prices for similar assets determined by bid quotations received from independent pricing services. Declines in the fair value of securities below their amortized cost that are other than temporary are reflected in earnings or other comprehensive income, as appropriate. For those debt securities whose fair value is less than their amortized cost basis, the Company considers our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security.  In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.

 

Other Investments - Due to restrictions on the Company’s investments in the FHLB and the Federal Reserve Bank of Richmond (“FRB”), these securities are considered restricted and carried at cost. The FHLB requires the Bank to maintain stock in an amount equal to 3.75% of outstanding borrowings. The FRB requires the Company to maintain stock with a par value equal to 6% of its outstanding capital and surplus.

 

Allowance for Credit Losses – Available for Sale Securities - For available for sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

 

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance of any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

 

 
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Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available for sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2025 and 2024, there was no allowance for credit loss related to the available for sale securities portfolio.

 

Accrued interest receivable on available for sale debt securities totaled $1.5 million at December 31, 2025 and was excluded from the estimate of credit losses.

 

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $3.6 million at December 31, 2025 and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

 

Nonaccruals, Past Dues, and Charge-offs - The policy for placing commercial and consumer loans on nonaccrual status is generally when the loan is 90 days delinquent unless the credit is well secured and in process of collection. Consumer loans are typically charged-off when management judges the loan to be uncollectible. Commercial loans are typically written down to net realizable value when it is determined that the Company will be unable to collect the principal amount in full and the amount is a confirmed loss. Loans in all segments of portfolios are considered past due or delinquent when a contractual payment has not been satisfied. Loans are placed on nonaccrual status or charged off at an earlier date if collection of principal and interest is considered doubtful and in accordance with regulatory requirements.

 

For both the commercial and consumer loan portfolio segments, all interest accrued but not collected for loans placed on nonaccrual status or charged-off is reversed against interest income and accrual of interest income is terminated. Payments and interest on these loans are accounted for using the cost-recovery method by applying all payments received as a reduction to the outstanding principal balance until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The determination of future payments being reasonably assured varies depending on the circumstances present with the loan; however, the timely payment of contractual amounts owed for six consecutive months is a primary indicator.

 

Allowance for Credit Losses – Loans - The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses. The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts.

 

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. There were no changes to the allowance for credit losses methodology for the year.  The Company has identified the following portfolio segments and calculates the allowance for credit losses for each using a remaining life methodology:

 

1-4 family residential construction. Construction loans are subject to general risks from changing housing market trends and economic conditions that may impact demand for completed properties, availability of building materials, and the costs of completion. Changes in construction costs and interest rates may impact the borrower’s ability to service the debt.  These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates. Risks specific to the borrower are also evaluated, including previous repayment history, debt service ability, and current and projected loan-to-value ratios for the collateral.

 

Other construction, land development and land. Construction and land development loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion.  Completed properties that do not sell or become leased within originally expected timeframes may impact the borrower’s ability to service the debt.  These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates. Risks specific to the borrower are also evaluated, including previous repayment history, debt service ability, and current and projected loan-to-value ratios for the collateral.

 

 
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Secured by farmland. Farmland loans are loans secured by agricultural property.  These loans are subject to risks associated with the value of the underlying farmland and the cash flows of the borrower’s farming operations.

 

Home equity - open end. The home-equity loan portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios.  The Company manages these risks through policies and procedures such as limiting loan-to-value at origination, experienced underwriting, and requiring standards for appraisers.

 

Real estate. Real estate loans are for consumer residential 1-4 family real estate where the credit quality is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, and local housing market trends and interest rates. Risks specific to a borrower are determined by previous repayment history, loan-to-value ratios, and debt-to-income ratios.

 

Home equity - closed end. The home-equity closed-end loan portfolio carries risks associated with the creditworthiness of the borrower, changes in loan-to-value ratios, and subordinate lien positions.  The Company manages these risks through policies and procedures such as limiting loan-to-value at origination, experienced underwriting, and requiring standards for appraisers.

 

Multifamily. Multifamily loans are loans secured by multi-unit residential property.  These loans are subject to risks associated with the value of the underlying property, availability of rental units, as well as the successful operation and management of the property.

 

Owner-occupied commercial real estate. The commercial real estate segment includes loans secured by commercial real estate occupied by the owner/borrower. Loans in this segment are impacted by economic risks from changing commercial real estate markets, business bankruptcy rates, local unemployment rates and interest rate trends that would impact the businesses occupying the commercial real estate. 

 

Other commercial real estate. The other commercial real estate segment includes loans secured by commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for commercial buildings, business bankruptcy rates, local unemployment rates and interest rate trends that would impact the businesses housed by the commercial real estate. 

 

Agriculture loans. Agriculture loans are secured by agricultural equipment or are unsecured. Credit risk for these loans is subject to economic conditions, local agricultural/farming trends, interest rates, and borrower repayment ability and collateral value (if secured).

 

Commercial and industrial. Commercial and industrial loans are secured by collateral other than real estate or are unsecured.  Credit risk for these loans is subject to economic conditions, local business bankruptcy trends, interest rates, and borrower repayment ability and collateral value (if secured).

 

Credit cards. Credit card loan portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment.  The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt-to-income ratios, and minimum borrower credit scores.

 

Automobile loans. Automobile loans generally carry certain risks associated with the values of the collateral and borrower’s ability to repay the loan.  Lending on new and used vehicles is subject to the risk of changes in the availability of vehicles and the resale value.

 

Other consumer loans. Other consumer loans may be secured or unsecured. Credit risk stems primarily from the borrower’s ability to repay.  If the loan is secured, the Company analyzes loan-to-value ratios.  All consumer non-real estate loans are analyzed for debt-to-income ratios and previous credit history, as well as for general risks to the portfolio, including local unemployment rates, personal bankruptcy rates and interest rates.

 

 
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Municipal loans. Municipal loans are unsecured loans generally made to local towns within the Bank’s market area. Credit risk is based on the cash flow and management of the local town’s budgets.

 

Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and economic conditions not already captured.

 

Loans that do not share risk characteristics are evaluated on an individual basis. Management evaluates loans on nonaccrual status over $250,000 on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

 

Allowance for Credit Losses – Unfunded Commitments - Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

 

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

 

Earnings per Share - Basic Earnings per Share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding.   Nonvested restricted shares are included in the computation of basic earnings per share as the holder is entitled to full shareholder benefits during the vesting period, including voting rights and sharing in nonforfeitable dividends. Diluted earnings per share includes all convertible securities, such as convertible preferred stock, convertible debt, equity options, and warrants. The Company does not have any convertible securities that would dilute the earnings per share.

 

Other Real Estate Owned (“OREO”) - OREO is held for sale and represents real estate acquired through, or in lieu of, foreclosure. OREO is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The Company’s policy is to carry OREO on its balance sheet at the lower of cost or fair value less estimated costs to sell.  If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.  Operating costs after acquisition are expensed.

 

Bank Premises and Equipment - Land is carried at cost. Buildings and equipment are stated at cost less accumulated depreciation. Depreciation is charged to income over the estimated useful lives of the assets on a combination of the straight-line and accelerated methods.  Estimated useful lives range from 10 to 39 years for buildings, and 5 to 10 years for furniture and equipment. Maintenance, repairs, and minor improvements are charged to operations as incurred; major improvements are capitalized. Gains and losses on dispositions are reflect-ed in other income or expense.

 

Leases - In accordance with the requirements of Accounting Standards Codification (“ASC”) 842, Leases, the Company evaluates new real estate and equipment leases to determine whether the contractual arrangements constitute a lease, or contain an embedded lease that would be in scope under ASC 842, and whether such leases would meet the requirements of an operating or financing lease under the standard.

 

For operating leases, right-of-use assets (“ROU assets”) and lease liabilities are recognized at the commencement date of the lease. ROU assets represent the Company’s right to use leased assets over the term of the lease. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term and are measured as the present value of the lease payments over the lease term. ROU assets are measured as the amount of the lease liability adjusted for certain items such as prepaid lease payments, unamortized lease incentives, and unamortized direct costs. ROU assets are amortized on a straight-line basis less the periodic interest expense adjustment of the lease liability and the amortization is included in occupancy expense in the Company’s consolidated statements of operations. The discount rate used for the present value calculations for lease liabilities was the rate implicit in the lease if determinable, and when the rate was not determinable, the Company used its incremental, collateralized borrowing rate with the Federal Home Loan Bank of Atlanta ("FHLB") for the period that most closely coincided with the respective lease term as of the commencement date of the lease.

 

 
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As of and for the years ended December 31, 2025 and 2024, the Company did not have any leases that met the standard definition of a finance lease, did not engage in any sale-leaseback transactions, or have any material income from leased properties that have been sublet to third parties. In accordance with the ASC, the Company elects not to recognize an ROU asset and lease obligation for contracts with an initial term of twelve months or less. The expense associated with these short-term leases is included in noninterest expense in the consolidated statements of operations. To the extent that a lease arrangement includes both lease and non-lease components, the Company has elected not to account for these separately. Rent expense on operating leases is recorded using the straight-line method over the appropriate lease term.

 

Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised as assessed by management at lease commencement. Changes to renewal assumptions are handled in accordance with ASC 842.

 

Periodically, the Company evaluates its lease population for changes to management renewal assumptions, new lease contracts, and potential impairment. Triggers for impairment include change in use of the underlying asset, ability to exit the lease contract, and/or ability to sublet at market rates. Impairments, if any, are recorded as a charge to earnings in the period in which a triggering event was identified.

 

Goodwill and Intangible Assets - Goodwill, the excess of purchase price over the fair value of the identifiable net assets acquired, is evaluated for impairment by comparing the fair value of a reporting unit with its carrying amount. Impairment testing is performed annually as of December 31, as well as when management reasonably believes an impairment-triggering event may have occurred. The Company performed the internal evaluation of goodwill for December 31, 2025, and based on the results, no impairment was deemed necessary.

 

Acquired intangible assets are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives.

 

Bank Owned Life Insurance - The Company has purchased life insurance on certain key employees and directors. These policies are recorded at their cash surrender value and are included in a separate line item on the Company’s Consolidated Balance Sheets. Income generated from policies is recorded as noninterest income. The Company is exposed to credit risk to the extent an insurance company is unable to fulfill its financial obligations under a policy.

 

Loans Held for Sale - Loans held for sale consist of one-to-four family conforming residential real estate loans originated for sale in the secondary market. Credit risk associated with these loans is mitigated by entering sales commitments with third party investors to purchase the loans after they are originated; the Company does not service these loans after they are sold.

 

The Company records loans held for sale via the fair value option; see Note 12 “Derivatives” for additional information. The change in the fair value of loans held for sale is included in “Mortgage banking income” on the Company’s Consolidated Statements of Income.

 

Low-Income Housing Partnerships - The Company has investments in low-income housing partnerships whose primary benefit is the distribution of federal income tax credits to partners.  The Company recognizes the benefits and the costs of the investments over the life of the partnership on the Consolidated Balance Sheets.

 

Pension Plan - The Bank had a qualified noncontributory defined benefit pension plan which covered all full-time employees hired prior to April 1, 2012.  The benefits were primarily based on years of service and earnings.  The Company recognizes the over-funded or under‑funded status of pension and other postretirement benefit plans on the balance sheet. Gains and losses, prior service costs and credits, and any remaining transition amounts that have not yet been recognized through net periodic benefit cost will be recognized in accumulated other comprehensive loss, net of tax effects, until they are amortized as a component of net periodic cost. The Virginia Bankers Association Defined Benefit Plan for Farmers & Merchants Bank was amended on February 15, 2023 to stop the accrual of future benefits and was terminated on June 1, 2024.  Substantially all of the assets were used to pay pension obligations in the fourth quarter of 2025; see Note 16 “Employee Benefits.”

 

 
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Income Taxes - Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the temporary differences between the book and tax bases of assets and liabilities and gives current recognition to changes in tax rates and laws.

 

When the Company’s federal tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would ultimately be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more likely than not to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying Consolidated Balance Sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties, if any, associated with unrecognized tax benefits are classified as additional income taxes in the Consolidated Statements of Income.

 

Advertising Costs - The Company expenses advertising costs as incurred.

 

Transfers of Financial Assets - Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

 

Loss Contingencies - Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the consolidated financial statements.

 

Revenue Recognition - The majority of the Company’s noninterest income is generated from short-term contracts for fees on deposit accounts, ATM and check cards, and annuity and insurance commissions that is accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers.

 

Service charges on deposit accounts consist of account maintenance charges and overdrawn account fees. The Company’s performance obligation is generally satisfied, and the related revenue recognized, immediately, when the transaction occurs, or by month-end. Wealth management income consists primarily of commissions received on mutual funds and other investment sales that are recognized on the trade date, which is when the Company has satisfied its performance obligation. Title insurance and real estate settlement services revenue is recognized at the time the real estate transaction is completed. ATM and check card fees are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. The Company’s performance obligation is generally satisfied, and the related revenue recognized, immediately, when the transaction occurs, or by month-end. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized no less than monthly.

 

Noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for December 31, 2025 and 2024 consisted of the following (dollars in thousands). 

 

 

 

Twelve Months Ended

December 31,

 

 

 

2025

 

 

2024

 

Noninterest income

 

 

 

 

 

 

Service charges on deposit accounts

 

$1,292

 

 

$1,193

 

Wealth management income

 

 

2,243

 

 

 

2,181

 

Title insurance income

 

 

1,864

 

 

 

1,489

 

ATM and check card fees

 

 

3,350

 

 

 

3,101

 

Other

 

 

408

 

 

 

269

 

Within scope of ASC 606

 

 

9,157

 

 

 

8,233

 

Not within scope of ASC 606

 

 

2,014

 

 

 

2,533

 

Total noninterest income

 

$11,171

 

 

$10,766

 

 

 
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Reclassifications - The accompanying consolidated financial statements and notes reflect certain immaterial reclassifications in prior periods to conform to the current presentation. None of these reclassifications are considered material and have no impact on net income or shareholders’ equity.

 

Recent Accounting Pronouncements

 

Accounting Standards Recently Adopted:

 

On December 31, 2025, the Company adopted Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The amendments were applied prospectively and did not have a material effect on the Company’s consolidated financial statements. Refer to Note 17 “Income Taxes.”

 

Accounting Standards Pending Adoption:

 

In December 2025, the Financial Accounting Standards Board (FASB) issued amendments to the ASC to make incremental improvements to generally accepted accounting principles. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company will apply the amendments prospectively to all transactions recognized on or after the date that the Company first applies the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

 

In November 2025, the FASB amended the Financial Instruments—Credit Losses topic in the ASC to expand the population of acquired financial assets subject to the gross-up approach. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements.

 

In January 2025, the FASB amended the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company does not expect these amendments to have a material effect on its financial statements.

 

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

 

 
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Other accounting standards that have been issued or proposed 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.

 

NOTE 2 SECURITIES

 

The amortized cost and estimated fair value of securities available for sale along with gross unrealized gains and losses are summarized are as follows (dollars in thousands):

 

December 31, 2025

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

U. S. Treasuries

 

$15,089

 

 

$-

 

 

$755

 

 

$14,334

 

U. S. Government agencies

 

 

57,997

 

 

 

-

 

 

 

2,845

 

 

 

55,152

 

Municipal securities

 

 

27,082

 

 

 

126

 

 

 

1,250

 

 

 

25,958

 

Mortgage-backed securities

 

 

240,548

 

 

 

1,794

 

 

 

16,031

 

 

 

226,311

 

Corporate debt securities

 

 

25,650

 

 

 

106

 

 

 

2,172

 

 

 

23,584

 

Total Securities Available for Sale

 

$366,366

 

 

$2,026

 

 

$23,053

 

 

$345,339

 

 

December 31, 2024

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

U. S. Treasuries

 

$20,072

 

 

$-

 

 

$1,458

 

 

$18,614

 

U. S. Government agencies

 

 

72,995

 

 

 

-

 

 

 

5,270

 

 

 

67,725

 

Municipal securities

 

 

40,674

 

 

 

-

 

 

 

2,467

 

 

 

38,207

 

Mortgage-backed securities

 

 

198,591

 

 

 

158

 

 

 

23,800

 

 

 

174,949

 

Corporate debt securities

 

 

30,550

 

 

 

-

 

 

 

2,375

 

 

 

28,175

 

Total Securities Available for Sale

 

$362,882

 

 

$158

 

 

$35,370

 

 

$327,670

 

 

There was no allowance for credit losses on available for sale securities at December 31, 2025 and 2024.

 

The amortized cost and fair value of securities at December 31, 2025, by contractual maturity are shown below (dollars in thousands).  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 Available for Sale

 

 

 

Amortized Cost

 

 

Fair Value

 

Due in one year or less

 

$23,883

 

 

$23,476

 

Due after one year through five years

 

 

80,930

 

 

 

78,006

 

Due after five years through ten years

 

 

61,199

 

 

 

56,713

 

Due after ten years

 

 

200,354

 

 

 

187,144

 

Total

 

$366,366

 

 

$345,339

 

 

The following tables show the gross unrealized losses and estimated fair value of available sale securities for which an allowance for credit losses has not been recorded aggregated by category and length of time that securities have been in a continuous unrealized loss position at December 31, 2025 and 2024 (dollars in thousands):

 

 

 

Less than 12 Months

 

 

More than 12 Months

 

 

Total

 

December 31, 2025

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

U. S. Treasuries

 

$-

 

 

$-

 

 

$14,334

 

 

$755

 

 

$14,334

 

 

$755

 

U. S. Government agencies

 

 

-

 

 

 

-

 

 

 

55,152

 

 

 

2,845

 

 

 

55,152

 

 

 

2,845

 

Municipal securities

 

 

-

 

 

 

-

 

 

 

18,080

 

 

 

1,250

 

 

 

18,080

 

 

 

1,250

 

Mortgage-backed securities

 

 

22,829

 

 

 

10

 

 

 

120,511

 

 

 

16,021

 

 

 

143,340

 

 

 

16,031

 

Corporate debt securities

 

 

-

 

 

 

-

 

 

 

18,679

 

 

 

2,172

 

 

 

18,679

 

 

 

2,172

 

Total Securities Available for Sale

 

$22,829

 

 

$10

 

 

$226,756

 

 

$23,043

 

 

$249,585

 

 

$23,053

 

 

 
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Less than 12 Months

 

 

More than 12 Months

 

 

Total

 

December 31, 2024

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

 

Fair Value

 

 

Unrealized Losses

 

U. S. Treasuries

 

$-

 

 

$-

 

 

$18,614

 

 

$1,458

 

 

$18,614

 

 

$1,458

 

U. S. Government agencies

 

 

-

 

 

 

-

 

 

 

67,725

 

 

 

5,270

 

 

 

67,725

 

 

 

5,270

 

Municipal securities

 

 

9,971

 

 

 

139

 

 

 

28,236

 

 

 

2,328

 

 

 

38,207

 

 

 

2,467

 

Mortgage-backed securities

 

 

39,461

 

 

 

603

 

 

 

126,470

 

 

 

23,197

 

 

 

165,931

 

 

 

23,800

 

Corporate debt securities

 

 

1,463

 

 

 

37

 

 

 

26,712

 

 

 

2,338

 

 

 

28,175

 

 

 

2,375

 

Total Securities Available for Sale

 

$50,895

 

 

$779

 

 

$267,757

 

 

$34,591

 

 

$318,652

 

 

$35,370

 

 

Unrealized losses at December 31, 2025 were generally attributable to changes in market interest rates and interest spread relationships since the investment securities were originally purchased, and not due to credit quality concerns on the investment securities. Issuers continue to make timely principal and interest payments. The Company currently has no plans to sell the investments and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

 

At December 31, 2025, there were $226.8 million or 84 instances of individual available for sale securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $23.0 million. At December 31, 2024 there were $267.8 million or 100 instances of individual available for sale securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $34.6 million.

 

The Company pledged securities with market value of $118.9 million to the Federal Reserve Discount Window as of December 31, 2025. The Discount Window provides access to funding to help depository institutions manage their liquidity risks. Additionally, the Company pledged securities with a market value of $9.5 million to the Federal Reserve Bank of Richmond as collateral for deposits of the Department of Justice U.S. Bankruptcy Trustee as of December 31, 2025. The Company pledged securities with a market value of $134.9 million to the Federal Reserve as of December 31, 2024. The Company did not borrow from the Discount Window during 2025 or 2024.

 

There were no sales of securities available for sale during the years ended December 31, 2025 or 2024.

 

The primary purpose of the investment portfolio is to generate income and meet liquidity needs of the Company through readily saleable financial instruments.  The portfolio includes fixed rate bonds, whose prices move inversely with rates and variable rate bonds.  At the end of any accounting period, the investment portfolio has unrealized gains and losses.  The Company monitors the portfolio, which is subject to liquidity needs, market rate changes and credit risk changes for any indication of credit losses.  The primary concern in a loss situation is the credit quality of the issuer behind the instrument. Bonds deteriorate in value due to credit quality of the individual issuer and changes in market conditions. 

 

As of December 31, 2025, other investments consisted of restricted stock in the FRB (carrying basis of $1.14 million), FHLB (carrying basis of $925 thousand), and various other investments (carrying basis of $189 thousand). As of December 31, 2024, other investments consisted of restricted stock in the FRB (carrying basis of $1.14 million), FHLB (carrying basis of $920 thousand), and various other investments (carrying basis of $809 thousand). The market values of these securities are estimated to approximate their carrying values as of December 31, 2025 and 2024 since the interests are restricted as to sales.

 

 
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NOTE 3 LOANS

 

The following is a summary of the major categories of total loans held for investment outstanding at December 31, 2025 and 2024 (dollars in thousands):

 

 

 

December 31, 2025

 

 

December 31, 2024

 

1-4 Family residential construction

 

$31,118

 

 

$25,102

 

Other construction, land development and land

 

 

39,187

 

 

 

58,208

 

Secured by farmland

 

 

115,000

 

 

 

86,016

 

Home equity – open end

 

 

51,393

 

 

 

49,542

 

Real estate

 

 

243,361

 

 

 

213,081

 

Home Equity – closed end

 

 

5,980

 

 

 

6,137

 

Multifamily

 

 

18,854

 

 

 

10,804

 

Owner-occupied commercial real estate

 

 

96,651

 

 

 

86,169

 

Other commercial real estate

 

 

114,434

 

 

 

98,189

 

Agricultural loans

 

 

20,127

 

 

 

17,928

 

Commercial and industrial

 

 

56,885

 

 

 

64,901

 

Credit Cards

 

 

3,387

 

 

 

3,524

 

Automobile loans

 

 

77,080

 

 

 

104,271

 

Other consumer loans

 

 

9,132

 

 

 

11,915

 

Municipal loans

 

 

4,219

 

 

 

4,901

 

Gross loans

 

 

886,808

 

 

 

840,688

 

Unamortized net deferred loan fees

 

 

(555)

 

 

(739)

Less allowance for credit losses

 

 

7,818

 

 

 

8,129

 

Net loans

 

$878,435

 

 

$831,820

 

 

The table above does not include loans held for sale of $3.2 million and $2.3 million at December 31, 2025 and December 31, 2024, respectively. Loans held for sale consists of single-family residential real estate loans originated for sale in the secondary market.

 

Accrued interest receivable on loans held for investment totaled $3.6 million and $3.5 million at December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, accrued interest receivable write-offs were not material to the Company’s consolidated financial statements.

 

The Company has pledged loans held for investment as collateral for borrowings with the FHLB totaling $310.7 million and $306.7 million as of December 31, 2025 and 2024, respectively.  The Company maintains a blanket lien on certain loans in its residential real estate, commercial, agricultural farmland, and home equity portfolios.

 

NOTE 4 ALLOWANCE FOR CREDIT LOSSES

 

The allowance for credit losses (“ACL”) consists of the allowance for credit losses on loans and the reserve for unfunded commitments. The Company’s ACL is governed by the Company’s ACL Committee, which reports to the Board of Directors and contains representatives from the Company’s finance, credit, and risk teams, and is responsible for calculating the Company’s estimate of expected credit losses and resulting ACL. The ACL Committee considers the quantitative model results and qualitative factors when finalizing the ACL. The Company’s ACL model is subject to the Company’s models risk management program, which is overseen by the Director of Risk Management that reports to the Company’s Board Risk Committee.

 

 
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Allowance for Credit Losses on Loans

 

The following tables show the allowance for credit losses activity by loan segment for the periods indicated (dollars in thousands).

 

Allowance for Credit Losses

For the Year Ended December 31, 2025

 

 

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision (Recovery) for loan credit losses

 

 

Ending Balance

 

1-4 Family residential construction

 

$258

 

 

$-

 

 

$-

 

 

$(65)

 

$193

 

Other construction, land development and land

 

 

1,551

 

 

 

23

 

 

 

24

 

 

 

(911)

 

 

641

 

Secured by farmland

 

 

946

 

 

 

-

 

 

 

-

 

 

 

512

 

 

 

1,458

 

Home equity – open end

 

 

197

 

 

 

27

 

 

 

24

 

 

 

(17)

 

 

177

 

Real estate

 

 

606

 

 

 

5

 

 

 

11

 

 

 

17

 

 

 

629

 

Home Equity – closed end

 

 

99

 

 

 

-

 

 

 

-

 

 

 

(35)

 

 

64

 

Multifamily

 

 

190

 

 

 

-

 

 

 

-

 

 

 

466

 

 

 

656

 

Owner-occupied commercial real estate

 

 

809

 

 

 

301

 

 

 

13

 

 

 

170

 

 

 

691

 

Other commercial real estate

 

 

105

 

 

 

-

 

 

 

-

 

 

 

141

 

 

 

246

 

Agricultural loans

 

 

27

 

 

 

171

 

 

 

-

 

 

 

274

 

 

 

130

 

Commercial and industrial

 

 

982

 

 

 

483

 

 

 

154

 

 

 

342

 

 

 

995

 

Credit Cards

 

 

87

 

 

 

57

 

 

 

28

 

 

 

32

 

 

 

90

 

Automobile loans

 

 

1,956

 

 

 

3,022

 

 

 

1,007

 

 

 

1,772

 

 

 

1,713

 

Other consumer loans

 

 

301

 

 

 

146

 

 

 

79

 

 

 

(105)

 

 

129

 

Municipal loans

 

 

15

 

 

 

-

 

 

 

-

 

 

 

(9)

 

 

6

 

Total

 

$8,129

 

 

$4,235

 

 

$1,340

 

 

$2,584

 

 

$7,818

 

 

Allowance for Credit Losses

For the Year Ended December 31, 2024

 

 

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provision (Recovery) for loan credit losses

 

 

Ending Balance

 

1-4 Family residential construction

 

$714

 

 

$362

 

 

$-

 

 

$(94)

 

$258

 

Other construction, land development and land

 

 

1,287

 

 

 

-

 

 

 

69

 

 

 

195

 

 

 

1,551

 

Secured by farmland

 

 

815

 

 

 

-

 

 

 

-

 

 

 

131

 

 

 

946

 

Home equity – open end

 

 

180

 

 

 

-

 

 

 

26

 

 

 

(9)

 

 

197

 

Real estate

 

 

810

 

 

 

-

 

 

 

5

 

 

 

(209)

 

 

606

 

Home Equity – closed end

 

 

77

 

 

 

-

 

 

 

-

 

 

 

22

 

 

 

99

 

Multifamily

 

 

181

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

190

 

Owner-occupied commercial real estate

 

 

1,221

 

 

 

-

 

 

 

-

 

 

 

(412)

 

 

809

 

Other commercial real estate

 

 

166

 

 

 

-

 

 

 

-

 

 

 

(61)

 

 

105

 

Agricultural loans

 

 

20

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

27

 

Commercial and industrial

 

 

1,034

 

 

 

310

 

 

 

51

 

 

 

207

 

 

 

982

 

Credit Cards

 

 

81

 

 

 

27

 

 

 

27

 

 

 

6

 

 

 

87

 

Automobile loans

 

 

1,443

 

 

 

2,755

 

 

 

823

 

 

 

2,445

 

 

 

1,956

 

Other consumer loans

 

 

292

 

 

 

213

 

 

 

88

 

 

 

134

 

 

 

301

 

Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15

 

 

 

15

 

Total

 

$8,321

 

 

$3,667

 

 

$1,089

 

 

$2,386

 

 

$8,129

 

 

Credit Quality Indicators

 

The Company presents loan portfolio segments and classes by credit quality indicator and vintage year. The Company defines the vintage date for the purpose of this disclosure as the date of the most recent credit decision. Renewals are categorized as new credit decisions and reflect the renewal date as the vintage date, except for renewals of loans modified for borrowers experiencing financial difficulty which are presented in the original vintage.

 

 
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Description of the Company’s credit quality indicators under the Current Expected Credit Loss (“CECL”) Model:

 

Grades 0-5 – Pass: Loans in all classes that are part of the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.

 

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 management’s 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.

 

Credit cards are classified as pass or substandard.  A credit card is substandard when payments of principal and interest are past due 90 days or more.

 

 
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The following table presents the Company’s recorded investment in loans by credit quality indicators and gross write-offs by year of origination as of December 31, 2025 (dollars in thousands):

 

 

 

Term Loans by Year of Origination

 

 

 

 

 

 

 

2025

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

Prior

 

 

Revolving

 

 

Total

 

1-4 Family residential construction

 

Pass

 

$-

 

 

$-

 

 

$338

 

 

$-

 

 

$-

 

 

$116

 

 

$30,664

 

 

$31,118

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total 1-4 Family residential construction

 

 

-

 

 

 

-

 

 

 

338

 

 

 

-

 

 

 

-

 

 

 

116

 

 

 

30,664

 

 

 

31,118

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other construction, land development and land

Pass

 

 

5,691

 

 

 

2,701

 

 

 

11,877

 

 

 

969

 

 

 

427

 

 

 

3,252

 

 

 

14,195

 

 

 

39,112

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75

 

 

 

75

 

Total Other construction, land development and land

 

 

5,691

 

 

 

2,701

 

 

 

11,877

 

 

 

969

 

 

 

427

 

 

 

3,252

 

 

 

14,270

 

 

 

39,187

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23

 

 

 

-

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured by farmland

Pass

 

 

17,063

 

 

 

9,423

 

 

 

10,887

 

 

 

12,838

 

 

 

13,122

 

 

 

34,648

 

 

 

13,470

 

 

 

111,450

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,609

 

 

 

1,507

 

 

 

-

 

 

 

-

 

 

 

3,116

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

319

 

 

 

-

 

 

 

-

 

 

 

114

 

 

 

434

 

Total Secured by farmland

 

 

17,063

 

 

 

9,423

 

 

 

10,887

 

 

 

14,766

 

 

 

14,629

 

 

 

34,648

 

 

 

13,584

 

 

 

115,000

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity – open end

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

122

 

 

 

50,587

 

 

 

50,709

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

684

 

 

 

684

 

Total Home equity - open end

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

122

 

 

 

51,271

 

 

 

51,393

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

 

 

-

 

 

 

-

 

 

 

27

 

Real estate

Pass

 

 

43,676

 

 

 

26,645

 

 

 

53,562

 

 

 

40,299

 

 

 

11,899

 

 

 

59,454

 

 

 

1,040

 

 

 

236,575

 

Watch

 

 

-

 

 

 

1,416

 

 

 

1,436

 

 

 

-

 

 

 

-

 

 

 

211

 

 

 

-

 

 

 

3,063

 

Substandard

 

 

-

 

 

 

-

 

 

 

289

 

 

 

81

 

 

 

655

 

 

 

2,698

 

 

 

-

 

 

 

3,723

 

Total Real estate

 

 

43,676

 

 

 

28,061

 

 

 

55,287

 

 

 

40,380

 

 

 

12,554

 

 

 

62,363

 

 

 

1,040

 

 

 

243,361

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Equity – closed end

Pass

 

 

635

 

 

 

422

 

 

 

2,339

 

 

 

192

 

 

 

57

 

 

 

2,281

 

 

 

-

 

 

 

5,926

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

54

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

54

 

Total Home Equity - closed end

 

 

689

 

 

 

422

 

 

 

2,339

 

 

 

192

 

 

 

57

 

 

 

2,281

 

 

 

-

 

 

 

5,980

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

Pass

 

 

7,051

 

 

 

2,680

 

 

 

-

 

 

 

2,556

 

 

 

1,241

 

 

 

2,262

 

 

 

3,064

 

 

 

18,854

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Multifamily

 

 

7,051

 

 

 

2,680

 

 

 

-

 

 

 

2,556

 

 

 

1,241

 

 

 

2,262

 

 

 

3,064

 

 

 

18,854

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner-occupied commercial real estate

Pass

 

 

20,096

 

 

 

9,403

 

 

 

2,354

 

 

 

16,357

 

 

 

14,163

 

 

 

18,587

 

 

 

4,929

 

 

 

85,889

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

62

 

 

 

1,148

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,503

 

 

 

49

 

 

 

10,762

 

Total Owner-occupied commercial real estate

 

 

20,158

 

 

 

10,551

 

 

 

2,354

 

 

 

16,357

 

 

 

14,163

 

 

 

28,090

 

 

 

4,978

 

 

 

96,651

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

301

 

 

 

-

 

 

 

301

 

Other commercial real estate

Pass

 

 

14,989

 

 

 

372

 

 

 

6,853

 

 

 

36,997

 

 

 

11,075

 

 

 

32,759

 

 

 

2,533

 

 

 

105,578

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

966

 

 

 

-

 

 

 

966

 

Substandard

 

 

-

 

 

 

7,806

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

84

 

 

 

-

 

 

 

7,890

 

Total Other commercial real estate

 

 

14,989

 

 

 

8,178

 

 

 

6,853

 

 

 

36,997

 

 

 

11,075

 

 

 

33,809

 

 

 

2,533

 

 

 

114,434

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 
51

Table of Contents

 

 

 

Term Loans by Year of Origination

 

 

 

 

 

 

 2025

 

 

 2024

 

 

 2023

 

 

 2022

 

 

2021 

 

 

 

Prior

 

 

Revolving 

 

 

Total 

 

Agricultural loans                                                                                                 

 

Pass

 

 

5,387

 

 

 

1,910

 

 

 

1,364

 

 

 

973

 

 

 

151

 

 

 

53

 

 

 

10,092

 

 

 

19,930

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

16

 

 

 

-

 

 

 

25

 

Substandard

 

 

-

 

 

 

-

 

 

 

112

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

60

 

 

 

172

 

Total Agricultural loans

 

 

5,387

 

 

 

1,910

 

 

 

1,476

 

 

 

982

 

 

 

151

 

 

 

69

 

 

 

10,152

 

 

 

20,127

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

171

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

Pass

 

 

18,025

 

 

 

6,615

 

 

 

2,710

 

 

 

4,675

 

 

 

2,359

 

 

 

251

 

 

 

20,980

 

 

 

55,615

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43

 

 

 

-

 

 

 

-

 

 

 

150

 

 

 

193

 

Substandard

 

 

35

 

 

 

-

 

 

 

317

 

 

 

17

 

 

 

-

 

 

 

-

 

 

 

708

 

 

 

1,077

 

Total Commercial and industrial

 

 

18,060

 

 

 

6,615

 

 

 

3,027

 

 

 

4,735

 

 

 

2,359

 

 

 

251

 

 

 

21,838

 

 

 

56,885

 

Current period gross write-offs

 

 

-

 

 

 

408

 

 

 

-

 

 

 

75

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Cards

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,387

 

 

 

3,387

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Credit Cards

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,387

 

 

 

3,387

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

57

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automobile loans

Pass

 

 

16,255

 

 

 

17,479

 

 

 

23,351

 

 

 

14,122

 

 

 

4,512

 

 

 

868

 

 

 

-

 

 

 

76,587

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

14

 

 

 

140

 

 

 

21

 

 

 

207

 

 

 

76

 

 

 

35

 

 

 

-

 

 

 

493

 

Total Automobile loans

 

 

16,269

 

 

 

17,619

 

 

 

23,372

 

 

 

14,329

 

 

 

4,588

 

 

 

903

 

 

 

-

 

 

 

77,080

 

Current period gross write-offs

 

 

97

 

 

 

904

 

 

 

1,082

 

 

 

644

 

 

 

186

 

 

 

109

 

 

 

-

 

 

 

3,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer loans

Pass

 

 

3,215

 

 

 

2,166

 

 

 

1,669

 

 

 

1,128

 

 

 

268

 

 

 

336

 

 

 

307

 

 

 

9,089

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

19

 

 

 

14

 

 

 

8

 

 

 

2

 

 

 

-

 

 

 

43

 

Total Other consumer loans

 

 

3,215

 

 

 

2,166

 

 

 

1,688

 

 

 

1,142

 

 

 

276

 

 

 

338

 

 

 

307

 

 

 

9,132

 

Current period gross write-offs

 

 

9

 

 

 

34

 

 

 

38

 

 

 

58

 

 

 

5

 

 

 

2

 

 

 

-

 

 

 

146

 

Municipal loans

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500

 

 

 

3,719

 

 

 

-

 

 

 

4,219

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500

 

 

 

3,719

 

 

 

-

 

 

 

4,219

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$152,248

 

 

$90,326

 

 

 

119,498

 

 

$133,405

 

 

$62,020

 

 

$172,223

 

 

$157,088

 

 

$886,808

 

Less: Unamortized net deferred loan fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(555)

Loans held for investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$886,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period gross write-offs

 

$106

 

 

$1,346

 

 

$1,120

 

 

$948

 

 

$223

 

 

$435

 

 

$57

 

 

$4,235

 

 

 
52

Table of Contents

 

 

The following table presents the Company’s recorded investment in loans by credit quality indicators and gross write-offs by year of origination as of December 31, 2024 (dollars in thousands):

 

 

 

Term Loans by Year of Origination

 

 

 

 

 

 

 

 

 

       2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolving

 

 

Total

 

1-4 Family residential construction

 

Pass

 

$-

 

 

$1,224

 

 

$-

 

 

$-

 

 

$-

 

 

$92

 

 

$23,786

 

 

$25,102

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total 1-4 Family residential construction

 

 

-

 

 

 

1,224

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

92

 

 

 

23,786

 

 

 

25,102

 

Current period gross write-offs

 

 

-

 

 

 

362

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other construction, land development and land

Pass

 

 

2,668

 

 

 

13,898

 

 

 

7,417

 

 

 

4,530

 

 

 

1,727

 

 

 

8,580

 

 

 

18,251

 

 

 

57,071

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

128

 

 

 

128

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

525

 

 

 

484

 

 

 

1,009

 

Total Other construction, land development and land

 

 

2,668

 

 

 

13,898

 

 

 

7,417

 

 

 

4,530

 

 

 

1,727

 

 

 

9,105

 

 

 

18,863

 

 

 

58,208

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured by farmland

Pass

 

 

5,462

 

 

 

10,038

 

 

 

13,283

 

 

 

12,908

 

 

 

25,209

 

 

 

8,413

 

 

 

8,074

 

 

 

83,387

 

Watch

 

 

155

 

 

 

-

 

 

 

1,667

 

 

 

-

 

 

 

-

 

 

 

754

 

 

 

-

 

 

 

2,576

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

53

 

 

 

-

 

 

 

53

 

Total Secured by farmland

 

 

5,617

 

 

 

10,038

 

 

 

14,950

 

 

 

12,908

 

 

 

25,209

 

 

 

9,220

 

 

 

8,074

 

 

 

86,016

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity – open end

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

153

 

 

 

48,589

 

 

 

48,742

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

249

 

 

 

249

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

551

 

 

 

551

 

Total Home equity - open end

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

153

 

 

 

49,389

 

 

 

49,542

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Real estate

Pass

 

 

21,150

 

 

 

59,160

 

 

 

43,895

 

 

 

13,643

 

 

 

11,595

 

 

 

59,013

 

 

 

1,671

 

 

 

210,127

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

203

 

 

 

86

 

 

 

528

 

 

 

-

 

 

 

2,137

 

 

 

-

 

 

 

2,954

 

Total Real estate

 

 

21,150

 

 

 

59,363

 

 

 

43,981

 

 

 

14,171

 

 

 

11,595

 

 

 

61,150

 

 

 

1,671

 

 

 

213,081

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Equity – closed end

Pass

 

 

727

 

 

 

2,469

 

 

 

252

 

 

 

87

 

 

 

786

 

 

 

1,816

 

 

 

-

 

 

 

6,137

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Home Equity - closed end

 

 

727

 

 

 

2,469

 

 

 

252

 

 

 

87

 

 

 

786

 

 

 

1,816

 

 

 

-

 

 

 

6,137

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily

Pass

 

 

2,130

 

 

 

-

 

 

 

4,854

 

 

 

1,368

 

 

 

866

 

 

 

1,586

 

 

 

-

 

 

 

10,804

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Multifamily

 

 

2,130

 

 

 

-

 

 

 

4,854

 

 

 

1,368

 

 

 

866

 

 

 

1,586

 

 

 

-

 

 

 

10,804

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner-occupied commercial real estate

Pass

 

 

7,187

 

 

 

2,207

 

 

 

17,127

 

 

 

15,754

 

 

 

6,697

 

 

 

19,933

 

 

 

5,042

 

 

 

73,947

 

Watch

 

 

1,165

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,165

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,613

 

 

 

2,444

 

 

 

11,057

 

Total Owner-occupied commercial real estate

 

 

8,352

 

 

 

2,207

 

 

 

17,127

 

 

 

15,754

 

 

 

6,697

 

 

 

28,546

 

 

 

7,486

 

 

 

86,169

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other commercial real estate

Pass

 

 

386

 

 

 

9,258

 

 

 

29,385

 

 

 

11,767

 

 

 

3,739

 

 

 

31,885

 

 

 

1,938

 

 

 

88,358

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,018

 

 

 

-

 

 

 

1,018

 

Substandard

 

 

7,942

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

871

 

 

 

-

 

 

 

8,813

 

Total Other commercial real estate

 

 

8,328

 

 

 

9,258

 

 

 

29,385

 

 

 

11,767

 

 

 

3,739

 

 

 

33,774

 

 

 

1,938

 

 

 

98,189

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 
53

Table of Contents

 

Term Loans by Year of Origination

 

 

2024

 

 

 

2023

 

 

 

2022

 

 

 

2021

 

 

 

2020

 

 

 

Prior

 

 

 

Revolving

 

 

 

 Total

 

Agricultural loans

 

 

Pass

 

 

3,522

 

 

 

2,181

 

 

 

1,818

 

 

 

333

 

 

 

180

 

 

 

-

 

 

 

9,673

 

 

 

17,707

 

Watch

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

24

 

 

 

-

 

 

 

13

 

 

 

50

 

Substandard

 

 

-

 

 

 

-

 

 

 

21

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

150

 

 

 

171

 

Total Agricultural loans

 

 

3,522

 

 

 

2,181

 

 

 

1,852

 

 

 

333

 

 

 

204

 

 

 

-

 

 

 

9,836

 

 

 

17,928

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

Pass

 

 

14,798

 

 

 

4,817

 

 

 

6,766

 

 

 

3,738

 

 

 

878

 

 

 

376

 

 

 

28,934

 

 

 

60,307

 

Watch

 

 

-

 

 

 

348

 

 

 

63

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

3,328

 

 

 

3,771

 

Substandard

 

 

-

 

 

 

-

 

 

 

57

 

 

 

609

 

 

 

-

 

 

 

-

 

 

 

157

 

 

 

823

 

Total Commercial and industrial

 

 

14,798

 

 

 

5,165

 

 

 

6,886

 

 

 

4,379

 

 

 

878

 

 

 

376

 

 

 

32,419

 

 

 

64,901

 

Current period gross write-offs

 

 

-

 

 

 

57

 

 

 

176

 

 

 

47

 

 

 

24

 

 

 

6

 

 

 

-

 

 

 

310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Cards

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,524

 

 

 

3,524

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Credit Cards

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,524

 

 

 

3,524

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automobile loans

Pass

 

 

26,426

 

 

 

37,698

 

 

 

25,096

 

 

 

10,563

 

 

 

3,121

 

 

 

975

 

 

 

-

 

 

 

103,879

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

22

 

 

 

66

 

 

 

147

 

 

 

110

 

 

 

36

 

 

 

11

 

 

 

-

 

 

 

392

 

Total Automobile loans

 

 

26,448

 

 

 

37,764

 

 

 

25,243

 

 

 

10,673

 

 

 

3,157

 

 

 

986

 

 

 

-

 

 

 

104,271

 

Current period gross write-offs

 

 

194

 

 

 

1,119

 

 

 

760

 

 

 

503

 

 

 

115

 

 

 

64

 

 

 

-

 

 

 

2,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer loans

Pass

 

 

3,604

 

 

 

3,102

 

 

 

2,633

 

 

 

989

 

 

 

210

 

 

 

994

 

 

 

359

 

 

 

11,891

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

7

 

 

 

6

 

 

 

11

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24

 

Total Other consumer loans

 

 

3,604

 

 

 

3,109

 

 

 

2,639

 

 

 

1,000

 

 

 

210

 

 

 

994

 

 

 

359

 

 

 

11,915

 

Current period gross write-offs

 

 

7

 

 

 

99

 

 

 

62

 

 

 

23

 

 

 

15

 

 

 

7

 

 

 

-

 

 

 

213

 

Municipal loans

Pass

 

 

-

 

 

 

-

 

 

 

-

 

 

 

775

 

 

 

1,032

 

 

 

3,094

 

 

 

-

 

 

 

4,901

 

Watch

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Substandard

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

775

 

 

 

1,032

 

 

 

3,094

 

 

 

-

 

 

 

4,901

 

Current period gross write-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$97,344

 

 

$146,676

 

 

 

154,586

 

 

$77,745

 

 

$56,100

 

 

$150,892

 

 

$157,345

 

 

$840,688

 

Less: Unamortized net deferred loan fees 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(739)

Loans held for investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$839,949

 

Current period gross write-offs

 

$201

 

 

$1,637

 

 

$998

 

 

$573

 

 

$154

 

 

$77

 

 

$27

 

 

$3,667

 

 

 
54

Table of Contents

 

Nonaccrual and Past Due Loans

 

The following table shows the aging of the Company’s loans held for investment, by segment (dollars in thousands):

 

Age Analysis of Past Due Loans

As of December 31, 2025

 

 

Accruing Loans 30-59 Days Past due

 

 

Accruing Loans 60-89 Days Past due

 

 

Accruing Loans 90 Days or More Past due

 

 

Nonaccrual Loans

 

 

Accruing Current Loans

 

 

Total Loans

 

1-4 Family residential construction

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$31,118

 

 

$31,118

 

Other construction, land development and land

 

 

601

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

38,586

 

 

 

39,187

 

Secured by farmland

 

 

-

 

 

 

-

 

 

 

-

 

 

 

434

 

 

 

114,566

 

 

 

115,000

 

Home equity – open end

 

 

267

 

 

 

61

 

 

 

-

 

 

 

462

 

 

 

50,603

 

 

 

51,393

 

Real estate

 

 

2,545

 

 

 

902

 

 

 

-

 

 

 

2,308

 

 

 

237,606

 

 

 

243,361

 

Home Equity – closed end

 

 

83

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,897

 

 

 

5,980

 

Multifamily

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,854

 

 

 

18,854

 

Owner-occupied commercial real estate

 

 

538

 

 

 

1,148

 

 

 

-

 

 

 

2,201

 

 

 

92,764

 

 

 

96,651

 

Other commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

114,434

 

 

 

114,434

 

Agricultural loans

 

 

121

 

 

 

-

 

 

 

-

 

 

 

172

 

 

 

19,834

 

 

 

20,127

 

Commercial and industrial

 

 

223

 

 

 

311

 

 

 

-

 

 

 

29

 

 

 

56,322

 

 

 

56,885

 

Credit Cards

 

 

37

 

 

 

12

 

 

 

5

 

 

 

-

 

 

 

3,333

 

 

 

3,387

 

Automobile loans

 

 

1,832

 

 

 

390

 

 

 

2

 

 

 

389

 

 

 

74,467

 

 

 

77,080

 

Other consumer loans

 

 

93

 

 

 

16

 

 

 

-

 

 

 

42

 

 

 

8,981

 

 

 

9,132

 

Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,219

 

 

 

4,219

 

Gross loans

 

 

6,340

 

 

 

2,840

 

 

 

7

 

 

 

6,037

 

 

 

871,584

 

 

 

886,808

 

Less: Unamortized net deferred loan fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(555)

 

 

(555)

Loans held for investment

 

$6,340

 

 

$2,840

 

 

$7

 

 

$6,037

 

 

$871,029

 

 

$886,253

 

 

Age Analysis of Past Due Loans

As of December 31, 2024

 

 

Accruing Loans 30-59 Days Past due

 

 

Accruing Loans 60-89 Days Past due

 

 

Accruing Loans 90 Days or More Past due

 

 

Nonaccrual Loans

 

 

Accruing Current Loans

 

 

Total Loans

 

1-4 Family residential construction

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$25,102

 

 

$25,102

 

Other construction, land development and land

 

 

-

 

 

 

10

 

 

 

-

 

 

 

14

 

 

 

58,184

 

 

 

58,208

 

Secured by farmland

 

 

-

 

 

 

-

 

 

 

-

 

 

 

53

 

 

 

85,963

 

 

 

86,016

 

Home equity – open end

 

 

130

 

 

 

-

 

 

 

-

 

 

 

501

 

 

 

48,911

 

 

 

49,542

 

Real estate

 

 

1,799

 

 

 

877

 

 

 

-

 

 

 

916

 

 

 

209,489

 

 

 

213,081

 

Home Equity – closed end

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,137

 

 

 

6,137

 

Multifamily

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,804

 

 

 

10,804

 

Owner-occupied commercial real estate

 

 

124

 

 

 

-

 

 

 

-

 

 

 

3,416

 

 

 

82,629

 

 

 

86,169

 

Other commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

785

 

 

 

97,404

 

 

 

98,189

 

Agricultural loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

171

 

 

 

17,757

 

 

 

17,928

 

Commercial and industrial

 

 

849

 

 

 

46

 

 

 

-

 

 

 

768

 

 

 

63,238

 

 

 

64,901

 

Credit Cards

 

 

41

 

 

 

19

 

 

 

32

 

 

 

-

 

 

 

3,432

 

 

 

3,524

 

Automobile loans

 

 

2,153

 

 

 

304

 

 

 

-

 

 

 

397

 

 

 

101,417

 

 

 

104,271

 

Other consumer loans

 

 

95

 

 

 

10

 

 

 

-

 

 

 

24

 

 

 

11,786

 

 

 

11,915

 

Municipal loans

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,901

 

 

 

4,901

 

Gross loans

 

 

5,191

 

 

 

1,266

 

 

 

32

 

 

 

7,045

 

 

 

827,154

 

 

 

840,688

 

Less: Unamortized net deferred loan fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(739)

 

 

(739)

Loans held for investment

 

$5,191

 

 

$1,266

 

 

$32

 

 

$7,045

 

 

$826,415

 

 

$839,949

 

 

 
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There were $6.0 million and $7.0 million in nonaccrual loans at December 31, 2025 and December 31, 2024, respectively.  There was no income recognized on nonaccrual loans during the years ended December 31, 2025 and 2024.

 

The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated (dollars in thousands).

 

 

 

December 31, 2025

 

 

December 31, 2024

 

 

 

Nonaccrual loans

 

 

Nonaccrual loans

 

 

 

With no Allowance

 

 

With an Allowance

 

 

Total

 

 

With no Allowance

 

 

With an Allowance

 

 

Total

 

1-4 Family residential construction

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

Other construction, land development and land

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14

 

 

 

-

 

 

 

14

 

Secured by farmland

 

 

-

 

 

 

434

 

 

 

434

 

 

 

53

 

 

 

-

 

 

 

53

 

Home equity – open end

 

 

462

 

 

 

-

 

 

 

462

 

 

 

501

 

 

 

-

 

 

 

501

 

Real estate

 

 

2,206

 

 

 

102

 

 

 

2,308

 

 

 

916

 

 

 

-

 

 

 

916

 

Owner-occupied commercial real estate

 

 

2,201

 

 

 

-

 

 

 

2,201

 

 

 

2,147

 

 

 

1,269

 

 

 

3,416

 

Other commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

785

 

 

 

-

 

 

 

785

 

Agricultural loans

 

 

60

 

 

 

112

 

 

 

172

 

 

 

171

 

 

 

-

 

 

 

171

 

Commercial and industrial

 

 

29

 

 

 

-

 

 

 

29

 

 

 

768

 

 

 

-

 

 

 

768

 

Automobile loans

 

 

389

 

 

 

-

 

 

 

389

 

 

 

397

 

 

 

-

 

 

 

397

 

Other consumer loans

 

 

42

 

 

 

-

 

 

 

42

 

 

 

24

 

 

 

-

 

 

 

24

 

Total loans

 

$5,389

 

 

$648

 

 

$6,037

 

 

$5,776

 

 

$1,269

 

 

$7,045

 

 

Collateral Dependent Disclosures

 

The collateral method is applied to individually evaluated loans for which foreclosure is probable. The collateral method is also applied to individually evaluated loans when borrowers are experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

 

The following table presents the total recorded investment in collateral-dependent loans of the Company as of the periods noted (dollars in thousands):

 

 

 

Collateral Dependent Loans and Leases

 

 

 

December 31,

 

 

 

2025

 

 

2024

 

Secured by farmland

 

$434

 

 

$-

 

Home equity – open end

 

 

175

 

 

 

-

 

Real estate

 

 

868

 

 

 

-

 

Owner-occupied commercial real estate

 

 

2,201

 

 

 

3,416

 

Other commercial real estate

 

 

-

 

 

 

785

 

Agricultural loans

 

 

112

 

 

 

-

 

Commercial and industrial

 

 

-

 

 

 

605

 

Total loans

 

$3,790

 

 

$4,806

 

 

 
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Troubled Loan Modifications

 

Loan modifications where the borrower is experiencing financial difficulty and the modification is in the form of principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, or a combination of the above modifications, are defined by the Company as troubled loan modifications (“TLMs”). The allowance for credit losses on loans (“ACLL”) on troubled loan modifications is measured using the same method as other loans held for investment.

 

The Company evaluates all loan modifications according to the accounting guidance for loan refinancing and restructuring to determine whether the modification should be accounted for as a new loan or a continuation of the existing loan. If the modification meets the criteria to be accounted for as a new loan, any deferred fees and costs remaining prior to the modification are recognized in income and any new deferred fees and costs are recorded on the loan as part of the modification. If the modification does not meet the criteria to be accounted for as a new loan, any new deferred fees and costs resulting from the modification are added to the existing amortized cost basis of the loan. 

 

The following tables present the amortized cost of loans and leases to borrowers experiencing financial difficulty by class of financing receivable, type of modification, financial effect of the modification, and percentage of the amortized cost basis of modifications as compared to the amortized cost basis of each loan segment for the periods presented (dollars in thousands).

 

Term Extensions as of December 31, 2025

 

 

 

Amortized Cost Basis

 

 

% of Total Loan Type

 

 

Financial Effect

 

Automobile loans

 

$23

 

 

 

0.03%

 

Added a weighted-average of 13.4 months to the life of the loans.

 

Total Term Extensions

 

$23

 

 

 

 

 

 

 

 

 

Interest Rate Reductions as of December 31, 2025

 

 

 

Amortized Cost Basis

 

 

% of Total Loan Type

 

 

Financial Effect

 

Home equity – closed end

 

$54

 

 

 

0.90%

 

Reduced the contractual interest rate from 9.25% to 8.00%.

 

Total Interest Rate Reductions

 

$54

 

 

 

 

 

 

 

 

 

Term Extensions as of December 31, 2024

 

 

 

Amortized Cost Basis

 

 

% of Total Loan Type

 

 

Financial Effect

 

Real estate

 

$7

 

 

 

<0.01%

 

Added a weighted-average of 11 months to the life of the loan.

 

Other commercial real estate

 

 

10

 

 

 

0.01%

 

Added a weighted-average of 13 months to the life of the loan.

 

Automobile loans

 

 

111

 

 

 

0.11%

 

Added a weighted-average of 4.4 months to the life of the loans.

 

Total Term Extensions

 

$128

 

 

 

0.03%

 

 

 

 

Interest Rate Reductions as of December 31, 2024

 

 

 

Amortized Cost Basis

 

 

% of Total Loan Type

 

 

Financial Effect

 

Owner-occupied commercial real estate

 

$5,448

 

 

 

5.55%

 

Reduced the contractual interest rate from 7.53% to 5.99%.

 

Total Interest Rate Reductions

 

$5,448

 

 

 

 

 

 

 

 

 

Other than Insignificant Payment Delays as of December 31, 2024

 

 

 

Amortized Cost Basis

 

 

% of Total Loan Type

 

 

Financial Effect

 

Owner-occupied commercial real estate

 

$1,205

 

 

 

1.23%

 

Delayed principal payments for 6 months.

 

Total Other than Insignificant Payment Delays

 

$1,205

 

 

 

 

 

 

 

 

 

 
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The following tables present an aging analysis of the amortized cost of TLMs as of the dates stated (dollars in thousands).

 

 

 

December 31, 2025

 

 

 

Current Loans

 

 

30-89 Days Past Due

 

 

Greater than 90 Days Past Due & Accruing

 

 

Nonaccrual

 

 

Total

 

Home equity – closed end

 

$-

 

 

$-

 

 

$-

 

 

$1

 

 

$1

 

Real estate

 

 

-

 

 

 

54

 

 

 

-

 

 

 

-

 

 

 

54

 

Owner occupied commercial real estate

 

 

5,360

 

 

 

-

 

 

 

-

 

 

 

891

 

 

 

6,251

 

Automobile loans

 

 

19

 

 

 

8

 

 

 

-

 

 

 

23

 

 

 

50

 

Total modified loans

 

$5,379

 

 

$62

 

 

$-

 

 

$915

 

 

$6,356

 

 

 

 

December 31, 2024

 

 

 

Current Loans

 

 

30-89 Days Past Due

 

 

Greater than 90 Days Past Due & Accruing

 

 

Nonaccrual

 

 

Total

 

Real estate

 

$7

 

 

$-

 

 

$-

 

 

$-

 

 

$7

 

Owner occupied commercial real estate

 

 

6,653

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,653

 

Other commercial real estate

 

 

10

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

Automobile loans

 

 

62

 

 

 

49

 

 

 

-

 

 

 

-

 

 

 

111

 

Total modified loans

 

$6,732

 

 

$49

 

 

$-

 

 

$-

 

 

$6,781

 

 

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The Company considers a default on a TLM to occur when the borrower is 90 days past due following the modification or a foreclosure and repossession of the applicable collateral occurs.  No loan or lease modifications to borrowers experiencing financial difficulty had a payment default at December 31, 2025 and 2024.

 

The Company monitors the performance of TLMs to determine the effectiveness of the modifications. As of December 31, 2025 and 2024, $62 thousand and $49 thousand, respectively, in loans modified and designated as a TLM were past due. The Company did not have any unfunded commitments on loans modified and designated as TLMs as of December 31, 2025.

 

Unfunded Commitments

 

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit. The allowance for off-balance sheet credit exposures is adjusted as a provision for (recovery of) credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over their estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans and are discussed above. The allowance for credit losses for unfunded loan commitments was $764 thousand and $647 thousand at December 31, 2025 and 2024, respectively, is separately classified on the Consolidated Balance Sheets within Other liabilities.

 

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the periods indicated (dollars in thousands).

 

 

 

2025

 

 

2024

 

Balance as of January 1

 

$647

 

 

$690

 

Provision for (recovery of) credit losses – unfunded commitments

 

 

117

 

 

 

(43)

Balance as of December 31

 

$764

 

 

$647

 

 

 
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NOTE 5 BANK PREMISES AND EQUIPMENT

 

Bank premises and equipment as of December 31 are summarized as follows (dollars in thousands):

 

 

 

2025

 

 

2024

 

Land

 

$5,063

 

 

$4,735

 

Buildings and improvements

 

 

18,015

 

 

 

17,989

 

Furniture and equipment

 

 

13,952

 

 

 

13,757

 

Total

 

 

37,030

 

 

 

36,481

 

Accumulated depreciation

 

 

(15,401)

 

 

(14,289)

Premises and equipment, net

 

$21,629

 

 

$22,192

 

 

Depreciation expense for the years ended December 31, 2025 and 2024 was $1.3 million and $1.4 million, respectively.

 

NOTE 6 LEASES

 

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs, and any incentives received from the lessor.

 

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term.  The Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised.  The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations. The Company has five operating leases for office properties.

 

The following tables present information about the Company’s leases (dollars in thousands):

 

 

 

December 31, 2025

 

 

December 31, 2024

 

Lease Liabilities (included in other liabilities)

 

$874

 

 

$589

 

Right-of-use assets (included in other assets)

 

$838

 

 

$558

 

Weighted average remaining lease term

 

9.34 years

 

 

9.02 years

 

Weighted average discount rate

 

 

3.85%

 

 

3.44%

 

 

 

 

 

 

 

 

 

Lease cost

 

2025

 

 

2024

 

Operating lease cost

 

$117

 

 

$134

 

Total lease cost

 

$117

 

 

$134

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$140

 

 

$155

 

 

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows (dollars in thousands):

 

 Lease payments due

 

As of December 31, 2025

 

 Twelve months ending December 31, 2026

 

$105

 

Twelve months ending December 31, 2027

 

 

101

 

Twelve months ending December 31, 2028

 

 

103

 

Twelve months ending December 31, 2029

 

 

106

 

Twelve months ending December 31, 2030

 

 

109

 

Thereafter

 

 

530

 

Total undiscounted cash flows

 

$1,054

 

Discount

 

 

(180)

Lease liabilities

 

$874

 

 

 
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NOTE 7 OTHER ASSETS

 

As of December 31, 2025, the Company was a partner in eleven low-income housing and historic equity partnerships with a carrying basis of $3.5 million.  The market values of these securities are estimated to approximate their carrying values as of December 31, 2025 since the partnership interests have limited transferability.  At December 31, 2025, the Company was committed to invest an additional $93 thousand in two low-income housing limited partnerships that has been reflected in accrued liabilities on the consolidated balance sheet.  These funds will be paid as requested by the general partner to complete the projects. 

 

NOTE 8 TIME DEPOSITS

 

Time deposits that meet or exceed the FDIC insurance limit of $250 thousand at year end 2025 and 2024 were $42.1 million and $57.6 million, respectively.  At December 31, 2025, the scheduled maturities of all time deposits are as follows (dollars in thousands):

 

2026

 

$206,957

 

2027

 

 

12,825

 

2028

 

 

2,396

 

2029

 

 

1,744

 

2030

 

 

1,491

 

Thereafter

 

 

-

 

Total

 

$225,413

 

 

NOTE 9 SHORT-TERM DEBT

 

The Company utilizes short-term debt such as Federal funds purchased and FHLB short-term borrowings to support loan growth and provide liquidity. Federal funds purchased are unsecured overnight borrowings from other financial institutions. FHLB short-term debt can be a daily rate variable loan that acts as a line of credit or a fixed rate advance, depending on the needs of the Company. FHLB advances are secured by a blanket lien on the qualifying loans in the Company’s residential, commercial, agriculture, and home equity loan portfolios. There was no outstanding short-term debt at December 31, 2025 or 2024.

 

As of December 31, 2025, the Company had unsecured lines of credit with correspondent banks totaling $90.0 million which may be used in the management of short-term liquidity, on which none was outstanding.  In addition, at December 31, 2025, the Bank had pledged investment securities with a par value totaling $118.9 million to the Federal Reserve System’s Discount Window. The Discount Window provides access to funding to help depository institutions manage their liquidity risks. The Bank did not borrow from the Discount Window during 2025.  In addition, the Bank had a secured line of credit with the FHLB with $180.1 million in available credit as of December 31, 2025. The FHLB line of credit is secured by a blanket lien on qualifying loans in the residential, commercial, agricultural real estate, and home equity portfolios.

 

NOTE 10 LONG-TERM DEBT

 

On October 24, 2025, the Company entered into a Subordinated Note Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company issued and sold $10.0 million in aggregate principal amount of 7.55% fixed to floating rate subordinated notes due November 1, 2035 (the “Notes”).

 

The Notes will initially bear interest at 7.55% per annum from and including November 1, 2025 to, but excluding, November 1, 2030, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2026. From and including November 1, 2030, to but excluding November 1, 2035, or up to an early redemption date, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (SOFR) plus 424.5 basis points, payable quarterly in arrears. Beginning on November 1, 2030, through maturity, the Notes may be redeemed, at the Company’s option, on any scheduled interest payment date. The Notes will mature on November 1, 2035. The Purchase Agreement contains certain customary representations, warranties and covenants.

 

 
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If certain events of default occur, such as the bankruptcy of the Company, the principal amount of the Notes will become and be immediately due and payable without any declaration or other act on the part of the holder of a Note. The Notes will be unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes are not convertible into common stock or preferred stock, and are not callable by the holders.

 

The Notes have been structured to qualify as Tier 2 capital under regulatory guidelines for bank holding companies. The Company used the proceeds from the sale of the Notes to redeem the Company’s existing subordinated debt and for such other general corporate purposes as the Company may determine. 

 

On October 31, 2025 the Company redeemed in full a $7.0 million 6.00% fixed to floating rate subordinated note issued by the Company to an institutional accredited investor on July 29, 2020 and due July 31, 2030.  The note had an aggregate principal amount of $7.0 million. The note initially bore interest at 6.00% per annum, beginning July 29, 2020 but excluding July 31, 2025, payable semi-annually in arrears. From and including July 31, 2025 through July 30, 2030, or up to an early redemption date, the interest rate would reset quarterly to an interest rate per annum equal to the current three-month SOFR plus 593 basis points, payable quarterly in arrears. Beginning on July 31, 2025 through maturity, the note could be redeemed, at the Company’s option, on any scheduled interest payment date. On September 30, 2025, the Company gave notice of full redemption on October 31, 2025 to the holder of the subordinated note.

 

NOTE 11 COMMITMENTS AND CONTINGENCIES

 

The Company makes commitments to extend credit in the normal course of business and issues standby letters of credit to meet the financing needs of its customers.  The amount of the commitments represents the Company's exposure to credit loss that is not included in the consolidated balance sheet.  As of December 31, 2025 and 2024, the Company had the following commitments outstanding (dollars in thousands):

 

 

 

2025

 

 

2024

 

Commitments to extend credit

 

$253,244

 

 

$229,330

 

Standby letters of credit

 

 

2,692

 

 

 

3,654

 

 

The Company uses the same credit policies in making commitments to extend credit and issue standby letters of credit as it does for the loans reflected in the consolidated balance sheet.

 

Commitments to extend credit are agreements to lend to a customer if there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis. Collateral required, if any, upon extension of credit is based on management's evaluation of the borrower’s ability to pay.  Collateral may include accounts receivable, inventory, property, plant and equipment.

 

As of December 31, 2025 and 2024, the Company had cash deposits in other commercial banks in excess of FDIC insurance limits totaling $3.2 million and $4.8 million, respectively. The Bank has established procedures for measuring and monitoring the concentration risk in correspondent banks and performs quarterly reviews of the financial condition of correspondent banks to assess and monitor risks.

 

NOTE 12 DERIVATIVES

 

Mortgage Banking Derivatives

 

Loans Held for Sale (“LHFS”) - The Bank originates residential mortgage loans for sale in the secondary market. Residential mortgage loans held for sale are sold to the permanent investor with the mortgage servicing rights released. Fair value of the Company’s LHFS is based on observable market prices for the identical instruments traded in the secondary mortgage loan markets in which the Company conducts business, totaling $3.2 million as of December 31, 2025, of which $3.2 million is related to unpaid principal. The Company’s portfolio of LHFS is classified as Level 2.

 

 
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Interest Rate Lock Commitments and Forward Sales Commitments - The Bank enters commitments to originate residential mortgage loans in which the interest rate on the loan is determined prior to funding, termed interest rate lock commitments (“IRLCs”). Such rate lock commitments on mortgage loans to be sold in the secondary market are derivatives. Upon entering a commitment to originate a loan, the Company protects itself from changes in interest rates during the period prior to sale by requiring a firm purchase agreement from a permanent investor before a loan can be closed (forward sales commitment).

 

The Company locks in the loan and rate with an investor and commits to deliver the loan if settlement occurs on a best-efforts basis, thus limiting interest rate risk. Certain additional risks exist if the investor fails to meet its purchase obligation; however, based on historical performance and the size and nature of the investors, the Company does not expect them to fail to meet their obligation. The Company determines the fair value of the IRLCs based on the price of the underlying loans obtained from an investor for loans that will be delivered on a best-efforts basis while taking into consideration the probability that the rate loan commitments will close.

 

The fair value of these derivative instruments is reported in “Other assets” in the Consolidated Balance Sheet at December 31, 2025, and totaled $37 thousand, with a notional amount of $4.5 million and total positions of 17. The fair value of the IRLCs at December 31, 2024 totaled $18 thousand, with a notional amount of $3.2 million and total positions of 13. Changes in fair value are recorded as a component of “Mortgage banking income” in the Consolidated Income Statement for the years ended December 31, 2025 and 2024. The Company’s IRLCs are classified as Level 2. At December 31, 2025 and 2024, each IRLC and all LHFS were subject to a forward sales commitment on a best- efforts basis.

 

The Company uses fair value accounting for its forward sales commitments related to IRLCs and LHFS under ASC 825-10-15-4(b). The fair value of forward sales commitments was reported in “Other Assets” in the Consolidated Balance Sheet at December 31, 2025 totaled $20 thousand, with a notional amount of $7.0 million and total positions of 27. The fair value of forward sales commitments reported in “Other Assets” in the Consolidated Balance Sheet at December 31, 2024 totaled $41 thousand, with a notional amount of $4.3 million and total positions of 18.  

 

NOTE 13 ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The balances in accumulated other comprehensive loss are shown in the following table (dollars in thousands):

 

 

 

Unrealized Securities Gains (Losses)

 

 

Adjustments Related to Pension Plan

 

 

Accumulated Other Comprehensive Loss

 

 

Balance at December 31, 2023

 

$(31,774)

 

$757

 

 

$(31,017)

Change in unrealized securities gains, net of tax of $1,053

 

 

3,955

 

 

 

-

 

 

 

3,955

 

Change in unfunded pension liability, net of tax of $84

 

 

-

 

 

 

(315)

 

 

(315)

Balance at December 31, 2024

 

$(27,819)

 

$442

 

 

$(27,377)

Change in unrealized securities gains, net of tax of $2,978

 

 

11,207

 

 

 

-

 

 

 

11,207

 

Change in unfunded pension liability, net of tax benefit of $116

 

 

-

 

 

 

(434)

 

 

(434)

Balance at December 31, 2025

 

$(16,612)

 

$8

 

 

$(16,604)

 

During 2025 and 2024, there were no realized security gains or losses reclassified out of unrealized loss on available for sale securities and reclassified into net investment security losses on the consolidated statements of income.

 

NOTE 14 REGULATORY MATTERS

 

Banking regulators have established a uniform system to address the adequacy of capital for financial institutions.  The rules require minimum capital levels based on risk-adjusted assets.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material impact on the Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

 

 
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Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer requirement is 2.50%. The Company’s capital conservation buffer for 2025 was 6.04% and for 2024 was 5.39%. The capital conservation buffer is designed to strengthen an institution’s financial resilience during economic cycles.  Financial institutions are required to maintain a minimum buffer as required by the Basel III final rules to avoid restrictions on capital distributions and other payments If the Company dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Federal and state banking regulations place certain restrictions on dividends paid by the Company. The total amount of dividends that may be paid at any date is generally limited to retained earnings of the Company.

 

As required by the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), qualifying banks and bank holding companies that have less than $10 billion in consolidated assets can elect to be subject to a 9% leverage ratio applied using less complex leverage calculations (commonly referred to as the community bank leverage ratio or “CBLR”). Under the rule, which became effective on January 1, 2020, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% are not subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and would be deemed to have met the well capitalized ratio requirements under the “prompt corrective action” framework. On November 2, 2025, federal banking regulators issued a proposed rule that would lower the CBLR from 9% to 8%.  No assurance can be made as to when and in what form a final rule will be adopted.  As of December 31, 2025, the Bank elected not to opt into the CBLR framework. The Bank does not expect to opt into the CBLR framework in 2026.

 

The minimum capital amounts and ratios are defined in the regulations and the amounts are set forth in the table below (dollars in thousands).  The Bank has maintained capital levels far above the minimum requirements throughout the year, and as of December 31, 2025 and 2024, the Bank met all capital adequacy requirements to which it was subject.

 

 

 

Actual

 

 

Minimum Capital Requirement

 

 

Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

 

December 31, 2025

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

Total risk-based ratio

 

$130,263

 

 

 

14.04%

 

$74,241

 

 

 

8.00%

 

$92,801

 

 

 

10.00%

Tier 1 risk-based ratio

 

 

121,679

 

 

 

13.11%

 

 

55,680

 

 

 

6.00%

 

 

74,241

 

 

 

8.00%

Common equity tier 1

 

 

121,679

 

 

 

13.11%

 

 

41,760

 

 

 

4.50%

 

 

60,321

 

 

 

6.50%

Tier 1 leverage ratio

 

 

121,679

 

 

 

8.73%

 

 

55,752

 

 

 

4.00%

 

 

69,690

 

 

 

5.00%

 

 

 

Actual

 

 

Minimum Capital Requirement

 

 

Minimum to be Well Capitalized Under Prompt Corrective Action Provisions

 

December 31, 2024

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

Total risk-based ratio

 

$120,892

 

 

 

13.39%

 

$72,223

 

 

 

8.00%

 

$90,279

 

 

 

10.00%

Tier 1 risk-based ratio

 

 

112,114

 

 

 

12.42%

 

 

54,168

 

 

 

6.00%

 

 

72,223

 

 

 

8.00%

Common equity tier 1

 

 

112,114

 

 

 

12.42%

 

 

40,626

 

 

 

4.50%

 

 

58,682

 

 

 

6.50%

Tier 1 leverage ratio

 

 

112,114

 

 

 

8.23%

 

 

54,472

 

 

 

4.00%

 

 

68,090

 

 

 

5.00%

 

NOTE 15 FAIR VALUE MEASUREMENTS

 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

 

 

Level 1 –

Valuation is based on quoted prices in active markets for identical assets and liabilities.

 

Level 2 –

Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.

 

Level 3 –

Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

 

 
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The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:

 

Available for Sale Securities (“AFS Securities”) - AFS Securities are recorded at fair value on a recurring basis. The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, benchmark yield curves, and market corroborated inputs. 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. The Company has contracted with a third-party portfolio accounting service vendor for valuation of its securities portfolio. No material differences were identified during the valuation for the years ended December 31, 2025 and 2024.

 

The carrying value of restricted FRB and FHLB stock approximates fair value based upon the redemption provisions of each security and is therefore excluded from the following table.

 

Loans Held for Sale - Residential loans originated for sale in the open market are carried at fair value. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). Gains and losses on the sale of loans are recorded within mortgage banking income on the Consolidated Statements of Income.    

 

Derivative assets – IRLCs - The Company recognizes IRLCs at fair value based on the price of the underlying loans obtained from an investor for loans that will be delivered on a best-efforts basis while taking into consideration the probability that the rate lock commitments will close.  The Company’s IRLCs are classified as Level 2. 

 

Derivative Asset/Liability – Forward Sale Commitments - The Company uses the fair value accounting for its forward sales commitments related to IRLCs and LHFS. Best-efforts sales commitments are entered into for loans intended for sale in the secondary market at the time the borrower commitment is made. The best-efforts commitments are valued using the committed price to the counterparty against the current market price of the interest rate lock commitment or mortgage loan held for sale. The Company’s forward sale commitments are classified Level 2.

 

The following tables present the balances of financial assets measured at fair value on a recurring basis as of December 31, 2025, and 2024 (dollars in thousands):

 

December 31, 2025

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Securities available for sale:

 

 

 

 

 

 

U.S. Treasury securities

 

$14,334

 

 

$-

 

 

$14,334

 

 

$-

 

U.S. Government agencies

 

 

55,152

 

 

 

-

 

 

 

55,152

 

 

 

-

 

Municipal securities

 

 

25,958

 

 

 

-

 

 

 

25,958

 

 

 

-

 

Mortgage-backed securities

 

 

226,311

 

 

 

-

 

 

 

226,311

 

 

 

-

 

Corporate debt securities

 

 

23,584

 

 

 

-

 

 

 

4,549

 

 

 

19,035

 

Total securities available for sale

 

$345,339

 

 

$-

 

 

$326,304

 

 

$19,035

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$3,191

 

 

$-

 

 

$3,191

 

 

$-

 

IRLC

 

 

37

 

 

 

-

 

 

 

37

 

 

 

-

 

Forward sales commitments

 

 

20

 

 

 

-

 

 

 

20

 

 

 

-

 

Total other assets

 

 

3,248

 

 

 

-

 

 

3,248

 

 

-

 

Assets at Fair Value

 

$348,587

 

 

$-

 

 

$329,552

 

 

$19,035

 

 

 
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December 31, 2024

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Securities available for sale:

 

 

 

 

 

 

U.S. Treasury securities

 

$18,614

 

 

$-

 

 

$18,614

 

 

$-

 

U.S. Government agencies

 

 

67,725

 

 

 

-

 

 

 

67,725

 

 

 

-

 

Municipal securities

 

 

38,207

 

 

 

-

 

 

 

38,207

 

 

 

-

 

Mortgage-backed securities

 

 

174,949

 

 

 

-

 

 

 

174,949

 

 

 

-

 

Corporate debt securities

 

 

28,175

 

 

 

-

 

 

 

4,512

 

 

 

23,663

 

Total securities available for sale

 

$327,670

 

 

$-

 

 

$304,007

 

 

$23,663

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$2,283

 

 

$-

 

 

$2,283

 

 

$-

 

IRLC

 

 

18

 

 

 

-

 

 

 

18

 

 

 

-

 

Forward sales commitments

 

 

41

 

 

 

-

 

 

 

41

 

 

 

-

 

Total other assets

 

 

2,342

 

 

 

-

 

 

2,342

 

 

-

 

Assets at Fair Value

 

$330,012

 

 

$-

 

 

$306,349

 

 

$23,663

 

 

The following table presents the change in corporate debt securities as of and for the year ended (dollars in thousands).

 

 

 

Corporate debt securities

 

Balance as of December 31, 2024

 

$23,663

 

Called security available for sale

 

 

4,900

 

Fair value adjustments

 

 

272

 

Balance as of December 31, 2025

 

$19,035

 

 

Fair Value – Nonrecurring Basis

 

Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

 

The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements:

 

Collateral Dependent Loans - In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.

 

Other Real Estate Owned - Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. Valuation of other real estate owned is determined using current appraisals from independent parties, a level two input. If current appraisals cannot be obtained prior to reporting dates, or if declines in value are identified after a recent appraisal is received, appraisal values are discounted, resulting in Level 3 estimates. If the Company markets the property with a realtor, estimated selling costs reduce the fair value, resulting in a valuation based on Level 3 inputs. The Company had no OREO at December 31, 2025, and OREO with a carrying value of $77 thousand at December 31, 2024.

 

 
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The Company markets OREO independently and with local realtors. Properties marketed by realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by selling costs.

 

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of December 31, 2025 and 2024 (dollars in thousands).  Fair values for December 31, 2025 and 2024 are estimated under the exit price notion in accordance with the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.”

 

The following tables summarize the Company’s financial assets that were measured at fair value on a nonrecurring basis during the period (dollars in thousands):

 

 

 

December 31, 2025

 

 

 

 

 

Fair Value Measurements Using:

 

 

 

Balance

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Collateral-dependent loans

 

$3,790

 

 

$-

 

 

$-

 

 

$3,790

 

 

 

 

December 31, 2024

 

 

 

 

 

Fair Value Measurements Using:

 

 

 

Balance

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Collateral-dependent loans

 

$4,806

 

 

$-

 

 

$-

 

 

$4,806

 

OREO

 

 

77

 

 

 

-

 

 

$-

 

 

 

77

 

 

The following table presents information about Level 3 Fair Value Measurements for December 31, 2025 and 2024 (dollars in thousands):

 

 

 

Fair Value at December 31, 2025

 

 

Valuation Technique

 

Significant Unobservable Inputs

 

Discount

 

Collateral Dependent Loans

 

$3,790

 

 

Discounted appraised value

 

Discount for selling costs and marketability

 

36.17-100%

 

 

 

 

Fair Value at December 31, 2024

 

 

Valuation Technique

 

Significant Unobservable Inputs

 

Discount

 

Collateral Dependent Loans

 

$4,806

 

 

Discounted appraised value

 

Discount for selling costs and marketability

 

 

34.26%

OREO

 

 

77

 

 

Discounted appraised value

 

Discount for selling costs and marketability

 

 

33.26%

 

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

 

The carrying values of cash and due from banks, federal funds sold, and restricted cash are of such short duration that carrying value reasonably approximates fair value (Level 1).

 

The carrying values of accrued interest receivable and accrued interest payable are of such short duration that carrying value reasonably approximates fair value (Level 2).

 

The carrying value of restricted equity investments approximates fair value based on the redemption provisions of each security (Level 2). The fair value of other investments is approximated by its carrying value (Level 3).

 

 
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The fair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans, and all other loans. The results are then adjusted to account for credit risk as described above. The fair value of the Company’s loan portfolio also considers illiquidity risk through the use of a discounted cash flow model to compensate for, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. This consideration of both credit risk and illiquidity risk provides an estimated exit price for the Company’s loan portfolio. Loans held for investment are reported as Level 3.

 

The carrying value of bank-owned life insurance reasonably approximates fair value, as these policies are reported at their cash surrender value, which is estimated based on information provided by insurance carriers (Level 3).

 

The carrying value of noninterest-bearing deposits approximates fair value (Level 1). The carrying values of interest-bearing demand, money market, and savings deposits approximates fair value based on their current pricing and are reported as Level 2. The fair values of time deposits were obtained using an income approach using recent issuance rates over the prior three months and a market rate analysis of recent offering rates for retail products.  Time deposits are reported as Level 2.

 

The fair value of the FHLB borrowings is estimated by discounting the future cash flows using current interest rates offered for similar advances (Level 2).

 

The fair value of the Company’s subordinated notes is estimated by utilizing recent issuance interest rates for subordinated debt offerings of similar issuer size (Level 3).

 

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Borrowers with fixed rate obligations may be less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates may be more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

 

The following tables (dollars in thousands) present estimated fair values and related carrying amounts of the Company’s financial instruments as of the dates indicated presented in accordance with the applicable accounting guidance.

 

 

 

December 31, 2025

 

 

 

 

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

 

Total Fair Value

 

 

 

Carrying Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Balance

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$68,853

 

 

$68,853

 

 

$-

 

 

$-

 

 

$68,853

 

Securities

 

 

345,339

 

 

 

-

 

 

 

326,304

 

 

 

19,035

 

 

 

345,339

 

Other investments

 

 

2,254

 

 

 

-

 

 

 

-

 

 

 

2,254

 

 

 

2,254

 

Loans held for sale

 

 

3,191

 

 

 

-

 

 

 

3,191

 

 

 

-

 

 

 

3,191

 

Loans held for investment, net

 

 

878,435

 

 

 

-

 

 

 

-

 

 

 

871,151

 

 

 

871,151

 

Interest receivable

 

 

5,118

 

 

 

-

 

 

 

5,118

 

 

 

-

 

 

 

5,118

 

Bank owned life insurance

 

 

24,395

 

 

 

-

 

 

 

24,395

 

 

 

-

 

 

 

24,395

 

IRLC

 

 

37

 

 

 

-

 

 

 

37

 

 

 

-

 

 

 

37

 

Forward sales commitments

 

 

20

 

 

 

-

 

 

 

20

 

 

 

-

 

 

 

20

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$279,398

 

 

$279,398

 

 

$-

 

 

$-

 

 

$279,398

 

Interest checking deposits

 

 

148,624

 

 

 

-

 

 

 

148,624

 

 

 

-

 

 

 

148,624

 

Savings deposits

 

 

591,777

 

 

 

-

 

 

 

591,777

 

 

 

-

 

 

 

591,777

 

Time deposits

 

 

225,413

 

 

 

-

 

 

 

225,156

 

 

 

-

 

 

 

225,156

 

Long-term debt

 

 

9,917

 

 

 

-

 

 

 

-

 

 

 

10,085

 

 

 

10,085

 

Interest payable

 

 

1,361

 

 

 

-

 

 

 

1,361

 

 

 

-

 

 

 

1,361

 

 

 
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December 31, 2024

 

 

 

 

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

 

Total Fair Value

 

 

 

Carrying Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Balance

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$56,961

 

 

$56,961

 

 

$-

 

 

$-

 

 

$56,961

 

Securities

 

 

327,620

 

 

 

-

 

 

 

304,007

 

 

 

23,663

 

 

 

327,670

 

Other investments

 

 

2,869

 

 

 

-

 

 

 

-

 

 

 

2,869

 

 

 

2,869

 

Loans held for sale

 

 

2,283

 

 

 

-

 

 

 

2,283

 

 

 

-

 

 

 

2,283

 

Loans held for investment, net

 

 

831,820

 

 

 

-

 

 

 

-

 

 

 

808,812

 

 

 

808,812

 

Interest receivable

 

 

4,939

 

 

 

-

 

 

 

4,939

 

 

 

-

 

 

 

4,939

 

Bank owned life insurance

 

 

23,607

 

 

 

-

 

 

 

23,607

 

 

 

-

 

 

 

23,607

 

IRLC

 

 

18

 

 

 

-

 

 

 

18

 

 

 

-

 

 

 

18

 

Forward sales commitments

 

 

41

 

 

 

-

 

 

 

41

 

 

 

-

 

 

 

41

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$260,301

 

 

$260,301

 

 

$-

 

 

$-

 

 

$260,301

 

Interest checking deposits

 

 

138,919

 

 

 

-

 

 

 

138,919

 

 

 

-

 

 

 

138,919

 

Savings deposits

 

 

497,577

 

 

 

-

 

 

 

497,577

 

 

 

-

 

 

 

497,577

 

Time deposits

 

 

298,308

 

 

 

-

 

 

 

297,920

 

 

 

-

 

 

 

297,920

 

Long-term debt

 

 

6,975

 

 

 

-

 

 

 

-

 

 

 

6,917

 

 

 

6,917

 

Interest payable

 

 

1,900

 

 

 

-

 

 

 

1,900

 

 

 

-

 

 

 

1,900

 

 

NOTE 16 EMPLOYEE BENEFITS

 

Defined Benefit Pension Plan - The Company has a qualified noncontributory defined benefit pension plan which covers substantially all employees hired before April 1, 2012.  The plan was amended on February 15, 2023 to stop the accrual of future benefits and terminated on June 1, 2024. All vested benefit liabilities under the Plan were paid the fourth quarter of 2025; remaining assets to be distributed in the first quarter of 2026.

 

The Company uses December 31 as the measurement date for the defined benefit pension plan. The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets for 2025 and 2024 (dollars in thousands):

 

 

 

2025

 

 

2024

 

Change in Benefit Obligation

 

 

 

 

Benefit obligation, beginning

 

$3,377

 

 

$7,070

 

Service cost

 

 

-

 

 

 

-

 

Interest cost

 

 

56

 

 

 

317

 

Actuarial gain

 

 

-

 

 

 

(264)

Benefits paid

 

 

(4,039)

 

 

(3,467)

Decrease in obligation due to curtailment

 

 

-

 

 

 

-

 

Settlement (gain)

 

 

606

 

 

 

(279)

Benefit obligation, ending

 

$-

 

 

$3,377

 

 

 

 

 

 

 

 

 

 

Change in Plan Assets

 

 

 

 

 

 

 

 

Fair value of plan assets, beginning

 

$4,093

 

 

$7,502

 

Actual (loss) return on plan assets

 

 

(43)

 

 

58

 

Benefits paid

 

 

(4,039)

 

 

(3,467)

Fair value of plan assets, ending

 

$11

 

 

$4,093

 

Funded status at the end of the year

 

$11

 

 

$716

 

 

 
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The fair value of plan assets is measured based on the fair value hierarchy as discussed in Note 15, “Fair Value Measurements” to the Consolidated Financial Statements. The valuations are based on third party data received as of the balance sheet date. All plan assets are considered Level 1 assets, as quoted prices exist in active markets for identical assets.

 

 

 

2025

 

 

2024

 

Amount recognized in the Consolidated Balance Sheet

 

 

 

 

Prepaid benefit cost

 

$-

 

 

$156

 

Overfunded pension benefit obligation under ASC 325-960

 

 

11

 

 

 

560

 

Deferred taxes

 

 

119

 

 

 

84

 

 

 

 

 

 

 

 

 

 

Amount recognized in accumulated other

 

 

 

 

 

 

 

 

comprehensive loss

 

 

 

 

 

 

 

 

Net gain

 

$(11)

 

$(560)

Prior service cost

 

 

-

 

 

 

-

 

Amount recognized

 

 

(11)

 

 

(560)

Deferred taxes

 

 

3

 

 

 

118

 

Amount recognized in accumulated comprehensive loss

 

$(8)

 

$(442)

 

 

 

 

 

 

 

 

 

Accrued benefit detail

 

 

 

 

 

 

 

 

Benefit obligation

 

$-

 

 

$(3,377)

Fair value of assets

 

 

11

 

 

 

4,093

 

Unrecognized net actuarial (income)

 

 

(11)

 

 

(560)

Accrued benefits

 

$-

 

 

$156

 

 

 

 

 

 

 

 

 

 

Components of net periodic benefit cost

 

 

 

 

 

 

 

 

Service cost

 

$-

 

 

$-

 

Interest cost

 

 

56

 

 

 

317

 

Expected return on plan assets

 

 

(20)

 

 

(391)

Recognized net gain due to settlement

 

 

-

 

 

 

(589)

Recognized net actuarial loss (gain)

 

 

120

 

 

 

(19)

Net periodic benefit gain (cost)

 

$156

 

 

$(682)

 

 

 

 

 

 

 

 

 

Other changes in plan assets and benefit obligations

 

 

 

 

 

 

 

 

recognized in other comprehensive (income) loss

 

 

 

 

 

 

 

 

Net loss

 

$549

 

 

$399

 

Amortization of prior service cost

 

 

-

 

 

 

-

 

Total recognized in other comprehensive income

 

$549

 

 

$399

 

Total recognized in net periodic benefit cost and other

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$704

 

 

$(283)

Additional disclosure information

 

 

 

 

 

 

 

 

Accumulated benefit obligation

 

$-

 

 

$3,377

 

Vested benefit obligation

 

$-

 

 

$3,377

 

Discount rate used for net pension cost

 

 

N/A

 

 

 

4.75%

Discount rate used for disclosure

 

 

 

 

 

 

 

 

First Five Years

 

 

N/A

 

 

 

4.17%

Five Years to Twenty Years

 

 

N/A

 

 

 

4.76%

After Twenty Years

 

 

N/A

 

 

 

5.25%

Retiree Annuities

 

 

N/A

 

 

 

4.50%

Expected return on plan assets

 

 

1.00%

 

 

5.50%

Rate of compensation increase

 

 

N/A

 

 

 

N/A

 

Average remaining service (years)

 

 

N/A

 

 

 

N/A

 

 

 
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Funding Policy - Due to the current funding status of the plan, the Company did not contribute to the plan in 2025 or 2024.  There will be no net periodic pension cost of the plan for 2026.  The Company was subject to settlement accounting in 2025.

 

Long-Term Rate of Return - The Company, as plan sponsor, selects the expected long-term rate of return on assets assumption in consultation with investment advisors and the plan actuary.  This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits.

 

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes.

 

Asset Allocation - The trust fund was 100% cash and equivalents as of December 31, 2025 and 2024 as the plan has terminated and all benefits were paid out in 2025.

 

Employee Stock Ownership Plan (ESOP) - The Company sponsors an ESOP, known as the F&M Bank Corp. Stock Bonus Plan (the “Plan”), which provides stock ownership to substantially all employees of the Company.  The Plan provides total vesting upon the attainment of five years of service.  Contributions to the plan are made at the discretion of the Board of Directors and are allocated based on the compensation of each employee relative to total compensation paid by the Company.  All shares issued and held by the Plan are considered outstanding in the computation of earnings per share. Dividends on Company stock are allocated and paid to participants at least annually. Shares of Company stock, when distributed, have restrictions on transferability.  The Company contributed $920 thousand in 2025 and $257 thousand in 2024 to the Plan and charged this expense to operations.  The shares held by the ESOP totaled 143,554 and 168,459 at December 31, 2025 and 2024, respectively.

 

401(k) Plan - The Company sponsors a 401(k) savings plan under which eligible employees may choose to save up to 20 percent of their salary on a pretax basis, subject to certain IRS limits. Under the Federal Safe Harbor rules employees are automatically enrolled at 3% (this increases by 1% per year up to 6%) of their salary unless elected otherwise. The Company matches one hundred percent of the first 1% contributed by the employee and fifty percent from 2% to 6% of employee contributions. Vesting in the contributions made by the Company is 100% after two years of service.  Contributions under the plan amounted to $383 thousand and $437 thousand in 2025 and 2024, respectively.

 

Deferred Compensation Plan - The Company has a nonqualified deferred compensation plan for its key employees and directors. The Company may make annual contributions to the plan, and the employee or director has the option to defer a portion of their salary or bonus based on qualifying annual elections. Contributions to the plan totaled $206 thousand in 2025 and $227 thousand in 2024.  A liability is accrued for the obligation under the plan and totaled $4.4 million and $3.6 million at December 31, 2025 and 2024, respectively.   

 

Investments in Life Insurance Contracts - The Bank currently offers a variety of benefit plans to all full-time employees. The costs of these plans are generally tax deductible to the Bank; however, to help offset the benefit costs and to attract and retain qualified employees, the Bank purchased Bank Owned Life Insurance (“BOLI”) contracts that will provide benefits to employees during their lifetime. Dividends received on these policies are tax-deferred and the death benefits under the policies are tax exempt.  Rates of return on a tax-equivalent basis are favorable when compared to other long-term investments which the Bank might make.  The accrued liability related to the BOLI contracts was $658 thousand and $735 thousand for December 31, 2025 and 2024, respectively.

 

Stock Incentive Plan - The Company has a Stock Incentive Plan adopted by the Company’s Board, effective upon shareholder approval on May 2, 2020 and will expire on March 18, 2030. The plan provides for the granting of an option, restricted stock, restricted stock unit, stock appreciation right, or stock award to employees, directors, and consultants. It authorizes the issuance of up to 200,000 shares of the Company’s common stock.

 

The Company’s Compensation Committee of the Board of Directors administers the plan including designating employees, directors, or other recipients to whom awards are to be granted, the amount of the award or equity to be granted, and the terms and conditions applicable to each award. On March 20, 2025, the Company’s Compensation Committee awarded 37,692 shares with a fair value of $728 thousand from this plan to selected employees. These shares vest 25% over each of the next four years. As of December 31, 2025 and 2024 the total unrecognized compensation cost related to the nonvested restricted stock awards were $962 thousand and $740 thousand, respectively.  Restricted stock compensation expense was $420 thousand and $226 thousand for the years ended December 31, 2025 and 2024, respectively.

 

 
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The following table summarizes the status of the Company’s nonvested awards for the year ended December 31, 2025:

 

 

 

Shares

 

 

Weighted-Average Grant Date Fair Value Per Share

 

Nonvested at December 31, 2024

 

 

49,056

 

 

$20.27

 

Granted

 

 

37,692

 

 

 

19.31

 

Vested

 

 

(15,521)

 

 

21.65

 

Forfeited

 

 

(2,931)

 

 

18.87

 

Nonvested at December 31, 2025

 

$68,296

 

 

$19.49

 

 

NOTE 17 INCOME TAXES

 

The components of income tax expense were as follows (dollars in thousands):

 

 

 

2025

 

 

2024

 

Current expense

 

$2,121

 

 

$931

 

Deferred benefit

 

 

(373)

 

 

(293)

Total Income Tax Expense

 

$1,748

 

 

$638

 

 

The following table provides information on the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 (dollars in thousands).

 

Deferred Tax Assets:

 

2025

 

 

2024

 

Allowance for credit losses

 

$1,645

 

 

$1,707

 

Allowance for unfunded commitments

 

 

165

 

 

 

136

 

Nonqualified deferred compensation obligations

 

 

929

 

 

 

812

 

Lease liabilities

 

 

184

 

 

 

124

 

Pass-through entities

 

 

659

 

 

 

526

 

Net unrealized losses on securities available for sale

 

 

4,416

 

 

 

7,393

 

Other

 

 

566

 

 

 

235

 

Total deferred tax assets

 

$8,564

 

 

$10,933

 

 

Deferred Tax Liabilities:

 

2025

 

 

2024

 

Depreciation

 

$575

 

 

$592

 

Goodwill

 

 

601

 

 

 

594

 

Right of use assets

 

 

176

 

 

 

117

 

Other investments

 

 

219

 

 

 

44

 

Other

 

 

14

 

 

 

121

 

Total deferred tax liabilities

 

 

1,585

 

 

 

1,468

 

Net deferred tax assets

 

$6,979

 

 

$9,465

 

 

During the year ended December 31, 2025, the Company made payments to federal tax authorities for income taxes in the amount of $1.15 million.

 

The following table provides a reconciliation of tax expense computed at the statutory federal tax rate and the recorded tax expense (in dollars in thousands and percentages) for the year ended December 31, 2025.

 

 

 

2025

 

 

 

Amount

 

 

Percent

 

Tax at federal statutory rate

 

$2,725

 

 

 

21.0%

Tax credits:

 

 

 

 

 

 

 

 

    Low-income housing

 

 

(740)

 

 

(5.7)%

Nontaxable or deductible items:

 

 

 

 

 

 

 

 

    Appreciation in cash surrender value of life insurance

 

 

(182)

 

 

(1.4)%

    Other

 

 

(55)

 

 

(0.4)%

Total Income Tax Expense

 

$1,748

 

 

 

13.5%

 

 
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The following table provides a reconciliation of tax expense computed at the statutory federal tax rate and the recorded tax expense (in thousands) for the year ended December 31, 2024.

 

 

 

2024

 

 

 

Amount

 

Tax at federal statutory rate

 

$1,664

 

Increases (decreases) in taxes resulting from:

 

 

 

 

    Tax-exempt income

 

 

(191)

    Low-income housing credits

 

 

(775)

    Other

 

 

(60)

Total Income Tax Expense

 

$638

 

 

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has recorded no liabilities related to uncertain tax positions in accordance with accounting guidance related to income taxes. The Company and its subsidiaries file federal income tax returns and state income tax returns. With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for years before 2022.

 

NOTE 18 RELATED PARTY TRANSACTIONS

 

In the ordinary course of business, the Company may have loans issued to its executive officers, directors, and principal shareholders. Pursuant to its policy, such loans are made in the ordinary course of business and do not involve more than the normal risk of collectability.

 

The Company’s subsidiary bank has made loans, in the normal course of business, to the directors and officers of the Company and its subsidiaries, and to their associates. The aggregate dollar amount of these loans was $18.4 million and $20.6 million at December 31, 2025 and 2024, respectively. During 2025, $4.0 million of advances or new loans were made and repayments totaled $6.2 million. During 2024, $3.8 million of advances or new loans were made and repayments totaled $4.0 million. There was a net decrease of $1.4 million during 2024 due to changes in individuals classified as a related party.

 

Deposits from related parties held by the Bank at December 31, 2025 and 2024 amounted to $7.6 million and $8.4 million respectively.

 

NOTE 19 PARENT COMPANY FINANCIAL INFORMATION

 

The primary source of funds for the dividends paid by F&M Bank Corp. (for this note only, the “Parent Company”) is dividends received from its subsidiaries. The payments of dividends by the Bank to the Parent Company are subject to certain statutory limitations which contemplate that the current year earnings and earnings retained for the two preceding years may be paid to the Parent Company without regulatory approval. As of December 31, 2025, the aggregate amount of unrestricted funds that could be transferred from the Bank to the Parent Company without prior regulatory approval totaled approximately $14.3 million or 13.69% of the consolidated shareholders’ equity. The Bank paid $3.7 million in dividends to the Parent Company in 2025.

 

 
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Financial information for the Parent Company is as follows:

 

PARENT COMPANY

CONDENSED BALANCE SHEETS

AS OF DECEMBER 31, 2025 and 2024

(Dollars in thousands)

 

 

 

2025

 

 

2024

 

Assets

 

 

Cash and cash equivalents

 

$4,909

 

 

$3,043

 

Investment in subsidiaries

 

 

108,394

 

 

 

88,074

 

Other assets

 

 

1,733

 

 

 

2,174

 

Total assets

 

$115,036

 

 

$93,291

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Long-term borrowings

 

$9,917

 

 

$6,975

 

Other liabilities

 

 

331

 

 

 

178

 

Total liabilities

 

 

10,248

 

 

 

7,153

 

Total shareholders' equity

 

 

104,788

 

 

 

86,138

 

Total liabilities and shareholders' equity

 

$115,036

 

 

$93,291

 

 

PARENT COMPANY

CONDENSED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2025 and 2024

(Dollars in thousands)

 

 

 

2025

 

 

2024

 

Income

 

 

 

 

Dividends received from subsidiaries

 

$4,096

 

 

$5,151

 

Other operating income

 

 

76

 

 

 

98

 

Total income

 

 

4,172

 

 

 

5,249

 

Expenses

 

 

 

 

 

 

 

 

Interest expense

 

 

597

 

 

 

462

 

Other operating expenses

 

 

48

 

 

 

42

 

Total expenses

 

 

645

 

 

 

504

 

Net income before income taxes and equity in undistributed net income from subsidiaries

 

 

3,527

 

 

 

4,745

 

Income tax benefit

 

 

(156)

 

 

(49)

Equity in undistributed net income from subsidiaries

 

 

7,546

 

 

 

2,491

 

Net Income

 

$11,229

 

 

$7,285

 

 

 
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PARENT COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2025 and 2024

(Dollars in thousands)

 

 

 

2025

 

 

2024

 

Operating activities:

 

 

 

 

Net income

 

$11,229

 

 

$7,285

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Equity in undistributed net income of subsidiaries

 

 

(7,546)

 

 

(2,491)

Amortization of debt issuance costs

 

 

29

 

 

 

43

 

Decrease (increase) in other assets

 

 

441

 

 

 

(411)

Decrease in other liabilities

 

 

(1,848)

 

 

(54)

Share based compensation expense

 

 

420

 

 

 

226

 

Net cash provided by operating activities

 

 

2,725

 

 

 

4,598

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from the sale of common stock

 

 

176

 

 

 

194

 

Proceeds from issuance of common stock

 

 

147

 

 

 

120

 

Purchases of common stock

 

 

(402)

 

 

-

 

Issuance of subordinated notes

 

 

9,913

 

 

 

-

 

Redemption of subordinated notes

 

 

(7,000)

 

 

-

 

Dividends paid in cash

 

 

(3,693)

 

 

(3,650)

Net cash used in financing activities

 

 

(859)

 

 

(3,336)

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

1,866

 

 

 

1,262

 

Cash and cash equivalents, beginning of the year

 

 

3,043

 

 

 

1,781

 

Cash and cash equivalents, end of the year

 

$4,909

 

 

$3,043

 

 

NOTE 20 SUBSEQUENT EVENTS

 

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

 

Management has reviewed the events occurring through the date the financial statements were issued and no additional subsequent events occurred requiring accrual or disclosure.

 

 
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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A.  Controls and Procedures.

 

Disclosure Controls and Procedures

 

The Company's management evaluated, with the participation of the Company's principal executive officer and principal financial officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective as of December 31, 2025 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

Because of the inherent limitations in all control systems, the Company believes that no system of controls, no matter how well designed and operated, can provide absolute assurance that all control issues have been detected.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Internal Control Over Financial Reporting

 

Management's Report on Internal Control Over Financial Reporting

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management's judgments and estimates concerning effects of events and transactions that are accounted for or disclosed.

 

Management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting includes those policies and procedures that pertain to the Company's ability to record, process, summarize and report reliable financial data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

 

In order to ensure that the Company's internal control over financial reporting is effective, management regularly assesses such controls and did so most recently for its financial reporting as of December 31, 2025. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO, 2013) of the Treadway Commission. Based on this assessment, management believes the Company maintained effective internal control over financial reporting as of December 31, 2025. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in its annual report.

 

The Board of Directors, acting through its Audit Committee, is responsible for the oversight of the Company's accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. The Audit Committee is responsible for the appointment and compensation of the independent registered public accounting firm and approves decisions regarding the appointment or removal of the Company's internal auditors.  It meets periodically with management, the independent registered public accounting firm and the internal auditors to ensure that they are carrying out their responsibilities.

 

The Audit Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting and auditing procedures of the Company in addition to reviewing the Company's financial reports. The independent registered public accounting firm and the internal auditors have full and unlimited access to the Audit Committee, with or without management, to discuss the adequacy of internal control over financial reporting, and any other matter which they believe should be brought to the attention of the Audit Committee.

 

Item 9B.  Other Information.

 

None.

 

Item 9C.   Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

 

None.

 

 
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PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.

 

Information regarding directors, executive officers and the audit committee financial expert is incorporated by reference from the Company’s definitive proxy statement for the Company’s 2026 Annual Meeting of Shareholders to be held on May 16, 2026 (“Proxy Statement”), under the captions “Corporate Governance and the Board of Directors – Committees of the Board – Audit Committee” and “Executive Officers who are not Directors.”

 

Information on Section 16(a) beneficial ownership reporting compliance for the directors and executive officers of the Company is incorporated by reference from the Proxy Statement under the caption “Delinquent Section 16(a) Reports.”

 

The Company has adopted a broad-based code of ethics for all employees and directors. The Company has also adopted a code of ethics tailored to senior officers who have financial responsibilities. A copy of the codes may be obtained without charge by request from the corporate secretary.

 

The Company has adopted an insider trading and reporting policy governing the purchase, sale, and other dispositions of our securities by our directors, officers, and employees. The Company does not transact in its own securities if it is aware of material nonpublic information about the Company. The Company believes that these policies are reasonably designed to promote compliance with insider trading laws, rules, regulations, and listing standards applicable to the Company. A copy of our insider trading and reporting policy is filed as Exhibit 19.1 to this report.

 

Item 11.  Executive Compensation.

 

This information is incorporated by reference from the Proxy Statement under the caption “Executive Compensation.”

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

This information is incorporated by reference from the Proxy Statement under the captions “Security Ownership of Directors and Executive Officers,” “Security Ownership of Certain Beneficial Owners” and “Executive Compensation.”

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

 

This information is incorporated by reference from the Proxy Statement under the caption “Certain Relationships and Related Transactions” and “Corporate Governance and the Board of Directors – Independence of Directors.”

 

Item 14.  Principal Accountant Fees and Services.

 

This information is incorporated by reference from the Proxy Statement under the caption “Fees of Independent Registered Public Accounting Firm.”

 

 
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PART IV

 

Item 15.  Exhibits and Financial Statement Schedules.

 

The following financial statements are filed as a part of this report:

 

(a)(1)  Financial Statements

 

The following consolidated financial statements and reports of independent auditors of the Company are in Part II, Item 8:

 

Report of Independent Registered Public Accounting Firm (PCAOB ID 149)

 

30

 

Report of Yount, Hyde & Barbour, P.C., Independent Registered Public Accounting Firm (PCAOB ID 613)

 

32

 

Consolidated Balance Sheets - December 31, 2025 and 2024

 

33

 

Consolidated Statements of Income - Years ended December 31, 2025 and 2024

 

34

 

Consolidated Statements of Comprehensive Income - Years ended December 31, 2025 and 2024

 

35

 

Consolidated Statements of Changes in Shareholders’ Equity – Years ended December 31, 2025 and 2024

 

36

 

Consolidated Statements of Cash Flows - Years ended December 31, 2025 and 2024

 

37

 

Notes to the Consolidated Financial Statements

 

38

 

 

(a)(2) Financial Statement Schedules

 

All schedules are omitted since they are not required, are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

 

 
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(a)(3) Exhibits

 

The following exhibits are filed as a part of this Form 10-K:

 

Exhibit No.

 

 

3.1

 

Restated Articles of Incorporation of F&M Bank Corp., incorporated herein by reference from F & M Bank Corp.’s Quarterly Report on Form 10-Q, filed November 14, 2013.

3.2

 

Articles of Amendment to the Articles of Incorporation of F&M Bank Corp. designating the Series A Preferred Stock, incorporated herein by reference from F&M Bank Corp.’s Current Report on Form 8-K filed December 4, 2014.

3.3

 

Amended and Restated Bylaws of F & M Bank Corp., incorporated herein by reference from Exhibit 3.1 to F&M Bank Corp.’s Current Report on Form 8-K, filed January 28, 2025.

4.1

 

Description of Securities, incorporated herein by reference from Exhibit 4.1 to F&M Bank Corp’s Annual Report on Form 10-K, filed March 16, 2020.

4.3

 

Form of 2035 Subordinated Note, incorporated herein by reference from Exhibit 4.1 to F&M Bank Corp.’s Current Report on Form 8-K, filed October 29, 2025.

10.1+

 

VBA Executives Deferred Compensation Plan for Farmers & Merchants Bank, incorporated herein by reference from F & M Bank Corp.’s Annual Report on Form 10-K, filed March 28, 2014.

10.2+

 

VBA Directors Non-Qualified Deferred Compensation Plan for Farmers & Merchants Bank, incorporated herein by reference from F & M Bank Corp.’s Annual Report on Form 10-K, filed March 28, 2014.

10.3+

 

Amended and Restated Employment Agreement, dated December 16, 2025, by and between F&M Bank Corp., Farmers & Merchants Bank, and Barton E. Black, incorporated herein by reference from Exhibit 10.2 to F&M Bank Corp.’s Current Report on Form 8-K, filed December 18, 2025.

10.4+

 

F&M Bank Corp. 2020 Stock Incentive Plan, incorporated herein by reference from Exhibit 10.1 to F&M Bank Corp.’s Quarterly Report on Form 10-Q, filed August 11, 2020.

10.5+

 

Form of Restricted Stock Award Agreement, incorporated herein by reference from Exhibit 10.7 from F&M Bank Corp.’s Form 10-K, filed March 22, 2023.

10.6

 

Form of 2035 Subordinated Note Purchase Agreement, incorporated herein by reference to Exhibit 10.1 to F&M Bank Corp.’s Current Report on Form 8-K filed October 29, 2025.

10.7+

 

Amended and Restated Employment Agreement, dated December 16, 2025, by and between F&M Bank Corp., Farmers & Merchants Bank, and Aubrey Michael Wilkerson, incorporated herein by reference from Exhibit 10.1 to F&M Bank Corp.’s Current Report on Form 8-K, filed December 18, 2025.

10.8+

 

Amended and Restated Employment Agreement, dated December 16, 2025, by and between F&M Bank Corp., Farmers & Merchants Bank, and Lisa F. Campbell, incorporated herein by reference from Exhibit 10.3 to F&M Bank Corp.’s Current Report on Form 8-K, filed December 18, 2025.

10.9+

 

F&M Bank Corp. 2023 Directors Stock Incentive Plan, incorporated herein by reference to Exhibit 4.1 to F&M Bank Corp.’s Registration Statement on Form S-8 (No. 333-279300), filed May 10, 2024.

10.10+

 

F & M Bank Corp. Employee Stock Purchase Plan, incorporated herein by reference to Exhibit 4.3 to F & M Bank Corp.’s Registration Statement on Form S-8 (No. 333-159074), filed May 8, 2009.

16.1

 

Letter of Yount, Hyde & Barbour, P.C., dated January 28, 2025, incorporated herein by reference to Exhibit 16.1 to F&M Bank Corp.’s Current Report on Form 8-K, filed January 28, 2025.

19.1

 

F&M Bank Corp. Insider Trading and Reporting Policy, incorporated herein by reference to Exhibit 19.1 to F&M Bank Corp.’s Annual Report on Form 10-K, filed March 28, 2025.

21.1

 

Subsidiaries of the Registrant

23.1

 

Consent of Elliott Davis, PLLC

23.2

 

Consent of Yount, Hyde & Barbour, P.C.

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

 

The following materials from F&M Bank Corp.’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) related notes (furnished herewith).

104

 

The cover page from F&M Bank Corp.’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL (included with Exhibit 101)

 

+ Indicates management contract or compensatory plan

 

Item 16.  Form 10-K Summary.

 

Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information.

 

 
78

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

(Registrant)

 

 

 

 

By: 

 /s/ Aubrey M. Wilkerson

 

 March 27, 2026 

 

 Aubrey M. Wilkerson

 

Date

 

 Director and Chief Executive Officer

 

 

 

 (Principal Executive Officer)

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and as of the date indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Aubrey M. Wilkerson

 

Director and Chief Executive Officer

 

March 27, 2026

Aubrey M. Wilkerson

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Lisa F. Campbell

 

Executive Vice President and

 

March 27, 2026

Lisa F. Campbell

 

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

 

 

 

 

 

 

 

/s/ Michael W. Pugh

 

Director, Chair

 

March 27, 2026

Michael W. Pugh

 

 

 

 

 

 

 

 

 

/s/ E. Ray Burkholder

 

Director

 

March 27, 2026

E. Ray Burkholder

 

 

 

 

 

 

 

 

 

/s/ Bret V. Harrison

 

Director

 

March 27, 2026

Bret V. Harrison

 

 

 

 

 

 

 

 

 

/s/ Neil Houff

 

Director

 

March 27, 2026

Neil Houff

 

 

 

 

 

 

 

 

 

/s/ Hannah Hutman

 

Director

 

March 27, 2026

Hannah Hutman

 

 

 

 

 

 

 

 

 

/s/ Anne Keeler

 

Director

 

March 27, 2026

Anne Keeler

 

 

 

 

 

 

 

 

 

/s/ Christopher S. Runion

 

Director

 

March 27, 2026

Christopher S. Runion

 

 

 

 

 

 

 

 

 

/s/ John Willingham

 

Director

 

March 27, 2026

John Willingham

 

 

 

 

 

 

 

 

 

/s/ Dean W. Withers

 

Director

 

March 27, 2026

Dean W. Withers

 

 

 

 

 

 

 

 

 

/s/ Peter H. Wray

 

Director

 

March 27, 2026

 Peter H. Wray

 

 

 

 

 

 
79

 

Source: View Original Filing on SEC EDGAR

FAQ

How did FMBM’s profitability change in 2025 compared with 2024?

F&M Bank Corp.’s profitability strengthened notably in 2025. Net income increased to $11.2 million from $7.3 million, and return on average assets rose to 0.85% while return on average equity climbed to 11.76%, reflecting wider margins and modest revenue growth.

What drove FMBM’s higher net interest income and margin in 2025?

Net interest income rose on both higher yields and lower funding costs. It increased to $41.5 million, while net interest margin expanded to 3.35%, helped by larger loan balances, better securities yields, and a 36-basis-point drop in the cost of funds to 2.15%.

How strong were FMBM’s capital ratios and balance sheet at year-end 2025?

The Bank remained well capitalized at December 31, 2025. Total risk-based capital was 14.04%, tier 1 and CET1 ratios were each 13.11%, assets reached $1.37 billion, and deposits totaled $1.25 billion, supporting continued lending growth.

What was the asset quality profile of FMBM’s loan portfolio in 2025?

Asset quality indicators were stable to improving. Nonperforming loans fell to $6.0 million, or 0.68% of total loans. The allowance for credit losses was $7.8 million, equal to 0.88% of loans and about 129% of nonperforming assets.

Did FMBM return capital to shareholders through dividends and buybacks in 2025?

Yes, F&M Bank Corp. continued shareholder distributions. The company paid four quarterly dividends totaling $1.04 per share in both 2025 and 2024 and repurchased 17,111 shares under a $2.2 million stock repurchase plan authorized in June 2025.

How did FMBM’s noninterest income and expenses change in 2025?

Noninterest income grew modestly while expenses increased faster. Noninterest income rose 3.76% to $11.2 million, with higher title insurance and card fee income. Noninterest expenses increased 7.51% to $37.0 million, mainly from higher salaries, benefits, professional fees, and card processing costs.

What cybersecurity posture and incidents did FMBM report for 2025?

The company emphasized a formal cybersecurity program and reported no material incidents. Its program aligns with FFIEC and NIST frameworks, uses third‑party testing, board oversight, and specialized leadership. F&M stated it had no cybersecurity events that materially affected its business in 2025.
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FMBM Latest News

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F&M Bank Corp. Reports First Quarter 2025 Earnings And Quarterly Dividend

FMBM Latest SEC Filings

Mar 27, 2026
[Form 4] F&M BANK CORP Insider Trading Activity
Mar 24, 2026
[Form 4] F&M BANK CORP Insider Trading Activity
Mar 24, 2026
[Form 4] F&M BANK CORP Insider Trading Activity
Mar 24, 2026
[Form 4] F&M BANK CORP Insider Trading Activity
Mar 23, 2026
[Form 4] F&M BANK CORP Insider Trading Activity

FMBM Stock Data

108.85M
3.16M
Banks - Regional
Financial Services
Link
United States
Timberville