F&M BANK CORP
For the period ended Jun 30, 2025. Filed Aug 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 14, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001654954-25-005678
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001654954-25-009632
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 91 current paragraphs.
23 unchanged; 20 reworded; 48 added; 27 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (48)
Current report
Comparing the Three-Month Periods Ending June 30, 2025 and June 30, 2024
Current report
Net income decreased $50,000 to $2.97 million, or $0.84 per share, for the three months ended June 30, 2025, compared to $3.01 million, or $0.86 per share, for the same period in 2024. Return on average assets was 0.91% and return on average equity was 12.81% for the second quarter of 2025, compared to 0.93% and 15.58%, respectively, for the same period in 2024.
Current report
The $50,000 decrease in net income resulted from a $2.3 million increase in net interest income offset by a $1.6 million increase in provision for credit losses, a $206,000 decrease in noninterest income, and a $542,000 increase in noninterest expenses.
Current report
Net interest income increased by $2.3 million as total interest income increased by $1.1 million and interest expense decreased by $1.2 million. Net interest income was positively impacted by a $33.1 million decrease in short-term debt, which was partially offset by a $13.9 million increase in deposits. The net interest margin increased 74-basis points to 3.48%.
Current report
Noninterest income decreased by $206,000 in the second quarter of 2025 from decreases in wealth management income and mortgage banking income. The decreases were partially offset by increases in title insurance income, card services and interchange income, and income on bank owned life insurance.
Current report
Noninterest expenses increased by $542,000 and were primarily attributable to an increase in employee benefits and data processing fees. Employee benefits in 2024 included a gain as a result of pension settlement accounting. The increases were partially offset by a decrease in salary expense and occupancy and equipment expense.
Current report
Comparing the Six-Month Periods Ending June 30, 2025 and June 30, 2024
Current report
Net income increased $1.2 million to $5.4 million, or $1.53 per share, for the six months ended June 30, 2025, compared to $4.2 million, or $1.21 per share, for the same period in 2024. Return on average assets was 0.84% and return on average equity was 12.08% for the six months ended June 30, 2025, compared to 0.65% and 10.96%, respectively, for the same period in 2024.
Current report
The $1.2 million increase in net income resulted from $3.6 million increase in net interest income and a $305,000 increase in noninterest income, which was partially offset by a $717,000 increase in provision for credit losses, a $1.6 million increase in noninterest expenses, and a $399,000 increase in income tax expense.
Current report
Net interest income increased $3.6 million from a $1.8 million increase in total interest income and a $1.9 million decrease in interest expense. Net interest income was positively impacted by a $53.2 million decrease in average borrowings coupled with a $5.3 million increase in average earning assets. Net interest margin increased 60-basis points to 3.32% at June 30, 2025, from 2.72% for the same period ended 2024.
Current report
Provision for credit losses increased by $717,000. For the six months ended June 30, 2025, provision for credit losses totaled $1.1 million and was comprised of a $902,000 provision for credit losses on loans and a $181,000 provision for credit losses on unfunded commitments. For the same period in 2024, the provision for credit losses totaled $366,000.
Current report
Noninterest income increased by $305,000 primarily from an increase in title insurance income, card services and interchange income, income on bank owned life insurance, and service charges. The increases were partially offset by a decrease in mortgage banking income.
Current report
Noninterest expenses increased by $1.6 million and were primarily attributable to an increase in salaries and employee benefits, data processing expense, and other operating expenses. Expenses related to the Company’s pension plan increased due to an increase in net periodic pension cost and pension settlement gains received in 2024.
Current report
Net Interest Income
Current report
Net interest income represents the primary source of earnings for the Company. Net interest income equals the amount by which interest income on interest-earning assets, predominantly loans and securities, exceeds interest expense on interest-bearing liabilities, including deposits, other borrowings, and subordinated debt. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, are the components that impact the level of net interest income. The net interest margin is calculated by dividing net interest income by average earning assets. The provision for credit losses, noninterest income, and noninterest expense are the other components that determine net income. Noninterest income and expense primarily consist of income from service charges on deposit accounts, revenue from wealth management services, mortgage banking, title insurance income, ATM and check card income, income from bank owned life insurance, and general and administrative expenses.
Current report
Three Month Period Ended June 30, 2025
Current report
Net interest income increased by $2.3 million, or 28%, to $10.5 million for the three months ended June 30, 2025 as compared to the same period in the prior year. Total interest income increased by $1.1 million and interest expense decreased by $1.2 million.
Current report
The increase in total interest income was attributed to a $543,000 increase in interest from securities available for sale, a $477,000 increase in interest and fees on loans held for investment, and a $169,000 increase in interest on federal funds sold. The increase in interest income from securities available for sale was attributable to a 77-basis point increase in yield compared to the same period in the prior year. The increase in interest income on loans held for investment was attributable to an 11-basis point increase in yield and 2% increase in average balance compared to the same period in the prior year. The increase in income on federal funds sold was attributable to a 120% increase in average balance.
Current report
The decrease in total interest expense was attributable to a $782,000 decrease in interest expense on deposits and a $452,000 decrease in interest expense on short-term debt. The lower interest expense on deposits resulted from a 40-basis point decrease in the cost of interest-bearing deposits and a 2% increase in average interest-bearing deposit balances. The decrease in cost of deposits was impacted by a decrease in rates paid on deposits and a change in the composition of the deposit portfolio as lower cost demand and savings deposit balances increased, while higher cost time deposit balances decreased. The lower interest expense on borrowings resulted from a $33.1 million decrease in the average balance of short-term borrowings.
Current report
The net interest margin was 3.48% for the second quarter of 2025 compared to 2.74% for the same period in the prior year as the yield on earning assets increased 31-basis points and the cost of funds decreased 40-basis points.
Current report
Six Month Period Ended June 30, 2025
Current report
Net interest income increased $3.6 million, or 22%, to $20.0 million for the first six months of 2025 compared to the same period in the prior year. Total interest income increased by $1.8 million and total interest expense decreased by $1.9 million.
Current report
The increase in total interest income was attributable to a $758,000 increase in interest income from securities available for sale, a $664,000 increase in interest income on federal funds sold, and a $590,000 increase in interest income and fees on loans held for investment. The increase in interest income from securities available for sale was attributable to a 69-basis point increase in yield. The increase in interest income on federal funds sold is attributable to a 256% increase in average balance. The increase in interest income on loans held for investment was attributable to an 8-basis point increase in yield and a 1% increase in average balance.
Current report
The decrease in total interest expense was attributable to a $420,000 decrease in interest expense on deposits and a $1.4 million decrease in interest expense on short-term debt. The lower interest expense on deposits resulted from a 21-basis point decrease in the cost of interest-bearing deposits. The decrease in the cost of interest-bearing deposits was impacted by a decrease in rates paid on deposits and a change in composition of the deposit portfolio as higher cost time deposit balances decreased, while lower cost demand and savings deposit balances increased. The lower interest expense on borrowings resulted from a $53.2 million decrease in average balances of borrowings.
Current report
Provision for (Recovery of) Credit Losses
Current report
The provision for credit losses totaled $1.2 million for the three-month period ended June 30, 2025, compared to a recovery of provision of $457,000 for the same period of the prior year. The provision was comprised of $1.1 million provision for credit losses on loans and $105,000 provision for credit losses on unfunded commitments. The increase in provision for credit losses on loans resulted primarily from net charge-offs totaling $531,000, an increase in the specific reserve component of the allowance for credit losses on loans, and an increase in the general reserve component of the allowance during the period resulting from a change in a qualitative factor related to loan volume.
Current report
The provision for credit losses totaled $1.1 million for the six-month period ended June 30, 2025, compared to $366,000 for the same period in the prior year. The provision was comprised of $902,000 provision for credit losses on loans and $181,000 provision for credit losses on unfunded commitments. The increase in provision for credit losses on loans resulted primarily from net charge-offs totaling $719,000, an increase in the specific reserve component of the allowance for credit losses, an increase in the general reserve component of the allowance during the period resulting from a change in a qualitative factors related to classified loans, loan review, and loan volume, which were partially offset by decreases in the qualitative factor related to economic conditions.
Current report
Noninterest Income
Current report
Noninterest income decreased $206,000, or 7%, to $2.8 million for the second quarter of 2025, compared to the same period of 2024. The decrease resulted from a $404,000 decrease in mortgage banking income due to a decrease in originations held for sale. The decrease in mortgage banking income was offset by a $157,000 increase in title insurance income due to increased title premium and loan closing volume.
Current report
Total noninterest income increased $305,000, or 6%, to $5.6 million for the six months ended June 30, 2025, compared to the same period in 2024. The increase resulted from a $209,000 increase in title insurance income due to increased title premiums and loan closing volume and a $112,000 increase in card services and interchange income due to renegotiated interchange contracts. These increases were offset by a $209,000 decrease in mortgage banking income due to a decrease in originations of loans held for sale.
Current report
Noninterest Expense
Current report
Noninterest expenses increased $542,000, or 7%, to $8.7 million for the three-month period ended June 30, 2025, compared to the same period one year ago. The increase was primarily attributable to a combined $430,000 increase in salaries and employee benefits and a $118,000 increase in data processing expense. Salaries and benefits were lower in 2024 due to pension settlement gains of $547,000 and lower periodic pension costs. Data processing expense increased due to development and implementation of advanced technology for process improvements.
Current report
Noninterest expenses increased $1.6 million, or 10%, to $18.2 million for the six-month period ended June 30, 2025, compared to the same period one year ago. The increase was primarily attributable to a $1.0 million increase in combined salaries and employee benefits, a $312,000 increase in data processing expense, and a $262,000 increase in other operating expenses. Salaries and employee benefits increased due to increased net periodic pension costs, no pension settlement gains in 2025, and a lower refund (rebate) of health insurance expenses. Data processing expenses increased due to new products provided by our core provider and additional software contracts process improvements. The increase in other operating expenses is attributable to an increase in fraud losses and collection expenses.
Current report
Income Taxes
Current report
Income tax expense decreased $16,000 for the second quarter of 2025, compared to the same period one year ago. The effective tax rate, before tax credits, for the second quarter of 2025 was 18.98% compared to 19.17% for the same period in 2024. The Company’s income tax expense differed from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the three months ended June 30, 2025, and 2024. The difference was a result of net permanent tax deductions, primarily comprised of tax-exempt interest income, income from bank owned life insurance, and low-income housing credits. A more detailed discussion of the Company’s tax calculation is contained in Note 18 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Current report
Income tax expense, before tax credits, increased $399,000, or 85%, for the first six months of 2025 compared with the same period in 2024. The effective tax rate for the first six months of 2025 was 19.77% compared with 18.37% for the same period in 2024. The decreased effective tax rate for 2025 was the result of increased permanent tax differences in 2025 compared to 2024.
Current report
General
Current report
Assets totaled $1.3 billion at June 30, 2025, which was an increase of $9.9 million or 1% from December 31, 2024. The asset composition changed during the first six months of the year as loans held for investment, net of the allowance for loan losses, increased by $8.6 million, securities available for sale increased by $12.4 million and federal funds sold decreased by $11.2 million.
Current report
Total liabilities increased $1.3 million during the six-month period ended June 30, 2025 from December 31, 2024, primarily due to an increase in deposits during the first six months of 2025. Composition of deposits as of June 30, 2025 changed as non-interest bearing deposits increased $18.0 million and interest bearing deposits decreased $16.7 million.
Current report
Total shareholders’ equity increased $8.6 million during the first six months of 2025, primarily from a $3.6 million increase in retained earnings and a $4.7 million decrease in accumulated other comprehensive loss. Retained earnings increased as $5.4 million of net income was partially offset by $1.8 million of cash dividends on common stock. The decrease in accumulated other comprehensive loss was attributable to lower unrealized losses in the available-for-sale securities portfolio. The Bank’s capital ratios continued to exceed the minimum capital requirements for regulatory purposes.
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Removed paragraphs (27)
Previous report
Net income for the first quarter of 2025 was $2.5 million, or $0.70 per share, compared to $1.2 million, or $0.35 per share, for the first quarter of 2024—an increase of $1.2 million, or $0.35 per share. Return on average assets was 0.76% and return on average equity was 11.31% for the three months ended March 31, 2025, both improving from the prior-year period. The increase in net income was primarily driven by two factors: (1) lower total interest expense following the redemption of short-term debt, and (2) a recovery of provision for credit losses of $104,000, compared to a provision of $823,000 in the prior year, resulting in a net improvement of $927,000 in provision expense. These factors, coupled with an increase of $687,000 in interest income, increased net interest income to $9.4 million at March 31, 2025 from $8.1 million at March 31, 2024.
Previous report
Net Interest Income and Net Interest Margin
Previous report
Net interest income for first quarter 2025 was $9.4 million, an increase of $1.3 million over first quarter 2024. Interest income for first quarter 2025 increased $687,000 due to higher interest rates, while interest expense decreased $628,000 due to no short-term debt. Net interest margin for the quarter ended March 31, 2025 was 3.15%, up 45 basis points from the quarter ended March 31, 2024. Higher average balances in loans held for investment and federal funds sold were offset by a decline in average balances of investments and interest-bearing deposits in banks. The earning asset yield increased 26 basis points to 5.43% from 5.17%. Cost of interest-bearing liabilities decreased 20 basis points to 2.94%. Interest expense on deposits increased $363,000 due to an increase in the average balance of savings and time deposits; however, interest expense on debt decreased $991,000 due to redemption of short-term FHLB advances.
Previous report
During first quarter 2025, the Bank recorded a recovery of provision for credit losses of $104,000, compared to a provision of $823,000 in first quarter 2024. The current quarter recovery of provision was the result of a $12.9 million decrease in total loans held for investment and decreased net loan charge-offs during the first three months of 2025. The recovery of provision also included a provision of $76,000 in the reserve for unfunded commitments that resulted from an increase in outstanding loan commitments. At March 31, 2025, the ACL totaled $7.8 million or 0.94% of gross loans outstanding.
Previous report
Non-interest income
Previous report
Non-interest income totaled $2.8 million for first quarter 2025, an increase of $513,000. The increase resulted from increases across all categories, notably $214,000 in mortgage banking income, $95,000 in wealth management, and $53,000 in title insurance income. Non-interest income to average assets increased to 0.88% at March 31, 2025 compared to 0.72% at March 31, 2024.
Previous report
Non-interest Expense
Previous report
Non-interest expenses totaled $9.5 million for first quarter 2025, compared to $8.4 million for the first quarter 2024, an increase of $1.1 million. Salaries increased $347,000 largely due to higher commissions paid related to wealth management and mortgage banking income, and an increase in bonus accruals. Employee benefits increased $250,000 due to a higher refund (rebate) of health insurance expenses in 2024, and a change from pension income in 2024 to pension expense in 2025. Data processing expense increased $196,000 primarily due to a shift in statement processing costs to data processing as part of our core vendor contract; additionally, new software was implemented to improve financial reporting and efficiency. Other operating expenses rose $154,000 due to an increase in fraud losses and collection expenses. Non-interest expense to average assets increased from 2.60% at March 31, 2024 to 2.96% at March 31, 2025.
Previous report
Overview
Previous report
On March 31, 2025, assets totaled $1.31 billion, a decrease of $10.1 million since December 31, 2024. Total loans decreased by $12.9 million to $827.0 million, including decreases of $9.0 million in commercial and industrial loans, $6.6 million in automobile loans, and $4.4 million in owner-occupied commercial real estate loans. These decreases were offset by increases of $6.1 million in real estate loans, $3.1 million in other construction and land loans, and $2.3 million in loans secured by farmland. Investment securities decreased by $6.5 million due to paydowns on U.S. Agency mortgage-backed securities and bond maturities, which were offset by purchases of $15.4 million. Total deposits grew by $4.9 million to $1.2 billion, with noninterest bearing deposits increasing by $11.1 million and interest-bearing deposits declining by $6.2 million. Long-term debt remained consistent at $7.0 million. Total shareholders’ equity rose by $5.2 million to $91.3 million.
Previous report
This represents a decrease of $6.5 million, or 2.0%. The average balance of the AFS securities portfolio during the first three months of 2025 was $319.1 million, compared to $365.5 million during the same period in 2024. The average AFS securities portfolio accounted for 26.3% and 30.1% of average earning assets for the three months ended March 31, 2025, and 2024, respectively. The decrease in AFS securities is primarily due to maturities and expected paydowns on mortgage-backed securities in the bond portfolio. Net unrealized losses related to the fair value of AFS securities were $30.7 million as of March 31, 2025, compared to $35.2 million as of December 31, 2024. This unrealized loss is attributed to rising market interest rates rather than credit quality. During the period, $26.2 million in mortgage-backed securities and municipal bonds matured or were paid down, of which $15.4 million was reinvested in higher-yielding bonds. Scheduled maturities and paydowns are expected to total $35.2 million in the remaining nine months of 2025. The portfolio’s weighted average life is 5.07 years, with a modified duration of 4.04 years.
Previous report
Loan Portfolio
Previous report
The Company operates in a diverse local economy supported by various industries, including agribusiness, manufacturing, services, and several universities and colleges. The Bank is an active lender for residential mortgages and residential construction and typically provides commercial loans to small and mid-size businesses and farms within its primary service area. Additionally, the Bank offers automobile and recreational vehicle loans through its dealer finance division.
Previous report
Loans Held for Investment totaled $827.0 million at March 31, 2025 and decreased $12.9 million from $839.9 million at December 31, 2024. As a percentage of average earning assets, average loans were 68.4% for the three months ended March 31, 2025, compared with 67.9% for the three months ended March 31, 2024.
Previous report
Allowance for Credit Losses
Previous report
Management has implemented a comprehensive analytical process to evaluate the adequacy of the allowance for credit losses. Refer to the discussion in Note 1 Summary of Significant Accounting Policies in Notes to the Consolidated Financial Statements for management’s approach to estimating the ACL.
Previous report
The Company maintains the ACL at a level deemed adequate by management for expected credit losses. The Company’s ACL is calculated quarterly with any adjustment recorded to the provision for credit losses in the consolidated Statement of Income. Management evaluates the adequacy of the ACL 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 experiences, trends in delinquencies, non-performing loans and other risk assets, and 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.
Previous report
The current quarter recovery of provision for credit losses of $104,000 was a combination of $180,000 recovery of provision for the allowance for loan credit losses, plus $76,000 provision for the allowance for unfunded commitments. The current quarter recovery of provision of $180,000 was driven by net loan charge-offs of $187,000 and decreased loan balances of $12.9 million. There were changes that increased environmental factors for credit quality in the owner and non-owner occupied commercial real estate; for loan review in commercial construction, secured by farmland, real estate, owner and non-owner occupied commercial real estate, loans to farmers, and commercial and industrial; and for other factors in loans secured by farmers. The economic forecast from the Federal Reserve showed improvement in gross domestic product for the next twelve months, lowering the environmental economic factor for non-owner occupied commercial real estate, commercial and industrial, and municipal loans.
Previous report
As of March 31, 2025, year-to-date net charge-offs totaled $187,000, down from $807,000 during the same period ended March 31, 2024. Gross loans decreased by $12.9 million in the first quarter of 2025 and loans individually analyzed increased $2.0 million. As of March 31, 2025, the ACL was $7.8 million, or 0.94% of loans held for investment, compared to $8.1 million, or 0.97% of loans held for investment, as of December 31, 2024.
Previous report
The reserve for unfunded commitments increased from $648,000 at December 31, 2024, to $724,000 March 31, 2025 due to increases in loan commitments of $6.2 million in commercial and industrial loans, $2.8 million in owner-occupied commercial real estate, and $2.6 million in 1-4 family construction, coupled with increased environmental factors previously mentioned for these segments.
Previous report
Management classifies nonperforming loans as nonaccrual loans and loans that are 90 days or more past due. Nonaccrual loans are those on which interest accruals have been suspended or permanently discontinued. The Company’s nonaccrual loans increased $1.9 million from December 31, 2024, primarily due to one real estate loan ($727,000) and one owner-occupied commercial real estate loan ($1.2 million). The Company determined no reserve was necessary for either loan based on estimated collateral values. For more details on nonperforming loans by segment, see Note 3 Loans and Credit Quality in Notes to the Consolidated Financial Statements.
Previous report
Deposits and Other Borrowings
Previous report
The Company's main source of funding consists of deposits received from individuals, governmental entities and businesses located within the Company's service area. Deposit accounts include demand deposits, savings, money market, and certificates of deposit. Total deposits were $1.20 billion at March 31, 2025 and December 31, 2024, however, noninterest bearing deposits increased $11.1 million while interest bearing deposits decreased $6.2 million.
Previous report
Shareholders’ Equity
Previous report
Total Shareholders’ equity at March 31, 2025, was $91.3 million, compared to $86.1 million at December 31, 2024. Shareholders’ equity increased $5.2 million due to net income of $2.5 million and other comprehensive income of $3.5 million, offset by dividends to shareholders of $917,000. Other comprehensive income was the result of an increase in the unrealized gains on securities available for sale.
Previous report
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.
Previous report
Uninsured deposits at March 31, 2025 were $148.4 million or 12% to total deposits. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could more than satisfy the demand with liquid assets and FHLB borrowing capacity.
Reworded paragraphs (20)
Previous wording
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands)
Current wording
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Previous wording
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 and VST. F&M Mortgage is a wholly owned subsidiary of the Bank.
Current wording
F & M Bank Corp. (the “Company”), incorporated in Virginia in 1983, is a one-bank holding company registered 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 and VST. During the second quarter of 2025, the operations, assets, and liabilities of F&M Mortgage were transferred to the Bank.
Previous wording
The Company, through its subsidiary 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 FRB. The Bank provides services to customers located primarily in the counties of Rockingham, Shenandoah, and Augusta, and the cities of Harrisonburg, Staunton, Waynesboro and Winchester in Virginia. Services are provided at fourteen branch offices and a dealer finance division loan production office. The Company offers insurance, mortgage lending, and title insurance through its subsidiaries F&M Mortgage, and VST. The Company’s primary trade area services customers in the counties of Rockingham, Shenandoah, Augusta and Frederick, and the cities of Harrisonburg, Staunton, Waynesboro, and Winchester.
Current wording
The Company, through its subsidiary 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 FRB. The Bank provides services to customers located primarily in the counties of Rockingham, Shenandoah, and Augusta, 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 VST. The Company’s primary trade area services customers in the counties of Rockingham, Shenandoah, Augusta and Frederick, and the cities of Harrisonburg, Staunton, Waynesboro, and Winchester.
Previous wording
Certain statements in this report may contain “forward-looking statements” as defined by federal securities laws, which are subject to significant risks and uncertainties. These include statements regarding future plans, strategies, results, or expectations that are not historical facts, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “will,” “estimate,” “project,” “plan” or similar expressions or other statements concerning opinions or judgements of the Company and its management about future events. These statements are based on estimates and assumptions, and our ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Our actual results could differ materially from those contemplated by these forward-looking statements.
Current wording
Certain statements in this report may contain “forward-looking statements” as defined by federal securities laws, which are subject to significant risks and uncertainties. These include statements regarding future plans, strategies, results, or expectations that are not historical facts, and are generally identified by the use of words such as “believe,” “expect,” “intend,” “anticipate,” “will,” “estimate,” “project,” “plan” or similar expressions or other statements concerning opinions or judgments of the Company and its management about future events. These statements are based on estimates and assumptions, and our ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Our actual results could differ materially from those contemplated by these forward-looking statements.
Previous wording
(Recovery of) Provision for Credit Losses
Current wording
Provision for credit losses increased by $1.6 million. For the second quarter of 2025, provision for credit losses totaled $1.2 million and was comprised of a $1.1 million provision for credit losses on loans and a $105,000 provision for credit losses on unfunded commitments. For the same period of 2024, the recovery of provision for credit losses totaled $457,000.
Previous wording
The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the three months ended March 31, 2025 and 2024 (dollars in thousands):
Current wording
The following tables show interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated (dollars in thousands):
Previous wording
The Company’s loans held for investment portfolio is well-diversified, with first-lien, amortizing residential mortgage loans as the largest segment, representing 26.47% of total loans. Commercial real estate loans, including both owner-occupied and non-owner-occupied properties, comprise $178.9 million, or 21.62% of the portfolio. Automobile loans, originated through the Company’s dealer finance division, total $97.6 million, accounting for 11.80% of the portfolio. Following is a breakdown of the loan portfolio composition as of March 31, 2025, and December 31, 2024 (dollars in thousands):
Current wording
Following is a breakdown of the loan portfolio composition as of the periods indicated (dollars in thousands):
Previous wording
Loans Held for Sale totaled $634,000 as of March 31, 2025, a decrease of $1.6 million from $2.3 million on December 31, 2024. This category consists of F&M Mortgage loans, which are affected by interest rate changes, seasonal trends, and refinancing activity. All mortgage loans held for sale have been pre-committed to investors, effectively minimizing interest rate risk.
Current wording
Loans held for sale totaled $2.3 million at June 30, 2025 and at December 31, 2024. Loans held for sale consists of one-to-four family residential real estate loans investors at pre-committed rates. The volume of loans held for sale originated are affected by interest rate changes, seasonal trends, and refinancing activity.
Previous wording
The following table summarizes the Company’s non-performing assets as of March 31, 2025, and December 31, 2024 (in thousands):
Current wording
The following table summarizes the Company’s non-performing loans and assets as of the periods indicated (in thousands):
Previous wording
The Company’s available-for-sale (AFS) securities portfolio is reported at fair value, based on market prices of comparable instruments. This portfolio mainly includes U.S. Treasury securities, U.S. agency and mortgage-backed securities issued by federal agencies, as well as municipal bonds and corporate debt securities. As of March 31, 2025, the total AFS securities were $321.2 million, down from $327.7 million on December 31, 2024.
Current wording
The securities portfolio plays a primary role in the management of the Company’s interest rate sensitivity and serves as a source of liquidity. The portfolio is used as needed to meet collateral requirements, such as those related to secure balances with the FRB. The Company’s AFS portfolio is reported at fair value, based on market prices of comparable instruments. The portfolio consists primarily of U.S. Treasury securities, U.S. agency and mortgage-backed securities issued by federal agencies, as well as municipal bonds and corporate debt securities.
Previous wording
The following table shows the balance of each category of deposits as of the dates indicated (dollars in thousands).
Current wording
Deposits totaled $1.2 billion on June 30, 2025, which was a $1.3 million increase from December 31, 2024. The composition of the deposit portfolio has shifted from time deposits to savings accounts. The following table shows the balance of each category of deposits as of the dates indicated (dollars in thousands):
Previous wording
The following table shows the average balances of deposits and average interest rates paid as of March 31, 2025 (dollars in thousands).
Current wording
The following table shows the average balances of deposits and average interest rates paid as of the periods indicated (dollars in thousands):
Previous wording
Long-term debt remained stable at $7.0 million from December 31, 2024 to March 31, 2025 and consisted solely of one subordinated debt note. The note bears interest at 6.00% per annum through July 30, 2025, payable semi-annually in arrears. From July 31, 2025 through July 30, 2030, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 593 basis points, payable quarterly in arrears. Beginning on July 31, 2025 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date.
Current wording
Long-term debt totaled $7.0 million on June 30, 2025 and December 31, 2024, and consisted of one subordinated debt note. The note bore interest at 6.00% per annum through July 30, 2025, payable semi-annually in arrears. From July 31, 2025 through July 30, 2030, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 593 basis points, payable quarterly in arrears. Beginning on July 31, 2025 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date.
Previous wording
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.
Current wording
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, a 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.
Previous wording
The Company closely monitors changes in the industry and market conditions that may impact the Company’s liquidity. Deposits have remain a steady source of liquidity. 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 due to declines in fair value of the Company’s securities portfolio due to rising market interest rates.
Current wording
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. 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 due to declines in fair value of the Company’s securities portfolio due to rising market interest rates.
Previous wording
As of March 31, 2025, liquid assets totaled $106.2 million, or 8.1% of total assets, and liquid earning assets totaled $84.4 million, or 6.4% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. The Bank is scheduled to receive $35.2 million from bond paydowns and maturities by the end of 2025 which can be used to fund future loan growth and for other purposes.
Current wording
As of June 30, 2025, liquid assets totaled $65.9 million, or 5.0% of total assets, and liquid earning assets totaled $45.5 million, or 3.5% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. The Bank is scheduled to receive $26.4 million from bond paydowns and maturities by the end of 2025, which can be used to fund future loan growth and for other purposes.
Previous wording
At March 31, 2025 the Bank pledged investment securities with a par value totaling $120.3 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 the first three months of 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, and a secured line of credit with the FHLB with $179.8 million in available credit at March 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.
Current wording
At June 30, 2025, the Bank pledged investment securities with a par value totaling $137.6 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 the first six months of 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, and a secured line of credit with the FHLB with $179.8 million in available credit at June 30, 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.
Previous wording
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.
Current wording
Market risk is the sensitivity of a financial institution’s earnings or 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.
Previous wording
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 (“EVE”) 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.
Current wording
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 of equity (“EVE”) 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.
Previous wording
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 March 31, 2025, the Company had $121.1 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.
Current wording
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 June 30, 2025, the Company had $117.7 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.