F&M BANK CORP

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 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.

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 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

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 wording

Net income increased $2.1 million to $2.92 million, or $0.82 per share, for the three months ended September 30, 2025, compared to $792,000, or $0.23 per share, for the same period in 2024. Return on average assets was 0.87% and return on average equity was 11.99% for the third quarter of 2025, compared to 0.24% and 3.66%, respectively, for the same period in 2024.

Previous wording

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 wording

The $2.1 million increase in net income resulted from a $2.0 million increase in net interest income, a $363,000 decrease in provision for credit losses, a $14,000 decrease in noninterest income, and a $336,000 decrease in noninterest expenses.

Previous wording

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 wording

Net interest income increased by $2.0 million as total interest income increased by $762,000 and interest expense decreased by $1.2 million. Net interest income was positively impacted by a $15.0 million decrease in short-term debt, which was partially offset by a $17.0 million increase in deposits. The net interest margin increased 61-basis points to 3.36%.

Previous 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.

Current wording

Provision for credit losses decreased by $363,000. For the third quarter of 2025, provision for credit losses totaled $539,000 and consisted of a $595,000 provision for credit losses on loans and a $56,000 recovery of provision for credit losses on unfunded commitments. For the same period of 2024, the provision for credit losses totaled $902,000.

Previous wording

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 wording

Noninterest income decreased by $14,000 in the third quarter of 2025 due to a decrease in mortgage banking income that was offset by increases in card services and interchange income and title insurance income.

Previous wording

Comparing the Six-Month Periods Ending June 30, 2025 and June 30, 2024

Current wording

Comparing the Nine-Month Periods Ending September 30, 2025 and September 30, 2024

Previous wording

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 wording

Net income increased $3.3 million to $8.3 million, or $2.35 per share, for the nine months ended September 30, 2025, compared to $5.0 million, or $1.44 per share, for the same period in 2024. Return on average assets was 0.85% and return on average equity was 12.04% for the nine months ended September 30, 2025, compared to 0.51% and 8.37%, respectively, for the same period in 2024.

Previous wording

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 wording

The $3.3 million increase in net income resulted from a $5.6 million increase in net interest income and a $281,000 increase in noninterest income, which was partially offset by a $354,000 increase in provision for credit losses, a $1.3 million increase in noninterest expenses, and a $955,000 increase in income tax expense.

Previous wording

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 wording

Net interest income increased $5.6 million resulting from a $2.5 million increase in total interest income and a $3.1 million decrease in interest expense. Net interest income was positively impacted by a $41.2 million decrease in average borrowings coupled with an $8.0 million increase in average earning assets. Net interest margin increased 60-basis points to 3.33% at September 30, 2025, from 2.73% for the same period in 2024.

Previous wording

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 wording

Provision for credit losses increased by $354,000 for the first nine months of 2025 as compared to the same period in 2024. For the nine months ended September 30, 2025, provision for credit losses totaled $1.6 million and consisted of a $1.5 million provision for credit losses on loans and a $125,000 provision for credit losses on unfunded commitments. For the same period in 2024, the provision for credit losses totaled $1.3 million.

Previous wording

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 wording

Noninterest income increased by $281,000 primarily from an increase in title insurance income, card services and interchange income, income on bank-owned life insurance, and service charges on deposit accounts. The increases were partially offset by a decrease in mortgage banking income.

Previous wording

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 wording

Noninterest expenses increased by $1.3 million and were primarily attributable to an increase in salaries and employee benefits, legal and professional fees, and data processing expense. Expenses related to the Company’s pension plan increased $749,000 due to an increase in net periodic pension cost and pension settlement gains of $580,000 received in 2024. Other expenses decreased due to an external fraud loss of $731,000 in 2024.

Previous wording

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 wording

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 income, title insurance income, ATM and check card income, income from bank-owned life insurance, and general and administrative expenses.

Previous wording

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 wording

Net interest income increased by $2.0 million, or 24%, to $10.5 million for the three months ended September 30, 2025, as compared to the same period in the prior year. Total interest income increased by $762,000 and interest expense decreased by $1.2 million.

Previous wording

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 wording

The increase in total interest income was attributed to a $574,000 increase in interest from securities available for sale and a $297,000 increase in interest and fees on loans held for investment. The increase in interest income from securities available for sale was attributable to an 83-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 a $36.3 million, or 4%, increase in average balance offsetting a 17-basis point decrease in yield.

Previous wording

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 wording

The decrease in total interest expense was attributable to a $1.0 million decrease in interest expense on deposits and a $241,000 decrease in interest expense on short-term debt. The lower interest expense on deposits resulted from a 47-basis point decrease in the cost of interest-bearing deposits and a decrease in average time deposit balances replaced with an increase in lower cost saving deposits. 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 $17.3 million decrease in the average balance of short-term borrowings.

Previous wording

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 wording

The net interest margin was 3.36% for the third quarter of 2025 compared to 2.75% for the same period in the prior year as the yield on earning assets increased 17-basis points and the cost of funds decreased 40-basis points.

Previous wording

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 wording

Net interest income increased $5.6 million, or 23%, to $30.5 million for the first nine months of 2025 compared to $24.8 million for the same period in the prior year. Total interest income increased by $2.5 million and total interest expense decreased by $3.1 million.

Previous wording

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 wording

The increase in total interest income was attributable to a $1.3 million increase in interest income from securities available for sale, an $888,000 increase in interest income and fees on loans held for investment, and a $614,000 increase in interest income on federal funds sold. The increase in interest income from securities available for sale was attributable to a 74-basis point increase in yield. The increase in interest income on federal funds sold is attributable to a 110% increase in average balance. The increase in interest income on loans held for investment was attributable to a 2% increase in average balance.

Previous wording

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 wording

The decrease in total interest expense was attributable to a $1.5 million decrease in interest expense on deposits and a $1.7 million decrease in interest expense on short-term debt. The lower interest expense on deposits resulted from a 30-basis point decrease in the cost of interest-bearing deposits. The decrease in the cost of interest-bearing deposits was the result of 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 savings deposit balances increased. The lower interest expense on borrowings resulted from a $41.1 million decrease in average balances of borrowings.

Previous wording

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 wording

The provision for credit losses totaled $539,000 for the three-month period ended September 30, 2025, compared to a provision of $902,000 for the same period of the prior year. The provision consisted of $595,000 provision for credit losses on loans and $56,000 recovery of provision for credit losses on unfunded commitments. The decrease in the provision for credit losses on loans resulted primarily from net charge-offs totaling $1.1 million and partially offset by a decrease in the specific reserve component of the allowance for credit losses on loans.

Previous wording

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 wording

The provision for credit losses totaled $1.6 million for the nine-month period ended September 30, 2025, compared to $1.3 million for the same period in the prior year. The provision consisted of $1.5 million provision for credit losses on loans and $125,000 provision for credit losses on unfunded commitments. The increase in the provision for credit losses on loans resulted primarily from net charge-offs totaling $1.8 million, a decrease 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. The qualitative factor for classified loans increased in the commercial real estate, commercial and industrial loans, and automobile loan segments due to increases in nonaccrual and classified loans. The qualitative factor for loan review increased in other construction, loans secured by farmland, loans secured by first liens, commercial real estate, loans to finance agricultural production, and commercial and industrial loans due to the results of an external loan review. The qualitative factor for loan volume increased in loans secured by farmland, loans secured by first liens, and other commercial real estate segments due to increased year over year portfolio increases; this increase was partially offset by a decrease in the automobile segment due to strategic reduction in the portfolio balance. The decrease in economic conditions was due to an improvement in the forecast for real gross domestic product that affected the commercial real estate, commercial and industrial loans, and municipal loan segments.

Previous wording

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 wording

Noninterest income decreased $14,000, or 1% compared to the same period of 2024. The decrease resulted from a $245,000 decrease in mortgage banking income due to a decrease in loans held for sale. The decrease in mortgage banking income was offset by a $97,000 increase in title insurance income due to increased title premium and loan closing volume, and a $111,000 increase in card services and interchange income.

Previous wording

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 wording

Total noninterest income increased $281,000, or 3%, to $8.4 million for the nine months ended September 30, 2025, compared $8.1 million for the same period in 2024. The increase resulted from a $307,000 increase in title insurance income due to increased title premiums and loan closing volume and a $223,000 increase in card services and interchange income due to renegotiated interchange contracts. These increases in title income and card services and interchange income were offset by a $435,000 decrease in mortgage banking income. The decrease in mortgage banking income was due to a decrease in originations of loans held for sale.

Previous wording

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 wording

Noninterest expenses increased $1.3 million, or 5%, to $27.6 million for the nine-month period ended September 30, 2025, compared to $26.3 million for the same period one year ago. The increase was primarily attributable to a $982,000 increase in combined salaries and employee benefits, a $293,000 increase in legal and professional fees, and a $280,000 increase in data processing expense. These increases were partially offset by a $220,000 decrease in other operating expenses. Salaries and employee benefits increased due to increased net periodic pension costs of $187,000, no pension settlement gains in 2025, and a lower refund (rebate) of health insurance expenses. The increase in legal and professional fees, as compared to the same period in 2024, was 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. Data processing expenses increased due to new products provided by our core provider and additional software contracts process improvements. The decrease in other operating expenses is attributable to an external fraud loss in 2024 that totaled $731,000.

Previous wording

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 wording

Income tax expense increased $555,000 for the third quarter of 2025, compared to the same period one year ago. The effective tax rate, before tax credits, for the third quarter of 2025 was 19.00% compared to 12.75% 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 September 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 2024 Form 10-K.

Previous wording

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 wording

Income tax expense, before tax credits, increased $955,000, or 265%, for the first nine months of 2025 compared with the same period in 2024. The effective tax rate, before tax credits, for the first nine months of 2025 was 19.50% compared with 17.65% for the same period in 2024. The increased effective tax rate for 2025 was the result of increased income in 2025 compared to 2024.

Previous wording

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 wording

Assets totaled $1.4 billion at September 30, 2025, which was an increase of $56.1 million or 4%, from December 31, 2024. The asset composition changed during the first nine months of the year as loans held for investment, net of the allowance for credit losses, increased by $32.6 million and federal funds sold increased by $26.6 million.

Previous wording

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 wording

Total liabilities increased $40.7 million during the nine-month period ended September 30, 2025 from December 31, 2024, due to an increase in deposits during the first nine months of 2025. Composition of deposits as of September 30, 2025, changed as non-interest bearing deposits increased $20.6 million, savings accounts increased $76.4 million, interest checking increased $7.2 million, and time deposits decreased $64.0 million.

Previous wording

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.

Current wording

Total shareholders’ equity increased $15.4 million during the first nine months of 2025, primarily from a $5.6 million increase in retained earnings and a $9.5 million decrease in accumulated other comprehensive loss. Retained earnings increased as $8.3 million of net income was partially offset by $2.8 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.

Previous wording

Loans held for investment totaled $848.8 million at June 30, 2025, which was an $8.8 million, or 1% increase from December 31, 2024. The loan portfolio is primarily comprised of loans secured by one-to-four family residential real estate, loans secured by commercial real estate, loans secured by farmland, and indirect automobile loans. The growth of loans since December 31, 2024 has shifted the composition of the loan portfolio by decreasing indirect automobile loans and increasing loans secured by farmland.

Current wording

Loans held for investment totaled $872.3 million at September 30, 2025, which was a $32.4 million, or 4% increase from December 31, 2024. The loan portfolio is primarily composed of loans secured by one-to-four family residential real estate, loans secured by commercial real estate, loans secured by farmland, and indirect automobile loans. The growth of loans since December 31, 2024 has shifted the composition of the loan portfolio by decreasing indirect automobile loans and increasing loans secured by farmland and other commercial real estate.

Previous 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.

Current wording

Loans held for sale totaled $1.3 million at September 30, 2025 and $2.3 million at December 31, 2024. Loans held for sale consist of one-to-four family residential real estate loans to 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

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. Nonperforming loans totaled $7.7 million and $7.1 million at June 30, 2025 and December 31, 2024, representing 0.90% and 0.84% of total loans, respectively. Nonaccrual loans totaled $7.6 million and $7.0 million at June 30, 2025 and December 31, 2024, respectively. There was no OREO at June 30, 2025 and $77,000 in OREO at December 31, 2024. 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 local realtors. The Bank did not have any consumer mortgage loans secured by real estate properties for which formal foreclosure proceedings were in process as of June 30, 2025.

Current wording

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. Nonperforming loans totaled $7.5 million and $7.1 million at September 30, 2025 and December 31, 2024. Nonaccrual loans totaled $7.5 million and $7.0 million representing 0.85% and 0.84% of total loans, at September 30, 2025 and December 31, 2024, respectively. There was no other real estate owned (“OREO”) at September 30, 2025 compared to $77,000 in OREO at December 31, 2024. 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 local realtors. The Bank had one consumer mortgage loan totaling $186,000 secured by real estate for which formal foreclosure proceedings were in process as of September 30, 2025.

Previous 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.

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. government agency and mortgage-backed securities issued by federal agencies, as well as municipal bonds and corporate debt securities.

Previous wording

On June 30, 2025, the AFS portfolio totaled $340.0 million, an increase of $12.4 million, or 4%, from $327.7 at December 31, 2024. The increase is attributable to purchases of $40.9 million in AFS securities during the first six months of 2025 and a $4.7 million decrease in unrealized losses of the investment securities. The change in the unrealized losses of investment securities from December 31, 2024 to June 30, 2025 was related to changes in market interest rates and maturities of lower yielding bonds. These increases were partially offset by maturities of $21.4 million and paydowns on mortgage-backed securities of $12.8 million. Scheduled maturities and paydowns are expected to total $26.4 million in the remaining six months of 2025.

Current wording

On September 30, 2025, the AFS portfolio totaled $329.4 million, an increase of $1.8 million, or 1%, from $327.7 at December 31, 2024. The increase is primarily attributable to purchases of $40.9 million in AFS securities during the first nine months of 2025 and a $12.0 million decrease in unrealized losses in the investment securities portfolio. The change in the unrealized losses of investment securities from December 31, 2024 to September 30, 2025 was related to changes in market interest rates and maturities of lower yielding bonds. These increases were partially offset by maturities and calls of $32.3 million, paydowns on mortgage-backed securities of $18.3 million, and amortization of $500,000.

Previous wording

Restricted securities, including Federal Home Loan Bank, FRB, and Community Bankers' Bank stock, are generally viewed as long-term investments because there is a minimal market for the stock and they are carried at cost.

Current wording

Restricted securities, including FHLB, FRB, and Community Bankers’ Bank stock, are generally viewed as long-term investments because there is minimal market for the stock and they are carried at cost. Other investments totaled $2.3 million and $2.2 million at September 30, 2025 and December 31, 2024, respectively.

Previous 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):

Current wording

Deposits totaled $1.2 billion on September 30, 2025, which was a $40.2 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

Estimated uninsured deposits totaled approximately $148.4 million and $131.9 million at June 30, 2025, and December 31, 2024, respectively.

Current wording

Estimated uninsured deposits totaled approximately $163.2 million and $131.9 million at September 30, 2025, and December 31, 2024, respectively.

Previous 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.

Current wording

Long-term debt totaled $7.0 million on September 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. On August 1, 2025, the interest rate converted from a fixed interest rate of 6.00% to a floating interest rate of Secured Overnight Financing Rate (SOFR) plus 593 basis points, or 10.25. From August 1, 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. On September 30, 2025, the Company gave notice of full redemption on October 31, 2025 to the holder of the subordinated note.