UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
☒ Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2026
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 000-13273
F&M BANK CORP. |
Virginia | 54-1280811 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
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 | ||
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 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at May 11 , 2026 | |
Common Stock, par value ‑ $5 per share | 3,559,157 shares |
F & M BANK CORP.
Quarterly Report on Form 10-Q
For the quarterly period ended March 31, 2026
Table of Contents
| 2 |
| Table of Contents |
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
Consolidated Balance Sheets
(Dollars in thousands, except share data)
March 31, | December 31, | |||||||
2026 | 2025* | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and due from banks | $ | 18,337 | $ | 19,311 | ||||
Money market funds and interest-bearing deposits in other banks | 1,045 | 1,013 | ||||||
Federal funds sold | 66,512 | 48,529 | ||||||
Cash and cash equivalents | 85,894 | 68,853 | ||||||
Securities: | ||||||||
Available for sale, at fair value | 350,506 | 345,339 | ||||||
Other investments, at cost | 2,304 | 2,254 | ||||||
Loans held for sale, at fair value | 3,693 | 3,191 | ||||||
Loans held for investment, net of deferred fees and costs | 896,865 | 886,253 | ||||||
Less: allowance for credit losses | (7,910 | ) | (7,818 | ) | ||||
Net loans held for investment | 888,955 | 878,435 | ||||||
Bank premises and equipment, net | 22,040 | 21,629 | ||||||
Interest receivable | 5,210 | 5,118 | ||||||
Goodwill | 3,082 | 3,082 | ||||||
Bank owned life insurance | 24,600 | 24,395 | ||||||
Deferred tax asset, net | 7,134 | 6,979 | ||||||
Other assets | 15,533 | 14,482 | ||||||
Total Assets | $ | 1,408,951 | $ | 1,373,757 | ||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest bearing | $ | 290,343 | $ | 279,398 | ||||
Interest bearing | 984,721 | 965,814 | ||||||
Total deposits | 1,275,064 | 1,245,212 | ||||||
Long-term debt | 9,921 | 9,917 | ||||||
Other liabilities | 17,395 | 13,840 | ||||||
Total Liabilities | 1,302,380 | 1,268,969 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock, $5 par value, 6,000,000 shares authorized, 3,583,744 (2026) and | ||||||||
3,557,060 (2025) shares issued and outstanding | 17,549 | 17,444 | ||||||
Additional paid in capital | 11,705 | 11,743 | ||||||
Retained earnings | 94,506 | 92,205 | ||||||
Accumulated other comprehensive loss | (17,189 | ) | (16,604 | ) | ||||
Total Shareholders’ Equity | 106,571 | 104,788 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 1,408,951 | $ | 1,373,757 | ||||
*2025 derived from audited consolidated financial statements.
See Notes to Consolidated Financial Statements
| 3 |
| Table of Contents |
F & M BANK CORP.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||
Interest and Dividend income | 2026 | 2025 | ||||||
Interest and fees on loans held for investment | $ | 14,243 | $ | 13,465 | ||||
Interest and fees on loans held for sale | 25 | 24 | ||||||
Interest from federal funds sold | 564 | 652 | ||||||
Interest and dividends on interest bearing deposits and other investments | 23 | 30 | ||||||
Interest from debt securities | 2,638 | 2,093 | ||||||
Total interest and dividend income | 17,493 | 16,264 | ||||||
Interest expense | ||||||||
Total interest on deposits | 5,871 | 6,700 | ||||||
Interest on short-term debt | - | 3 | ||||||
Interest on long-term debt | 193 | 117 | ||||||
Total interest expense | 6,064 | 6,820 | ||||||
Net interest income | 11,429 | 9,444 | ||||||
Provision for (recovery of) credit losses - loans | 289 | (180 | ) | |||||
Provision for credit losses – unfunded commitments | 20 | 76 | ||||||
Total Provision for (Recovery of) Credit Losses | 309 | (104 | ) | |||||
Net Interest Income After (Recovery of) Provision for Credit Losses | 11,120 | 9,548 | ||||||
Noninterest income | ||||||||
Service charges on deposit accounts | 343 | 312 | ||||||
Wealth management income | 658 | 676 | ||||||
Mortgage banking income | 492 | 602 | ||||||
Title insurance income | 493 | 356 | ||||||
Income on bank owned life insurance | 212 | 209 | ||||||
Low income housing partnership amortization | (175 | ) | (196 | ) | ||||
ATM and check card fees | 775 | 764 | ||||||
Other operating income | 99 | 124 | ||||||
Total noninterest income | 2,897 | 2,847 | ||||||
Noninterest expense | ||||||||
Salaries | 4,301 | 4,127 | ||||||
Employee benefits | 1,517 | 1,116 | ||||||
Occupancy expense | 395 | 408 | ||||||
Equipment expense | 298 | 328 | ||||||
FDIC assessment | 213 | 265 | ||||||
Legal and professional expense | 753 | 479 | ||||||
ATM and check card fees | 370 | 327 | ||||||
Data processing fees | 948 | 916 | ||||||
Other operating expenses | 1,518 | 1,558 | ||||||
Total noninterest expense | 10,313 | 9,524 | ||||||
Income before income taxes | 3,704 | 2,871 | ||||||
Income tax expense | 478 | 414 | ||||||
Net Income | $ | 3,226 | $ | 2,457 | ||||
Per Common Share Data | ||||||||
Net income (basic and diluted) | $ | 0.91 | $ | 0.70 | ||||
Cash dividends on common stock | 0.26 | 0.26 | ||||||
Weighted average common shares outstanding (basic and diluted) | 3,560,093 | 3,530,700 | ||||||
See Notes to Consolidated Financial Statements
| 4 |
| Table of Contents |
F & M BANK CORP.
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2026 | 2025 | |||||||
Net Income | $ | 3,226 | $ | 2,457 | ||||
Other comprehensive income (loss): | ||||||||
Changes in pension plan benefits, net of deferred income tax benefit of $(2) for the three months ended March 31, 2026 | (8 | ) | - | |||||
Unrealized gain (loss) on available-for sale securities, net of income tax (benefit) expense of $(153) and $940 for the three months ended March 31, 2026 and 2025, respectively | (577 | ) | 3,537 | |||||
Total other comprehensive (loss) income | (585 | ) | 3,537 | |||||
Total comprehensive income | $ | 2,641 | $ | 5,994 | ||||
See Notes to Consolidated Financial Statements
| 5 |
| Table of Contents |
F & M BANK CORP.
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, 2026 and 2025.
Common Stock | Additional Paid | Retained | Accumulated Other Comprehensive | |||||||||||||||||||||
Shares | Amount | in Capital | Earnings | Loss | Total | |||||||||||||||||||
Balance December 31, 2024 | 3,525,649 | $ | 17,383 | $ | 11,463 | $ | 84,669 | $ | (27,377 | ) | $ | 86,138 | ||||||||||||
Net income | - | - | - | 2,457 | - | 2,457 | ||||||||||||||||||
Other comprehensive income | - | - | - | - | 3,537 | 3,537 | ||||||||||||||||||
Dividends on common stock | - | - | - | (917 | ) | - | (917 | ) | ||||||||||||||||
Common stock issued | 5,090 | 25 | 76 | - | - | 101 | ||||||||||||||||||
Net restricted common stock activity | 33,171 | - | - | - | - | - | ||||||||||||||||||
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes | - | 58 | (135 | ) | - | - | (77 | ) | ||||||||||||||||
Stock-based compensation expense | - | - | 72 | - | - | 72 | ||||||||||||||||||
Balance, March 31, 2025 | 3,563,910 | $ | 17,466 | $ | 11,476 | $ | 86,209 | $ | (23,840 | ) | $ | 91,311 | ||||||||||||
Balance December 31, 2025 | 3,557,060 | $ | 17,444 | $ | 11,743 | $ | 92,205 | $ | (16,604 | ) | $ | 104,788 | ||||||||||||
Net income | - | - | - | 3,226 | - | 3,226 | ||||||||||||||||||
Other comprehensive loss | - | - | - | - | (585 | ) | (585 | ) | ||||||||||||||||
Dividends on common stock | - | - | - | (925 | ) | - | (925 | ) | ||||||||||||||||
Common stock issued | 3,339 | 17 | 87 | - | - | 104 | ||||||||||||||||||
Net restricted common stock activity | 23,345 | - | - | - | - | - | ||||||||||||||||||
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes | - | 88 | (224 | ) | (136 | ) | ||||||||||||||||||
Stock-based compensation expense | - | - | 99 | - | 99 | |||||||||||||||||||
Balance, March 31, 2026 | 3,583,744 | $ | 17,549 | $ | 11,705 | $ | 94,506 | $ | (17,189 | ) | $ | 106,571 | ||||||||||||
See Notes to Consolidated Financial Statements
| 6 |
| Table of Contents |
F & M BANK CORP.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2026 | 2025 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 3,226 | $ | 2,457 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 320 | 325 | ||||||
Amortization of intangibles | 4 | 8 | ||||||
Amortization of securities | 69 | 192 | ||||||
Proceeds from loans held for sale | 28,724 | 10,849 | ||||||
Loans held for sale originated | (28,881 | ) | (8,763 | ) | ||||
Gain on sale of loans held for sale | (345 | ) | (437 | ) | ||||
Provision for (recovery of) credit losses | 309 | (104 | ) | |||||
Increase in interest receivable | (92 | ) | (18 | ) | ||||
Decrease in deferred tax asset | - | 80 | ||||||
(Increase) decrease in other assets | (1,225 | ) | 929 | |||||
(Decrease) increase in other liabilities | 3,527 | (28 | ) | |||||
Amortization of limited partnership investments | 175 | 196 | ||||||
Amortization of debt issuance costs | 4 | 11 | ||||||
Income from life insurance investment | (212 | ) | (209 | ) | ||||
Gain on the sale of assets held for sale | (2 | ) | (43 | ) | ||||
Stock-based compensation expense | 99 | 72 | ||||||
Net cash provided by operating activities | 5,700 | 5,517 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from maturity of investments available for sale | - | 21,360 | ||||||
Purchases of investments available for sale | (14,859 | ) | (15,359 | ) | ||||
Proceeds from paydowns of mortgage-backed securities | 8,893 | 4,796 | ||||||
Investment in restricted stock, net | (50 | ) | (5 | ) | ||||
Net (increase) decrease loans held for investment | (10,809 | ) | 12,755 | |||||
Proceeds from the sale of assets held for sale | 3 | - | ||||||
Net purchase of property and equipment | (732 | ) | (131 | ) | ||||
Net cash provided by investing activities | (17,554 | ) | 23,416 | |||||
Cash flows from financing activities | ||||||||
Net change in deposits | 29,852 | 4,916 | ||||||
Dividends paid in cash | (925 | ) | (917 | ) | ||||
Proceeds from issuance of common stock | 104 | 83 | ||||||
Repurchase of shares for tax withholding | (136 | ) | (59 | ) | ||||
Net cash provided by financing activities | 28,895 | 4,023 | ||||||
Net increase in Cash and Cash Equivalents | 17,041 | 32,956 | ||||||
Cash and cash equivalents, beginning of period | 68,853 | 56,507 | ||||||
Cash and cash equivalents, end of period | $ | 85,894 | $ | 89,463 | ||||
Supplemental Cash Flow information: | ||||||||
Cash paid for: Interest | $ | 8,786 | $ | 7,388 | ||||
Taxes | 820 | - | ||||||
Supplemental non-cash disclosures: | ||||||||
Change in unrealized gain (loss) on securities available for sale | $ | (730 | ) | $ | 4,477 | |||
See Notes to Consolidated Financial Statements
| 7 |
| Table of Contents |
Notes to the Consolidated Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Consolidated Financial Statements include the accounts of F&M Bank Corp. (the “Company”), Farmers & Merchants Bank (the “Bank”), VBS Mortgage, LLC (dba “F&M Mortgage”), and VSTitle, LLC (“VST”), with all significant intercompany accounts and transactions eliminated. 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.
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and to accepted practices within the banking industry.
Basis of Presentation and Use of Estimates
The preparation of 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. The material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for credit losses. The unaudited consolidated financial statements in this report have been prepared in accordance with GAAP for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments necessary to present a fair statement of the financial position and the results of operations for all periods presented.
All such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results of operations that the Company and its subsidiaries may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
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.
Reclassification
Certain reclassifications have been made to prior period amounts to conform to current period presentation. None of these reclassifications are considered material and have no impact on net income or shareholders’ equity.
| 8 |
| Table of Contents |
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold, money market funds and interest-bearing deposits. Generally, federal funds are purchased and sold on an overnight basis.
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 on 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.
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. At March 31, 2026 and December 31, 2025, 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 $1.3 million and $1.5 million at March 31, 2026 and December 31, 2025, respectively, 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 $3.9 million and $3.6 million at March 31, 2026 and December 31, 2025, respectively, 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.
The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.
All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.
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.
| 9 |
| Table of Contents |
The Company utilizes a Qualitative Scorecard (“scorecard”) to adjust the historical loss information, as necessary, to reflect the Company’s expectations about the future. For each segment, the scorecard calculates the difference between the quantitative expected credit loss and the high watermark average remaining maturity loss rates. This difference is the maximum qualitative adjustment that can be applied to that segment. Due to the low number of losses in the Bank’s portfolio, in particular from 2008-2012, all segments leverage peer data to calculate the overall loss rate. The Company believes that in order to provide a reasonable and supportable loss rate, data representative of losses during a financial downturn will provide a better representation of the perceived risk in the portfolio. In determining how to apply the weightings for the various qualitative factors, management assessed which factors would have the highest impact on potential loan losses. The economy and problem loan trends were determined to have the most significant effect on the estimated losses. The most influential factor on potential loan losses was economic conditions, with a weighting of 20%-25%. The Company evaluates the weighting applied to each pool on an annual basis.
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. 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.
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 ratios 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 ratios 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 housed by the commercial real estate.
| 10 |
| Table of Contents |
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.
Municipal loans. Municipal loans are unsecured loans generally made to local towns within the Bank’s trade area. Credit risk is based on the cash flow and management of the local towns’ budgets.
Additionally, the allowance for credit losses calculation includes 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 dated 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 consolidated statements of income. 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.
| 11 |
| Table of Contents |
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.
Recent Accounting Pronouncements
Accounting Standards Pending Adoption:
In December 2025, the Financial Accounting Standards Board (the “FASB”) issued amendments to the Accounting Standards Codification 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 Accounting Standards Codification 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 November 2024, the FASB issued Accounting Standards Update (“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.
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.
| 12 |
| Table of Contents |
NOTE 2 SECURITIES
The amortized cost and estimated fair value of securities available for sale, along with gross unrealized gains and losses are summarized as follows (dollars in thousands):
March 31, 2026 | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
U. S. Treasuries | $ | 15,093 | $ | - | $ | 787 | $ | 14,306 | ||||||||
U. S. Government agencies | 57,998 | - | 2,700 | 55,298 | ||||||||||||
Municipal securities | 27,044 | 22 | 1,600 | 25,466 | ||||||||||||
Mortgage-backed securities | 246,478 | 887 | 17,179 | 230,186 | ||||||||||||
Corporate debt securities | 25,650 | 5 | 405 | 25,250 | ||||||||||||
Total Securities Available for Sale | $ | 372,263 | $ | 914 | $ | 22,671 | $ | 350,506 | ||||||||
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 | ||||||||
The amortized cost and fair value of securities at March 31, 2026, 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 | $ | 35,588 | $ | 35,082 | ||||
Due after one year through five years | 69,405 | 66,837 | ||||||
Due after five years through ten years | 60,983 | 58,123 | ||||||
Due after ten years | 206,287 | 190,464 | ||||||
Total | $ | 372,263 | $ | 350,506 | ||||
There were no sales of available for sale securities in the first quarter of 2026 or 2025.
The following tables show the present fair value and gross unrealized losses (dollars in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of the dates stated. The reference point for determining when securities are in an unrealized loss position is period-end; therefore, it is possible that a security’s market value exceeded its amortized cost on other days during the past twelve-month period. Excluded from the tables below were securities whose amortized cost equaled their fair value or were in an unrealized gain position as of the dates stated totaling $70.7 million and $95.6 million, as of March 31, 2026 and December 31, 2025, respectively.
| 13 |
| Table of Contents |
Less than 12 Months More than 12 Months Total March 31, 2026 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U. S. Treasuries U. S. Government agencies Municipal securities Mortgage-backed securities Corporate debt securities Total Securities Available for Sale$ - $ - $ 14,306 $ 787 $ 14,306 $ 787 - - 55,298 2,700 55,298 2,700 6,419 118 17,810 1,482 24,229 1,600 45,579 706 116,668 16,474 162,247 17,179 4,097 53 19,648 352 23,745 405 $ 56,095 $ 877 $ 223,730 $ 21,795 $ 279,825 $ 22,671
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 | ||||||||||||
At March 31, 2026 and December 31, 2025, the majority of securities in an unrealized loss position were of investment grade; however, a portion of the portfolio does not have a third-party investment grade available (securities with fair values of $20.3 million and $19.0 million, respectively). These securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate debt securities in the tables above. The Company evaluated the issuers of these individually, observing that each issuer had strong capital ratios and profitability, thereby indicating limited exposure to asset quality or liquidity issues and resulted in no identifiable credit losses. Contractual cash flows for mortgage-backed securities and U.S. Treasury and agencies are guaranteed and/or funded by the U.S. government and government agencies. State and municipal securities showed no indication that the contractual cash flows would not be received when due. The Company does not intend to sell, nor does it believe that it will be required to sell, any of its impaired securities prior to the recovery of the amortized cost. As of March 31, 2026 and December 31, 2025, there was no allowance for credit losses (“ACL”) for the Company's securities AFS portfolio. Any impairment that has not been recorded through an ACL is recognized in accumulated other comprehensive income (loss).
The Company had securities with a collateral value of $113.1 million pledged to the Federal Reserve Discount Window as of March 31, 2026. 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 2026. Additionally, the Company had securities with a market value of $9.4 million pledged to the Federal Reserve Bank of Richmond as collateral for deposits of the Department of Justice U.S. Bankruptcy Trustee.
As of March 31, 2026, other investments consisted of restricted stock in the Federal Reserve Bank (“FRB”) (carrying basis of $1.14 million at March 31, 2026 and December 31, 2025), Federal Home Loan Bank (“FHLB”) (carrying basis of $975 thousand and $925 thousand at March 31, 2026 and December 31, 2025, respectively), and various other investments (carrying basis of $189 thousand at March 31, 2026 and December 31, 2025). Other investments are carried at cost.
| 14 |
| Table of Contents |
NOTE 3 LOANS
The following is a summary of the major categories of total loans outstanding at March 31, 2026 and December 31, 2025 (dollars in thousands):
March 31, 2026 | December 31, 2025 | |||||||
1-4 Family residential construction | $ | 26,802 | $ | 31,118 | ||||
Other construction, land development and land | 42,005 | 39,187 | ||||||
Secured by farmland | 117,937 | 115,000 | ||||||
Home equity – open end | 53,550 | 51,393 | ||||||
Real estate | 250,663 | 243,361 | ||||||
Home equity – closed end | 7,030 | 5,980 | ||||||
Multifamily | 25,276 | 18,854 | ||||||
Owner-occupied commercial real estate | 89,930 | 96,651 | ||||||
Other commercial real estate | 116,446 | 114,434 | ||||||
Agricultural loans | 21,530 | 20,127 | ||||||
Commercial and industrial | 59,833 | 56,885 | ||||||
Credit cards | 3,364 | 3,387 | ||||||
Automobile loans | 69,922 | 77,080 | ||||||
Other consumer loans | 9,044 | 9,132 | ||||||
Municipal loans | 4,137 | 4,219 | ||||||
Gross loans | 897,469 | 886,808 | ||||||
Unamortized net deferred loan fees | (604 | ) | (555 | ) | ||||
Less allowance for credit losses | 7,910 | 7,818 | ||||||
Net loans | $ | 888,955 | $ | 878,435 | ||||
The table above does not include loans held for sale of $3.7 million and $3.2 million at March 31, 2026 and December 31, 2025, respectively. Loans held for sale consist of single-family residential real estate loans originated for sale in the secondary market.
Accrued interest receivable on loans held for investment totaled $3.9 million and $3.6 million at March 31, 2026 and December 31, 2025, respectively. For the quarters ended March 31, 2026 and 2025, accrued interest receivable write-offs were not material to the Company’s consolidated financial statements.
The Company had loans held for investment pledged as collateral for borrowings with the FHLB totaling $348.1 million and $310.7 million as of March 31, 2026, and December 31, 2025, 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 model risk management program, which is overseen by the Director of Risk Management who reports to the Company’s Board Risk Committee.
| 15 |
| Table of Contents |
The following tables detail the changes in the ACL for the three months ended March 31, 2026 and 2025 (dollars in thousands).
For the three months ended March 31, 2026 | ||||||||||||||||||||
Beginning Balance | Charge-offs | Recoveries | (Recovery of) provision for loan credit losses | Ending Balance | ||||||||||||||||
1-4 Family residential construction | $ | 193 | $ | - | $ | - | $ | (28 | ) | $ | 165 | |||||||||
Other construction, land development and land | 641 | - | - | 81 | 722 | |||||||||||||||
Secured by farmland | 1,458 | - | - | 7 | 1,465 | |||||||||||||||
Home equity – open end | 177 | - | - | 7 | 184 | |||||||||||||||
Real estate | 629 | 12 | - | 27 | 644 | |||||||||||||||
Home equity – closed end | 64 | - | - | 3 | 67 | |||||||||||||||
Multifamily | 656 | - | - | 203 | 859 | |||||||||||||||
Owner-occupied commercial real estate | 691 | - | - | (4 | ) | 687 | ||||||||||||||
Other commercial real estate | 246 | - | - | 4 | 250 | |||||||||||||||
Agricultural loans | 130 | - | - | (26 | ) | 104 | ||||||||||||||
Commercial and industrial | 995 | - | 90 | (47 | ) | 1,038 | ||||||||||||||
Credit cards | 90 | 14 | 10 | 2 | 88 | |||||||||||||||
Automobile loans | 1,713 | 712 | 418 | 85 | 1,504 | |||||||||||||||
Other consumer loans | 129 | 14 | 37 | (25 | ) | 127 | ||||||||||||||
Municipal loans | 6 | - | - | - | 6 | |||||||||||||||
Total allowance for credit losses - loans | $ | 7,818 | $ | 752 | $ | 555 | $ | 289 | $ | 7,910 | ||||||||||
Allowance for credit losses – unfunded commitments | $ | 764 | $ | - | $ | - | $ | 20 | $ | 784 | ||||||||||
For the three months ended March 31, 2025 | ||||||||||||||||||||
Beginning Balance | Charge-offs | Recoveries | (Recovery of) provision for loan credit losses | Ending Balance | ||||||||||||||||
1-4 Family residential construction | $ | 258 | $ | - | $ | - | $ | (6 | ) | $ | 252 | |||||||||
Other construction, land development and land | 1,551 | - | - | 107 | 1,658 | |||||||||||||||
Secured by farmland | 946 | - | - | 97 | 1,043 | |||||||||||||||
Home equity – open end | 197 | - | 24 | (30 | ) | 191 | ||||||||||||||
Real estate | 606 | - | 1 | 85 | 692 | |||||||||||||||
Home equity – closed end | 99 | - | - | (16 | ) | 83 | ||||||||||||||
Multifamily | 190 | - | - | (158 | ) | 32 | ||||||||||||||
Owner-occupied commercial real estate | 809 | - | - | (96 | ) | 713 | ||||||||||||||
Other commercial real estate | 105 | - | - | (22 | ) | 83 | ||||||||||||||
Agricultural loans | 27 | - | - | (2 | ) | 25 | ||||||||||||||
Commercial and industrial | 982 | - | 3 | (159 | ) | 826 | ||||||||||||||
Credit cards | 87 | 15 | 6 | 1 | 79 | |||||||||||||||
Automobile loans | 1,956 | 397 | 164 | 171 | 1,894 | |||||||||||||||
Other consumer loans | 301 | 1 | 28 | (137 | ) | 191 | ||||||||||||||
Municipal loans | 15 | - | - | (15 | ) | - | ||||||||||||||
Total allowance for credit losses - loans | $ | 8,129 | $ | 413 | $ | 226 | $ | (180 | ) | $ | 7,762 | |||||||||
Allowance for credit losses – unfunded commitments | $ | 649 | $ | - | $ | - | $ | 76 | $ | 725 | ||||||||||
Credit Quality Indicators
The Company presents loan and lease 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.
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 comprise 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.
| 16 |
| Table of Contents |
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.
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 March 31, 2026 (dollars in thousands):
Term Loans by Year of Origination | ||||||||||||||||||||||||||||||||
2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving | Total | |||||||||||||||||||||||||
1-4 Family residential construction | ||||||||||||||||||||||||||||||||
Pass | $ | - | $ | - | $ | - | $ | 338 | $ | - | $ | - | $ | 26,464 | $ | 26,802 | ||||||||||||||||
Watch | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total 1-4 Family residential construction | - | - | - | 338 | - | - | 26,464 | 26,802 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Other construction, land development and land | ||||||||||||||||||||||||||||||||
Pass | 447 | 7,777 | 2,599 | 11,585 | 960 | 3,556 | 15,061 | 41,985 | ||||||||||||||||||||||||
Watch | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | 20 | - | 20 | ||||||||||||||||||||||||
Total Other construction, land development and land | 447 | 7,777 | 2,599 | 11,585 | 960 | 3,576 | 15,061 | 42,005 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Secured by farmland | ||||||||||||||||||||||||||||||||
Pass | 4,530 | 17,565 | 9,342 | 10,780 | 11,840 | 46,892 | 13,483 | 114,432 | ||||||||||||||||||||||||
Watch | - | - | - | - | 1,609 | 1,484 | - | 3,093 | ||||||||||||||||||||||||
Substandard | - | - | - | - | 302 | 110 | - | 412 | ||||||||||||||||||||||||
Total Secured by farmland | 4,530 | 17,565 | 9,342 | 10,780 | 13,751 | 48,486 | 13,483 | 117,937 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Home equity – open end | ||||||||||||||||||||||||||||||||
Pass | - | - | - | - | - | 294 | 52,548 | 52,842 | ||||||||||||||||||||||||
Watch | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | 110 | 598 | 708 | ||||||||||||||||||||||||
Total Home equity - open end | - | - | - | - | - | 404 | 53,146 | 53,550 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Real estate | ||||||||||||||||||||||||||||||||
Pass | 9,057 | 49,034 | 27,474 | 51,267 | 39,371 | 68,509 | - | 244,712 | ||||||||||||||||||||||||
Watch | 1,406 | - | - | 1,429 | - | 193 | - | 3,028 | ||||||||||||||||||||||||
Substandard | - | - | - | 283 | 80 | 2,560 | - | 2,923 | ||||||||||||||||||||||||
Total Real estate | 10,463 | 49,034 | 27,474 | 52,979 | 39,451 | 71,262 | - | 250,663 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | 12 | - | 12 | ||||||||||||||||||||||||
Home Equity – closed end | ||||||||||||||||||||||||||||||||
Pass | 126 | 624 | 411 | 2,309 | 185 | 2,501 | - | 6,156 | ||||||||||||||||||||||||
Watch | 60 | - | - | - | - | - | - | 60 | ||||||||||||||||||||||||
Substandard | - | 48 | - | - | - | 766 | - | 814 | ||||||||||||||||||||||||
Total Home Equity - closed end | 186 | 672 | 411 | 2,309 | 185 | 3,267 | - | 7,030 | ||||||||||||||||||||||||
Current period gross write-offs | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| 17 |
| Table of Contents |
Term Loans by Year of Origination 2026 2025 2024 2023 2022 Prior Revolving Total Multifamily Pass Watch Substandard Total Multifamily Current period gross write-offs Owner-occupied commercial real estate Pass Watch Substandard Total Owner-occupied commercial real estate Current period gross write-offs Other commercial real estate Pass Watch Substandard Total Other commercial real estate Current period gross write-offs Agricultural loans Pass Watch Substandard Total Agricultural loans Current period gross write-offs Commercial and industrial Pass Watch Substandard Total Commercial and industrial Current period gross write-offs Credit Cards Pass Substandard Total Credit Cards Current period gross write-offs Automobile loans Pass Watch Substandard Total Automobile loans Current period gross write-offs Other consumer loans Pass Watch Substandard Total Other consumer loans Current period gross write-offs Municipal loans Pass Watch Substandard Total Municipal loans Current period gross write-offs Total loans Less: Unamortized net deferred loan fees Loans held for investment Current period gross write-offs6,400 6,925 2,667 - 2,535 3,188 3,561 25,276 - - - - - - - - - - - - - - - - 6,400 6,925 2,667 - 2,535 3,188 3,561 25,276 - - - - - - - - 4,172 19,493 9,330 2,334 10,712 31,585 1,750 79,376 - - - - - - - - - 60 1,142 - - 9,352 - 10,554 4,172 19,553 10,472 2,334 10,712 40,937 1,750 89,930 - - - - - - - - 3,546 15,010 368 6,802 36,782 42,458 2,676 107,642 - - - - - 953 - 953 - - 7,768 - - 83 - 7,851 3,546 15,010 8,136 6,802 36,782 43,494 2,676 116,446 - - - - - - - - 1,592 4,857 1,733 1,232 806 112 11,088 21,420 - - - - 9 16 - 25 - - - 85 - - - 85 1,592 4,857 1,733 1,317 815 128 11,088 21,530 - - - - - - - - 2,265 17,429 6,358 2,380 4,216 2,252 24,452 59,352 - - - - 38 - - 38 - 33 - 293 17 - 100 443 2,265 17,462 6,358 2,673 4,271 2,252 24,552 59,833 - - - - - - - - - - - - - - 3,364 3,364 - - - - - - - - - - - - - - 3,364 3,364 - - - - - - 14 14 3,238 14,720 15,109 20,377 12,085 3,826 - 69,355 - - - - - - - - 15 15 174 45 214 104 - 567 3,253 14,735 15,283 20,422 12,299 3,930 - 69,922 - 102 276 256 50 28 - 712 1,451 3,001 1,905 1,360 873 389 37 9,016 - - - - - - - - - - - 17 9 2 - 28 1,451 3,001 1,905 1,377 882 391 37 9,044 - 3 - 1 3 7 - 14 - - - - - 4,137 - 4,137 - - - - - - - - - - - - - - - - - - - - - 4,137 - 4,137 - - - - - - - - $ 38,305 $ 156,591 $ 86,380 $ 112,916 $ 122,643 $ 225,452 $ 155,182 $ 897,469 (604 ) $ 896,865 $ - $ 105 $ 276 $ 257 $ 53 $ 47 $ 14 $ 752
| 18 |
| 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, 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 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
| 19 |
| Table of Contents |
Term Loans by Year of Origination 2025 2024 2023 2022 2021 Prior Revolving Total Commercial and industrial Pass Watch Substandard Total Commercial and industrial Current period gross write-offs Credit Cards Pass Substandard Total Credit Cards Current period gross write-offs Automobile loans Pass Watch Substandard Total Automobile loans Current period gross write-offs Other consumer loans Pass Watch Substandard Total Other consumer loans Current period gross write-offs Municipal loans Pass Watch Substandard Total Municipal loans Current period gross write-offs Total loans Less: Unamortized net deferred loan fees Loans held for investment Current period gross write-offs18,025 6,615 2,710 4,675 2,359 251 20,980 55,615 - - - 43 - - 150 193 35 - 317 17 - - 708 1,077 18,060 6,615 3,027 4,735 2,359 251 21,838 56,885 - 408 - 75 - - - 483 - - - - - - 3,387 3,387 - - - - - - - - - - - - - - 3,387 3,387 - - - - - - 57 57 16,255 17,479 23,351 14,122 4,512 868 - 76,587 - - - - - - - - 14 140 21 207 76 35 - 493 16,269 17,619 23,372 14,329 4,588 903 - 77,080 97 904 1,082 644 186 109 - 3,022 3,215 2,166 1,669 1,128 268 336 307 9,089 - - - - - - - - - - 19 14 8 2 - 43 3,215 2,166 1,688 1,142 276 338 307 9,132 9 34 38 58 5 2 - 146 - - - - 500 3,719 - 4,219 - - - - - - - - - - - - - - - - - - - - 500 3,719 - 4,219 - - - - - - - - $ 152,248 $ 90,326 $ 119,498 $ 133,405 $ 62,020 $ 172,223 $ 157,088 $ 886,808 (555 ) $ 886,253 $ 106 $ 1,346 $ 1,120 $ 948 $ 223 $ 435 $ 57 $ 4,235
| 20 |
| 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 March 31, 2026 | ||||||||||||||||||||||||
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 | $ | - | $ | - | $ | - | $ | - | $ | 26,802 | $ | 26,802 | ||||||||||||
Other construction, land development and land | - | 156 | - | 20 | 41,829 | 42,005 | ||||||||||||||||||
Secured by farmland | - | - | - | 412 | 117,525 | 117,937 | ||||||||||||||||||
Home equity – open end | 98 | 119 | - | 484 | 52,849 | 53,550 | ||||||||||||||||||
Real estate | 2,037 | 677 | - | 1,682 | 246,267 | 250,663 | ||||||||||||||||||
Home equity – closed end | 64 | - | - | 766 | 6,200 | 7,030 | ||||||||||||||||||
Multifamily | - | - | - | - | 25,276 | 25,276 | ||||||||||||||||||
Owner-occupied commercial real estate | 1,142 | - | - | 891 | 87,897 | 89,930 | ||||||||||||||||||
Other commercial real estate | - | - | - | - | 116,446 | 116,446 | ||||||||||||||||||
Agricultural loans | - | - | - | 85 | 21,445 | 21,530 | ||||||||||||||||||
Commercial and industrial | 69 | - | - | 30 | 59,734 | 59,833 | ||||||||||||||||||
Credit cards | 22 | 10 | 5 | - | 3,327 | 3,364 | ||||||||||||||||||
Automobile loans | 1,058 | 259 | - | 446 | 68,159 | 69,922 | ||||||||||||||||||
Other consumer loans | 110 | 14 | - | 28 | 8,892 | 9,044 | ||||||||||||||||||
Municipal loans | - | - | - | - | 4,137 | 4,137 | ||||||||||||||||||
Gross loans | 4,600 | 1,235 | 5 | 4,844 | 886,785 | 897,469 | ||||||||||||||||||
Less: Unamortized net deferred loan fees | - | - | - | - | (604 | ) | (604 | ) | ||||||||||||||||
Loans held for investment | $ | 4,600 | $ | 1,235 | $ | 5 | $ | 4,844 | $ | 886,181 | $ | 896,865 | ||||||||||||
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 | ||||||||||||
| 21 |
| Table of Contents |
There were $4.8 million and $6.0 million in nonaccrual loans at March 31, 2026 and December 31, 2025, respectively. There was no income recognized on nonaccrual loans during the three months ended March 31, 2026 and 2025.
The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated (dollars in thousands).
March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||
Nonaccrual loans | Nonaccrual loans | |||||||||||||||||||||||
With no Allowance | With an Allowance | Total | With no Allowance | With an Allowance | Total | |||||||||||||||||||
Other construction, land development and land | $ | 20 | $ | - | $ | 20 | $ | - | $ | - | $ | - | ||||||||||||
Secured by farmland | - | 412 | 412 | - | 434 | 434 | ||||||||||||||||||
Home equity – open end | 484 | - | 484 | 462 | - | 462 | ||||||||||||||||||
Real estate | 1,582 | 100 | 1,682 | 2,206 | 102 | 2,308 | ||||||||||||||||||
Home Equity – closed end | 766 | - | 766 | - | - | - | ||||||||||||||||||
Owner-occupied commercial real estate | 891 | - | 891 | 2,201 | - | 2,201 | ||||||||||||||||||
Agricultural loans | - | 85 | 85 | 60 | 112 | 172 | ||||||||||||||||||
Commercial and industrial | 30 | - | 30 | 29 | - | 29 | ||||||||||||||||||
Automobile loans | 446 | - | 446 | 389 | - | 389 | ||||||||||||||||||
Other consumer loans | 28 | - | 28 | 42 | - | 42 | ||||||||||||||||||
Total loans | $ | 4,247 | $ | 597 | $ | 4,844 | $ | 5,389 | $ | 648 | $ | 6,037 | ||||||||||||
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. 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 | ||||||||
March 31, | December 31, | |||||||
2026 | 2025 | |||||||
Secured by farmland | $ | 412 | $ | 434 | ||||
Home equity – open end | 110 | 175 | ||||||
Real estate | 866 | 868 | ||||||
Owner-occupied commercial real estate | 891 | 2,201 | ||||||
Agricultural loans | 85 | 112 | ||||||
Total loans | $ | 2,364 | $ | 3,790 | ||||
| 22 |
| Table of Contents |
Troubled Loan Modifications
The Company closely monitors the performance of borrowers experiencing financial difficulty and grants certain loan modifications it would not otherwise consider. The Company refers to such loan modifications as troubled loan modifications (“TLMs”).
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 March 31, 2026 | |||||||||||
Amortized Cost Basis | % of Total Loan Type | Financial Effect | |||||||||
Automobile loans | $ | 1 | 0.00 | % | Added a weighted-average of 6.2 months to the life of the loans. | ||||||
Total Term Extensions | $ | 1 | |||||||||
There were no loans modified for borrowers experiencing financial difficulty in the three months ended March 31, 2025.
The following tables present an aging analysis of the amortized cost of TLMs as of the dates stated (dollars in thousands).
March 31, 2026 | ||||||||||||||||||||
Current Loans | 30-89 Days Past Due | Greater than 90 Days Past Due & Accruing | Nonaccrual | Total | ||||||||||||||||
Real estate | $ | 48 | $ | - | $ | - | $ | - | $ | 48 | ||||||||||
Owner occupied commercial real estate | 5,336 | - | - | 891 | 6,227 | |||||||||||||||
Automobile loans | 19 | - | - | 19 | 38 | |||||||||||||||
Total modified loans | $ | 5,403 | $ | - | $ | - | $ | 910 | $ | 6,313 | ||||||||||
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 | ||||||||||
At March 31, 2026 and December 31, 2025, there were no unfunded commitments to borrowers with TLMs.
| 23 |
| Table of Contents |
The following table presents the amortized cost of TLMs modified in the preceding twelve months and had a payment default during the periods stated (dollars in thousands).
For the three months ended March 31, | ||||||||||||||||||||||
2026 | 2025 | |||||||||||||||||||||
Number of Loans | Amortized Cost | % of Amortized Cost to Gross Loans by Category | Number of Loans | Amortized Cost | % of Amortized Cost to Gross Loans by Category | |||||||||||||||||
Term extension and deferral | ||||||||||||||||||||||
Real estate | - | $ | - | 1 | $ | 6 | <0.01 | % | ||||||||||||||
Automobile loans | - | - | 2 | 14 | 0.03 | % | ||||||||||||||||
Total term extension and deferral | - | $ | - | 3 | $ | 20 | ||||||||||||||||
Other than temporary payment delay | ||||||||||||||||||||||
Owner occupied commercial real estate | - | $ | - | 1 | $ | 1,205 | 1.47 | % | ||||||||||||||
Total other than temporary payment delay | - | $ | - | 1 | $ | 1,205 | ||||||||||||||||
Total | - | $ | - | 4 | $ | 1,225 | ||||||||||||||||
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 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 ACL. The ACL for unfunded commitments is classified on the balance sheet within other liabilities.
NOTE 5 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 adjusted for prepaid rent, initial direct costs, and any incentives received from the lessor. The right-of-use assets are included in other assets and the lease liability in other liabilities in the consolidated balance sheets.
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 three operating leases for office properties.
| 24 |
| Table of Contents |
The following tables present information about the Company’s leases (dollars in thousands):
March 31, 2026 | ||||
Lease Liabilities (included in other liabilities) | $ | 1,099 | ||
Right-of-use assets (included in other assets) | $ | 1,063 | ||
Weighted average remaining lease term | 8.24 years | |||
Weighted average discount rate | 3.93 | % | ||
For the Three Months Ended March 31, | ||||||||
Lease cost | 2026 | 2025 | ||||||
Operating lease cost | $ | 28 | $ | 30 | ||||
Total lease cost | $ | 28 | $ | 30 | ||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 36 | $ | 34 | ||||
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 March 31, 2026 | |||
Nine months ending December 31, 2026 | $ | 107 | ||
Twelve months ending December 31, 2027 | 153 | |||
Twelve months ending December 31, 2028 | 157 | |||
Twelve months ending December 31, 2029 | 161 | |||
Twelve months ending December 31, 2030 | 166 | |||
Thereafter | 554 | |||
Total undiscounted cash flows | $ | 1,298 | ||
Discount | (199 | ) | ||
Lease liabilities | $ | 1,099 | ||
NOTE 6 REGULATORY CAPITAL MATTERS
Banks and financial holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, “prompt corrective action” regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The net unrealized gain or loss on AFS securities is not included in computing regulatory capital. Management believes as of March 31, 2026, the Bank met all capital adequacy requirements to which it was subject.
“Prompt corrective action” regulations provide five classifications: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”, although these terms are not used to represent overall financial condition. If “adequately capitalized”, regulatory approval is required to accept brokered deposits. If “undercapitalized”, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As of March 31, 2026, and December 31, 2025, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for “prompt corrective action”.
Actual | Minimum Capital Requirement | Minimum to be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
March 31, 2026 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Total risk-based ratio | $ | 132,729 | 14.10 | % | $ | 75,283 | 8.00 | % | $ | 94,104 | 10.00 | % | ||||||||||||
Tier 1 risk-based ratio | 124,033 | 13.18 | % | 56,462 | 6.00 | % | 75,283 | 8.00 | % | |||||||||||||||
Common equity tier 1 | 124,033 | 13.18 | % | 42,347 | 4.50 | % | 61,167 | 6.50 | % | |||||||||||||||
Tier 1 leverage ratio | 124,033 | 8.84 | % | 56,153 | 4.00 | % | 70,192 | 5.00 | % | |||||||||||||||
| 25 |
| Table of Contents |
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 Tier 1 risk-based ratio Common equity tier 1 Tier 1 leverage ratio$ 130,263 14.04 % $ 74,241 8.00 % $ 92,801 10.00 % 121,679 13.11 % 55,680 6.00 % 74,241 8.00 % 121,679 13.11 % 41,760 4.50 % 60,321 6.50 % 121,679 8.73 % 55,752 4.00 % 69,690 5.00 %
NOTE 7 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. |
Fair Value – Recurring Basis
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:
Securities - When quoted market prices are not available, fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discount cash flow methods. Level 2 securities included U.S. agency securities, mortgage-backed agency securities, obligations of state 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. Changes in securities classified as Level 3 as of March 31, 2026 related to changes in the market values from December 31, 2025.
The carrying value of restricted stock approximates fair value based upon the redemption provisions of each security and is therefore excluded from the following table.
Loans held for sale – Mortgage loans originated and intended for sale in the secondary market are carried at fair value, which is based on the price secondary markets are currently offering for similar loans using observable market data. Changes in fair value are recognized in mortgage banking income on the consolidated statements of income (Level 2).
Derivative financial instruments - Derivative instruments used to hedge residential mortgage loans held for sale and the related interest rate lock commitments include forward commitments to sell mortgage loans and are reported at fair value utilizing Level 2 inputs. The fair values of derivative financial instruments are based on derivative market data inputs as of the valuation date and the underlying value of mortgage loans for rate lock commitments.
| 26 |
| Table of Contents |
The following tables present the balances of financial assets measured at fair value on a recurring basis as of the dates stated (dollars in thousands):
March 31, 2026 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. Treasury securities | $ | 14,306 | $ | - | $ | 14,306 | $ | - | ||||||||
U.S. Government agencies | 55,298 | - | 55,298 | - | ||||||||||||
Municipal securities | 25,466 | - | 25,466 | - | ||||||||||||
Mortgage-backed securities | 230,186 | - | 230,186 | - | ||||||||||||
Corporate debt securities | 25,250 | - | 4,957 | 20,293 | ||||||||||||
Total securities available for sale | $ | 350,506 | $ | - | $ | 330,213 | $ | 20,293 | ||||||||
Other assets: | ||||||||||||||||
Loans held for sale | $ | 3,693 | $ | - | $ | 3,693 | $ | - | ||||||||
Forward sales commitments | 117 | - | 117 | - | ||||||||||||
Total other assets | 3,810 | - | $ | 3,810 | $ | - | ||||||||||
Assets at Fair Value | $ | 354,316 | $ | - | $ | 334,023 | $ | 20,293 | ||||||||
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 | ||||||||
Fair Value - Nonrecurring Basis
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. 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 - Collateral-dependent loans are carried at fair value, which equals the estimated market value of the collateral less estimated costs to sell. Collateral may be in the form of real estate, securities, or business assets, including equipment, inventory, and accounts receivable. A loan may have multiple types of collateral; however, the majority of the Company’s loan collateral is real estate. The value of real estate collateral is generally determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties or is discounted by the Company because of lack of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of operations.
| 27 |
| Table of Contents |
Other Real Estate Owned (“OREO”)- Certain assets such as OREO are measured at fair value less estimated costs to sell. Valuation of OREO is generally determined using current appraisals from independent parties, a Level 2 input. If current appraisals cannot be obtained prior to reporting dates, or if declines in value are identified after a recent appraisal, 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 following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2026 and December 31, 2025 (dollars in thousands). Fair values 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 assets that were measured at fair value on a nonrecurring basis as of the dates stated (dollars in thousands).
March 31, 2026 | ||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||
Balance | Level 1 | Level 2 | Level 3 | |||||||||||||
Collateral-dependent loans | $ | 2,203 | $ | - | $ | - | $ | 2,203 | ||||||||
December 31, 2025 | ||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||
Balance | Level 1 | Level 2 | Level 3 | |||||||||||||
Collateral-dependent loans | $ | 3,578 | $ | - | $ | - | $ | 3,578 | ||||||||
The following tables present quantitative information about Level 3 fair value measurements as of the dates stated (dollars in thousands).
Fair Value at March 31, 2026 | Valuation Technique | Significant Unobservable Inputs | Discount | ||||||||
Collateral Dependent Loans | $ | 2,203 | Discounted appraised value | Discount for selling costs and marketability | 11.13-100% | ||||||
Fair Value at December 31, 2025 | Valuation Technique | Significant Unobservable Inputs | Discount | ||||||||
Collateral Dependent Loans | $ | 3,578 | Discounted appraised value | Discount for selling costs and marketability | 36.17-100% | ||||||
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 the issuer (Level 2). The fair value of other investments is approximated by its carrying value (Level 3).
| 28 |
| Table of Contents |
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 BOLI 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 2).
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 a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for time deposits that mature in the same period. 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.
March 31, 2026 | ||||||||||||||||||||
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 | $ | 85,894 | $ | 85,894 | $ | - | $ | - | $ | 85,894 | ||||||||||
Securities | 350,506 | - | 330,213 | 20,293 | 350,506 | |||||||||||||||
Other investments | 2,304 | - | - | 2,304 | 2,304 | |||||||||||||||
Loans held for sale | 3,693 | - | 3,693 | - | 3,693 | |||||||||||||||
Loans held for investment, net | 888,955 | - | - | 884,676 | 884,676 | |||||||||||||||
Interest receivable | 5,210 | - | 5,210 | - | 5,210 | |||||||||||||||
Bank owned life insurance | 24,600 | - | 24,600 | - | 24,600 | |||||||||||||||
IRLC | - | - | - | - | - | |||||||||||||||
Forward sales commitments | 117 | - | 117 | - | 117 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Noninterest-bearing demand deposits | $ | 290,343 | $ | 290,343 | $ | - | $ | - | $ | 290,343 | ||||||||||
Interest checking deposits | 157,491 | - | 157,491 | - | 157,491 | |||||||||||||||
Savings deposits | 627,300 | - | 627,300 | - | 627,300 | |||||||||||||||
Time deposits | 199,930 | - | 199,200 | - | 199,200 | |||||||||||||||
Long-term debt | 9,921 | - | - | 9,988 | 9,988 | |||||||||||||||
Interest payable | 1,361 | - | 1,361 | - | 1,361 | |||||||||||||||
| 29 |
| Table of Contents |
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 Securities Other investments Loans held for sale Loans held for investment, net Interest receivable Bank owned life insurance IRLC Forward sales commitments Financial Liabilities Noninterest-bearing demand deposits Interest checking deposits Savings deposits Time deposits Long-term debt Interest payable$ 68,853 $ 68,853 $ - $ - $ 68,853 345,339 - 326,304 19,035 345,339 2,254 - - 2,254 2,254 3,191 - 3,191 - 3,191 878,435 - - 871,151 871,151 5,118 - 5,118 - 5,118 24,395 - 24,395 - 24,395 37 - 37 - 37 20 - 20 - 20 $ 279,398 $ 279,398 $ - $ - $ 279,398 148,624 - 148,624 - 148,624 591,777 - 591,777 - 591,777 225,413 - 225,156 - 225,156 9,917 - - 10,085 10,085 1,361 - 1,361 - 1,361
NOTE 8 SUBSEQUENT EVENTS
On April 30, 2026, the Company sold its investment in Richmond-based Bearing Insurance (“Bearing”), in which the Company held an investment of four (4) units collectively valued at $223,922 at March 31, 2026. The sale, which was finalized on April 30, 2026, after receiving member approval and all other necessary approvals, called for each unit to be valued at $1,265,073, resulting in proceeds to the Company of $5.1 million. As a result, the Company recorded a one-time, pre-tax gain of $4.8 million, resulting in an after tax gain of $3.8 million. The investment in Bearing was included in Other Assets on the balance sheet as of March 31, 2026.
| 30 |
| Table of Contents |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands)
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.
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 the Bank 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.
Management’s discussion and analysis is presented to assist the reader in understanding and evaluating the financial condition and results of operations of the Company. The analysis focuses on the consolidated financial statements, footnotes, and other financial data presented. The discussion highlights material changes from prior reporting periods and any identifiable trends which may affect the Company. Amounts have been rounded for presentation purposes. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements presented in Item 1, Part 1 of this Form 10-Q and in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”).
Forward-Looking Statements
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.
Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in local and national economies or market conditions; changes in interest rates; regulations and accounting principles; changes in policies or guidelines; loan demand and asset quality, including values of real estate and other collateral; deposit flow; the impact of competition from traditional or new sources; and other factors. Readers should consider these risks and uncertainties in evaluating forward-looking statements and should not place undue reliance on such statements.
All forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.
Critical Accounting Policies
The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of Directors of the Company.
The Company’s critical accounting policies used in the preparation of the Consolidated Financial Statements as of March 31, 2026 were unchanged from the policies disclosed in the 2025 Form 10-K within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Note 1 to the Consolidated Financial Statements in Part I, Item 1 for additional information.
| 31 |
| Table of Contents |
Results of Operations
Overview
Net income for the first quarter of 2026 was $3.2 million, or $0.91 per share, compared to $2.5 million, or $0.70 per share, for the first quarter of 2025—an increase of $769,000, or $0.21 per share. Return on average assets was 0.94% and return on average equity was 12.18% for the three months ended March 31, 2026, both improving from the prior-year period. The increase in net income was primarily the result of loan and investment securities growth, which contributed to a $1.2 million increase in interest income, along with a $756,000 decrease in interest expense. Net interest income increased to $11.4 million at March 31, 2026 from $9.4 million at March 31, 2025.
Net Interest Income and Net Interest Margin
Net interest income for first quarter 2026 was $11.4 million, an increase of $2.0 million over first quarter 2025. Interest income for first quarter 2026 increased $1.2 million due to loan and investment securities growth, while interest expense decreased $756,000 driven by a shift from higher-cost time deposits to lower-cost interest checking and money market accounts. Net interest margin for the quarter ended March 31, 2026 was 3.56%, up 41 basis points from the quarter ended March 31, 2025. The earning asset yield increased 1 basis point to 5.44% from 5.43%. Cost of interest-bearing liabilities decreased by 45 basis points to 2.49%. Interest expense on deposits decreased $830,000 due to a shift in the average balance of time deposits to lower-cost interest checking and money market accounts; however, interest expense on debt increased $74,000 due to higher interest rates on long-term debt and an increase of $2.9 million in average balances.
| 32 |
| Table of Contents |
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, 2026 and 2025 (dollars in thousands):
Three Months ended March 31, | ||||||||||||||||||||||||
2026 | 2025 | |||||||||||||||||||||||
Balance4 | Interest | Rate1 | Balance4 | Interest | Rate1 | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Loans held for investment2,3 | $ | 886,662 | $ | 14,243 | 6.51 | % | $ | 831,168 | $ | 13,465 | 6.57 | % | ||||||||||||
Loans held for sale | 1,775 | 25 | 5.71 | % | 1,425 | 24 | 6.83 | % | ||||||||||||||||
Federal funds sold | 62,929 | 564 | 3.63 | % | 60,159 | 652 | 4.40 | % | ||||||||||||||||
Interest bearing deposits in banks and other investments | 3,282 | 23 | 2.84 | % | 3,176 | 30 | 3.83 | % | ||||||||||||||||
Investment securities4 | ||||||||||||||||||||||||
Taxable | 332,060 | 2,530 | 3.09 | % | 302,917 | 1,988 | 2.66 | % | ||||||||||||||||
Tax exempt | 16,424 | 108 | 2.67 | % | 16,145 | 105 | 2.64 | % | ||||||||||||||||
Total investment securities | 348,484 | 2,638 | 3.07 | % | 319,062 | 2,093 | 2.66 | % | ||||||||||||||||
Total earning assets | 1,303,132 | 17,493 | 5.44 | % | 1,214,990 | 16,264 | 5.43 | % | ||||||||||||||||
Allowance for credit losses | (7,795 | ) | (8,004 | ) | ||||||||||||||||||||
Nonearning assets | 92,966 | 99,270 | ||||||||||||||||||||||
Total assets | $ | 1,388,303 | $ | 1,306,256 | ||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||
Demand-interest bearing | $ | 151,966 | $ | 572 | 1.53 | % | $ | 137,616 | $ | 580 | 1.71 | % | ||||||||||||
Savings | 607,699 | 3,579 | 2.39 | % | 517,628 | 3,380 | 2.65 | % | ||||||||||||||||
Time deposits | 217,709 | 1,720 | 3.20 | % | 279,585 | 2,740 | 3.97 | % | ||||||||||||||||
Total interest-bearing deposits | 977,374 | 5,871 | 2.44 | % | 934,829 | 6,700 | 2.91 | % | ||||||||||||||||
Short‑term debt | - | - | - | - | 3 | - | ||||||||||||||||||
Long-term debt | 9,919 | 193 | 7.89 | % | 6,980 | 117 | 6.80 | % | ||||||||||||||||
Total interest-bearing liabilities | 987,293 | 6,064 | 2.49 | % | 941,809 | 6,820 | 2.94 | % | ||||||||||||||||
Noninterest bearing deposits | 277,670 | 262,708 | ||||||||||||||||||||||
Other liabilities | 15,950 | 13,654 | ||||||||||||||||||||||
Total liabilities | 1,280,913 | 1,218,171 | ||||||||||||||||||||||
Shareholders’ equity | 107,390 | 88,085 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,388,303 | $ | 1,306,256 | ||||||||||||||||||||
Net interest earnings | $ | 11,429 | $ | 9,444 | ||||||||||||||||||||
Net yield on interest earning assets (NIM) | 3.56 | % | 3.15 | % | ||||||||||||||||||||
_______________________________________
1 Annualized.
2 Interest income on loans includes loan fees.
3 Loans held for investment include nonaccrual loans.
4 Average balance information is reflective of historical cost and has not been adjusted for changes in market value annualized.
| 33 |
| Table of Contents |
Provision for Credit Losses
During first quarter 2026, the Bank recorded a provision for credit losses of $309,000, compared to a recovery of provision for credit losses of $104,000 in first quarter 2025. The current quarter increase in provision was the result of a $10.6 million increase in total loans held for investment during the first quarter of 2026, compared to a decline of $12.9 million in the first three months of 2025. The provision also included a provision of $20,000 in the reserve for unfunded commitments that resulted from an increase in outstanding loan commitments. At March 31, 2026, the ACL totaled $7.9 million or 0.88% of gross loans outstanding.
Non-interest income
Non-interest income totaled $2.9 million for first quarter 2026, an increase of $50,000, compared to first quarter 2025. The increase was primarily driven by higher title insurance income and increased service charges on deposit accounts, partially offset by lower mortgage banking income. Non-interest income to average assets decreased to 0.85% at March 31, 2026 compared to 0.88% at March 31, 2025.
Non-interest Expense
Non-interest expenses totaled $10.3 million for first quarter 2026, compared to $9.5 million for the first quarter 2025, an increase of $789,000. The increase was primarily attributable to increased compensation and legal and professional fees, partially offset by a reduction in FDIC insurance expense. Salaries increased $174,000, largely due to the increase in the number of full-time equivalent employees and an increase in bonus accruals. Employee benefits increased $401,000 due to increases in payroll expenses, group insurance, and retirement contributions. Legal and professional fees increased $274,000 due to interim accounting assistance and other consulting fees. Non-interest expense to average assets increased from 2.96% at March 31, 2025 to 3.01% at March 31, 2026.
Balance Sheet Review
Overview
On March 31, 2026, assets totaled $1.4 billion, an increase of $35.2 million since December 31, 2025. Cash and cash equivalents increased $17.0 million to $85.9 million, primarily due to an increase in Federal funds sold during the quarter. Total loans increased by $10.6 million to $896.9 million, including increases of $8.4 million in residential mortgage loans, $6.4 million in multifamily residential loans, $2.9 million in commercial and industrial loans, $2.9 million in loans secured by farmland, and $2.8 million in other construction and land development loans. These increases were partially offset by declines of $6.7 million in owner‑occupied commercial real estate loans, $4.3 million in residential construction loans, and $7.2 million in automobile loans. Investment securities increased by $5.2 million due to purchases of $14.9 million, partially offset by $8.9 million in paydowns of U.S. agency mortgage‑backed securities. Total deposits grew by $29.9 million to $1.3 billion, with noninterest bearing deposits increasing by $10.9 million and interest-bearing deposits increasing by $18.9 million. Long-term debt remained consistent at $9.9 million. Total shareholders’ equity rose by $1.8 million to $106.6 million.
Securities Available for Sale (“AFS”)
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, 2026, the total AFS securities were $350.5 million, up from $345.3 million on December 31, 2025.
This represents an increase of $5.2 million, or 1.5%. The average balance of the AFS securities portfolio during the first three months of 2026 was $348.5 million, compared to $319.1 million during the same period in 2025. The average AFS securities portfolio accounted for 26.7% and 26.3% of average earning assets for the three months ended March 31, 2026, and 2025, respectively. The increase in AFS securities is primarily due to purchases of $14.9 million, partially offset by $8.9 million in paydowns of U.S. agency mortgage-backed securities in the bond portfolio. Net unrealized losses related to the fair value of AFS securities were $21.8 million as of March 31, 2026, compared to $21.0 million as of December 31, 2025. This unrealized loss is attributed to rising market interest rates rather than credit quality. During the period, $8.9 million in mortgage-backed securities were paid down, all of which was reinvested in higher-yielding bonds. Scheduled maturities and paydowns are expected to total $54.4 million in the remaining nine months of 2026. The portfolio’s weighted average life is 4.46 years, with a modified duration of 3.57 years.
| 34 |
| Table of Contents |
Loan Portfolio
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.
Loans Held for Investment totaled $896.9 million at March 31, 2026 and increased $10.6 million from $886.3 million at December 31, 2025. As a percentage of average earning assets, average loans were 63.9% for the three months ended March 31, 2026, compared with 68.4% for the three months ended March 31, 2025.
Loans Held for Sale totaled $3.7 million as of March 31, 2026, an increase of $502,000 from $3.2 million on December 31, 2025. This category consists of 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.
The Company’s loans held for investment portfolio is well-diversified, with first-lien, amortizing residential mortgage loans as the largest segment, representing 27.93% of total loans. Commercial real estate loans, including both owner-occupied and non-owner-occupied properties, comprise $206.4 million, or 23.00% of the portfolio. Loans secured by farmland totaled $117.9 million, or 13.14% of the portfolio. Automobile loans, originated through the Company’s dealer finance division, total $69.9 million, accounting for 7.79% of the portfolio. Following is a breakdown of the loan portfolio composition as of March 31, 2026, and December 31, 2025 (dollars in thousands):
March 31, 2026 | December 31, 2025 | |||||||||||||||
Loan Segment | Balance | Percentage of Portfolio | Balance | Percentage of Portfolio | ||||||||||||
1-4 Family residential construction | $ | 26,802 | 2.99 | % | $ | 31,118 | 3.51 | % | ||||||||
Other construction, land development and land | 42,005 | 4.68 | % | 39,187 | 4.42 | % | ||||||||||
Secured by farmland | 117,937 | 13.14 | % | 115,000 | 12.97 | % | ||||||||||
Home equity – open end | 53,550 | 5.97 | % | 51,393 | 5.80 | % | ||||||||||
Real estate | 250,663 | 27.93 | % | 243,361 | 27.44 | % | ||||||||||
Home Equity – closed end | 7,030 | 0.78 | % | 5,980 | 0.67 | % | ||||||||||
Multifamily | 25,276 | 2.82 | % | 18,854 | 2.13 | % | ||||||||||
Owner-occupied commercial real estate | 89,930 | 10.02 | % | 96,651 | 10.90 | % | ||||||||||
Other commercial real estate | 116,446 | 12.97 | % | 114,434 | 12.90 | % | ||||||||||
Agricultural loans | 21,530 | 2.40 | % | 20,127 | 2.27 | % | ||||||||||
Commercial and industrial | 59,833 | 6.67 | % | 56,885 | 6.41 | % | ||||||||||
Credit Cards | 3,364 | 0.37 | % | 3,387 | 0.38 | % | ||||||||||
Automobile loans | 69,922 | 7.79 | % | 77,080 | 8.69 | % | ||||||||||
Other consumer loans | 9,044 | 1.01 | % | 9,132 | 1.03 | % | ||||||||||
Municipal loans | 4,137 | 0.46 | % | 4,219 | 0.48 | % | ||||||||||
Gross loans | $ | 897,469 | 100.00 | % | $ | 886,808 | 100.00 | % | ||||||||
Unamortized deferred net loan fees | (604 | ) | (555 | ) | ||||||||||||
Loans held for investment, net of deferred loan fees | $ | 896,865 | $ | 886,253 | ||||||||||||
Allowance for Credit Losses
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.
| 35 |
| Table of Contents |
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.
The current quarter provision for credit losses of $309,000 was a combination of $289,000 provision for the allowance for loan credit losses, plus $20,000 provision for the allowance for unfunded commitments. The current quarter provision of $289,000 was driven by net loan charge-offs of $198,000 and a $10.6 million increase in loan balances.
As of March 31, 2026, year-to-date net charge-offs totaled $198,000, up from $187,000 during the same period ended March 31, 2025. Gross loans increased by $10.6 million in the first quarter of 2026 and loans individually analyzed decreased $1.4 million. As of March 31, 2026, the ACL was $7.9 million, or 0.88% of loans held for investment, compared to $7.8 million, or 0.88% of loans held for investment, as of December 31, 2025. The allowance for credit losses as a percentage of loans remained stable during the quarter, reflecting loan growth in line with existing portfolio risk characteristics and strong recovery performance.
The reserve for unfunded commitments increased from $764,000 at December 31, 2025, to $786,000 at March 31, 2026 due to increases in loan commitments of $9.2 million in construction loans, $1.7 million in home equity loans, and $1.5 million in nonowner-occupied commercial real estate, partially offset by a decrease of $11.7 million in commercial and industrial loans.
Asset Quality
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 decreased $1.2 million from December 31, 2025, primarily due to the payoff of three owner-occupied commercial real estate loans and one home equity loan related to one customer relationship ($325,000) and one owner-occupied commercial real estate loan ($1.0 million) becoming current during the quarter. For more details on nonperforming loans by segment, see Note 3 Loans in Notes to the Consolidated Financial Statements.
The following table summarizes the Company’s non-performing assets as of March 31, 2026, and December 31, 2025 (in thousands):
March 31, 2026 | December 31, 2025 | |||||||
Nonaccrual loans | $ | 4,844 | $ | 6,037 | ||||
Loans past due 90 days and accruing interest | 5 | 7 | ||||||
Total nonperforming loans | 4,849 | 6,044 | ||||||
Other real estate owned | - | - | ||||||
Total nonperforming assets | $ | 4,849 | $ | 6,044 | ||||
Allowance for credit losses | $ | 7,910 | $ | 7,818 | ||||
Total Loans | $ | 896,865 | $ | 886,253 | ||||
Ratios: | ||||||||
Allowance for credit losses to Total Loans | 0.88 | % | 0.88 | % | ||||
Allowance for credit losses to Total nonperforming assets | 163.13 | % | 129.35 | % | ||||
Allowance for credit losses to Nonaccrual loans | 163.29 | % | 129.50 | % | ||||
Nonaccrual Loans to Total Loans | 0.54 | % | 0.68 | % | ||||
Deposits and Other Borrowings
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 $1.28 billion and $1.25 billion at March 31, 2026 and December 31, 2025, respectively. Noninterest bearing deposits increased $10.9 million and interest bearing deposits increased $18.9 million.
The following table shows the balance of each category of deposits as of the dates indicated (dollars in thousands).
March 31, 2026 | December 31, 2025 | |||||||||||||||
Balance | % of total deposits | Balance | % of total deposits | |||||||||||||
Noninterest-bearing demand | $ | 290,343 | 22.8 | % | $ | 279,398 | 22.4 | % | ||||||||
Interest checking | 157,491 | 12.3 | % | 148,624 | 11.9 | % | ||||||||||
Savings accounts | 627,300 | 49.2 | % | 591,777 | 47.5 | % | ||||||||||
Time deposits | 199,930 | 15.7 | % | 225,413 | 18.1 | % | ||||||||||
Total deposits | $ | 1,275,064 | $ | 1,245,212 | ||||||||||||
Estimated uninsured deposits totaled approximately $177.7 million and $167.4 million at March 31, 2026, and December 31, 2025, respectively.
The following table shows the average balances of deposits and average interest rates paid as of March 31, 2026 and December 31, 2025 (dollars in thousands).
March 31, 2026 | December 31, 2025 | |||||||||||||||
Average Balance | Rate | Average Balance | Rate | |||||||||||||
Noninterest-bearing demand | $ | 277,670 | - | $ | 273,497 | - | ||||||||||
Interest-bearing: | ||||||||||||||||
Interest checking | 151,966 | 1.53 | % | 137,352 | 1.65 | % | ||||||||||
Savings accounts | 607,699 | 2.39 | % | 554,377 | 2.65 | % | ||||||||||
Time deposits | 217,709 | 3.20 | % | 245,951 | 3.52 | % | ||||||||||
Total interest-bearing deposits | 977,374 | 2.44 | % | 937,680 | 2.73 | % | ||||||||||
Total average deposits | $ | 1,255,044 | 1.90 | % | $ | 1,211,177 | 2.12 | % | ||||||||
The following table sets forth maturity ranges of time deposits, as of March 31, 2026, that meet or exceed the FDIC insurance limit (in thousands).
Maturity period: | March 31, 2026 | |||
3 months or less | $ | 11,489 | ||
Over 3 months through 6 months | 3,588 | |||
Over 6 months through 12 months | 21,071 | |||
Over 12 months | 1,059 | |||
Total | $ | 37,207 | ||
Long-term borrowings
Long-term debt remained stable at $9.9 million from December 31, 2025 to March 31, 2026 and consisted of $10.0 million in aggregate principal amount of 7.55% fixed to floating rate subordinated notes due November 1, 2035. 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 or 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.
| 36 |
| Table of Contents |
Shareholders’ Equity
Total Shareholders’ equity at March 31, 2026, was $106.6 million, compared to $104.8 million at December 31, 2025. Shareholders’ equity increased $1.8 million due to net income of $3.2 million, offset by other comprehensive loss of $585,000 and dividends to shareholders of $925,000. Other comprehensive loss was the result of a decrease in the unrealized gains on securities available for sale.
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. 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.
As of March 31, 2026, liquid assets totaled $121.5 million, or 8.6% of total assets, and liquid earning assets totaled $103.1 million, or 7.8% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. The Bank is scheduled to receive $54.4 million from bond paydowns and maturities by the end of 2026 which can be used to fund future loan growth and for other purposes.
At March 31, 2026 the Bank pledged investment securities with a collateral value totaling $113.1 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 2026. 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 $201.4 million in available credit at March 31, 2026. 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.
Uninsured deposits at March 31, 2026 were $177.7 million or 14% 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.
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.
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.
| 37 |
| Table of Contents |
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:
As of March 31, 2026 | As of December 31, 2025 | |||
Change in Interest Rates (in Basis Points) | Percent Change in Earnings | Percent Change in Earnings | ||
+ 400 basis points | -3.87% | -9.31% | ||
+ 300 basis points | -2.80% | -6.75% | ||
+ 200 basis points | -1.82% | -4.45% | ||
+ 100 basis points | -0.86% | -2.18% | ||
- 100 basis points | 0.18% | 1.78% | ||
- 200 basis points | -0.18% | 2.95% | ||
- 300 basis points | -1.27% | 3.21% | ||
- 400 basis points | -0.62% | 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 (“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.
The following table reflects the change in net economic value over different rate environments:
As of March 31, 2026 | As of December 31, 2025 | |||
Change in Interest Rates (in Basis Points) | Percentage Change in EVE | Percentage Change in EVE | ||
+ 400 basis points | -16.20% | -22.76% | ||
+ 300 basis points | -12.39% | -17.78% | ||
+ 200 basis points | -8.35% | -12.52% | ||
+ 100 basis points | -4.36% | -7.34% | ||
- 100 basis points | 2.09% | 2.83% | ||
- 200 basis points | 0.45% | 2.38% | ||
- 300 basis points | -4.41% | -1.22% | ||
- 400 basis points | -9.17% | -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.
| 38 |
| Table of Contents |
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, 2026, the Company had $88.9 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required
Item 4. Controls and Procedures
The Company's management, including the Chief Executive Officer and Chief Financial Officer, evaluated 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 March 31, 2026. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC and that such information is accumulated and communicated to management including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 39 |
| Table of Contents |
Part II Other Information
Item 1. | Legal Proceedings. | ||
There are no material pending legal proceedings other than ordinary routine litigation incidental to its business, to which the Company is a party or of which the property of the Company is subject. | |||
Item 1A. | Risk Factors. | Not required | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | None | |
Item 3. | Defaults Upon Senior Securities. | None | |
| Item 4. | Mine Safety Disclosures. | None | |
| Item 5. | Other Information. | None | |
Item 6. | Exhibits. |
(a) | Exhibits |
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith). | |
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith). | |
| 32 | ||
| 101 | The following materials from F&M Bank Corp. s Quarterly Report on Form 10-Q for the period ended March 31, 2026, formatted in Inline Extensible Business Reporting Language (iXBRL), 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 (filed herewith). | |
| 104 | The cover page from F&M Bank Corp. s Quarterly Report on Form 10-Q for the period ended March 31, 2026, formatted in Inline XBRL (included with Exhibit 101). |
| 40 |
| Table of Contents |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
F & M BANK CORP. (Registrant) | |||
| By: | /s/ Aubrey M. Wilkerson | ||
Aubrey M. Wilkerson | |||
Director and Chief Executive Officer | |||
(Principal Executive Officer) | |||
By: | /s/ Lisa F. Campbell | ||
Lisa F. Campbell | |||
Executive Vice President and Chief Financial Officer | |||
(Principal Financial Officer and Principal Accounting Officer) | |||
May 13, 2026
| 41 |