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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10‑Q

☒ Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2025

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-13273

F&M BANK CORP.

Virginia		54-1280811
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

P. O. Box 1111

Timberville, Virginia 22853

(Address of Principal Executive Offices) (Zip Code)

(540) 896-8941

(Registrant's Telephone Number, Including Area Code)

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 November 4, 2025
Common Stock, par value ‑ $5 per share		3,556,658 shares

F & M BANK CORP.

Quarterly Report on Form 10-Q

For the quarterly period ended September 30, 2025

Table of Contents

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets – September 30, 2025 and December 31, 2024	3

	Consolidated Statements of Income – Three Months Ended September 30, 2025 and 2024	4

	Consolidated Statements of Income – Nine Months Ended September 30, 2025 and 2024	5

	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2025 and 2024	6

	Consolidated Statements of Changes in Shareholders’ Equity - Three and Nine Months Ended September 30, 2025 and 2024	7

	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2025 and 2024	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45

Item 4.	Controls and Procedures	45

Part II	Other Information

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

Signatures		48

Certifications

Table of Contents

Part I Financial Information

Item 1 Financial Statements

F & M BANK CORP.

Consolidated Balance Sheets

(Dollars in thousands, except share data)

	September 30,			December 31,
	2025			2024*
	*(Unaudited)*
Assets
Cash and due from banks	$	18,862		$	18,685
Money market funds and interest-bearing deposits in other banks		982			298
Federal funds sold		64,091			37,524
Cash and cash equivalents		83,935			56,507

Securities available for sale, at fair value		329,423			327,670
Other investments		2,254			2,249
Loans held for sale, at fair value		1,288			2,283
Loans held for investment, net of deferred fees and costs		872,308			839,949
Less: allowance for credit losses		(7,848	)		(8,129	)
Net loans held for investment		864,460			831,820

Bank premises and equipment, net		21,568			22,192
Other real estate owned		-			77
Interest receivable		4,929			4,939
Goodwill		3,082			3,082
Bank owned life insurance		24,191			23,607
Deferred tax asset, net		6,857			9,465
Other assets		16,122			18,120
Total Assets	$	1,358,109		$	1,302,011
Liabilities
Deposits:
Noninterest bearing	$	280,937		$	260,301
Interest bearing		954,404			934,804
Total deposits		1,235,341			1,195,105

Long-term debt		7,000			6,975
Other liabilities		14,275			13,793
Total Liabilities		1,256,616			1,215,873

Commitments and contingencies

Shareholders’ Equity
Common stock, $5 par value, 6,000,000 shares authorized, 3,559,084 (2025) and 3,525,649 (2024) shares issued and outstanding		17,451			17,383
Additional paid in capital		11,661			11,463
Retained earnings		90,241			84,669
Accumulated other comprehensive loss		(17,860	)		(27,377	)
Total Shareholders’ Equity		101,493			86,138
Total Liabilities and Shareholders’ Equity	$	1,358,109		$	1,302,011

*2024 derived from audited consolidated financial statements.

See Notes to Consolidated Financial Statements

Table of Contents

F & M BANK CORP.

Consolidated Statements of Income

(Dollars in thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,
*Interest and dividend income*	2025			2024
Interest and fees on loans held for investment	$	14,130		$	13,833
Interest and fees on loans held for sale		(3	)		60
Interest from money market funds and federal funds sold		468			518
Interest and dividends on interest bearing deposits and other investments		59			55
Interest from securities available for sale		2,398			1,824
Total interest and dividend income		17,052			16,290

*Interest expense*
Total interest on deposits		6,399			7,440
Interest on short-term debt		-			241
Interest on long-term debt		158			116
Total interest expense		6,557			7,797

*Net interest income*		10,495			8,493

Provision for credit losses - loans		595			869
(Recovery of) provision for credit losses – unfunded commitments		(56	)		33
*Total Provision for Credit Losses*		539			902

*Net Interest Income After Provision for Credit Losses*		9,956			7,591

*Noninterest income*
Service charges on deposit accounts		347			317
Wealth management income		498			481
Mortgage banking income		426			671
Title insurance income		520			423
Income on bank-owned life insurance		160			191
Low income housing partnership amortization		(196	)		(196	)
ATM and check card fees		884			773
Other operating income		95			88
Total noninterest income		2,734			2,748

*Noninterest expense*
Salaries		4,084			4,056
Employee benefits		939			1,011
Occupancy expense		362			401
Equipment expense		290			323
FDIC assessment		221			257
Legal and professional expense		547			303
ATM and check card fees		384			296
Data processing fees		914			904
Other operating expenses		1,580			2,106
Total noninterest expense		9,321			9,657

*Income before income taxes*		3,369			682
Income tax expense (benefit)		445			(110	)
*Net Income*	$	2,924		$	792
*Per Common Share Data*
Net income (basic and diluted)	$	0.82		$	0.23
Cash dividends on common stock		0.26			0.26
Weighted average common shares outstanding (basic and diluted)		3,558,868			3,519,182

See Notes to Consolidated Financial Statements

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F & M BANK CORP.

Consolidated Statements of Income

(Dollars in thousands, except share and per share data)

(Unaudited)

	Nine Months Ended September 30,
*Interest and dividend income*	2025			2024
Interest and fees on loans held for investment	$	41,566		$	40,678
Interest and fees on loans held for sale		42			123
Interest from money market funds and federal funds sold		1,505			891
Interest and dividends on interest bearing deposits and other investments		147			357
Interest from securities available for sale		6,869			5,537
Total interest and dividend income		50,129			47,586

*Interest expense*
Total interest on deposits		19,270			20,728
Interest on short-term debt		4			1,691
Interest on long-term debt		390			347
Total interest expense		19,664			22,766

*Net interest income*		30,465			24,820

Provision for credit losses - loans		1,497			1,350
Provision for (recovery of) credit losses – unfunded commitments		125			(82	)
*Total Provision for Credit Losses*		1,622			1,268

*Net Interest Income After Provision for Credit Losses*		28,843			23,552

*Noninterest income*
Service charges on deposit accounts		967			881
Wealth management income		1,734			1,692
Mortgage banking income		1,386			1,821
Title insurance income		1,460			1,153
Income on bank-owned life insurance		584			558
Low income housing partnership amortization		(589	)		(589	)
ATM and check card fees		2,523			2,300
Other operating income		304			272
Total noninterest income		8,369			8,088

*Noninterest expense*
Salaries		11,915			11,682
Employee benefits		2,978			2,229
Occupancy expense		1,156			1,186
Equipment expense		916			1,002
FDIC assessment		731			778
Legal and professional expense		1,553			1,260
ATM and check card fees		940			811
Data processing fees		2,820			2,540
Other operating expenses		4,547			4,767
Total noninterest expense		27,556			26,255

*Income before income taxes*		9,656			5,385
Income tax expense		1,315			360
*Net Income*	$	8,341		$	5,025
*Per Common Share Data*
Net income (basic and diluted)	$	2.35		$	1.44
Cash dividends on common stock		0.78			0.78
Weighted average common shares outstanding (basic and diluted)		3,551,339			3,508,958

See Notes to Consolidated Financial Statements

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F & M BANK CORP.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024

Net Income	$	2,924	$	792	$	8,341	$	5,025

Other comprehensive income:
Unrealized gain on available-for sale securities, net of income tax expense of $1,279 and $2,213 for the three months and $2,530 and $2,402 for the nine months ended September 30, 2025 and 2024, respectively		4,811		8,325		9,517		9,044

Total other comprehensive income		4,811		8,325		9,517		9,044

Total comprehensive income	$	7,735	$	9,117	$	17,858	$	14,069

See Notes to Consolidated Financial Statements

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F & M BANK CORP.

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands)

(Unaudited)

Three Months Ended September 30, 2025 and 2024.

	Common Stock						Additional Paid in			Retained			Accumulated Other Comprehensive
	Shares			Amount			Capital			Earnings			Loss			Total
*Balance, June 30, 2024*		3,519,117		$	17,333		$	11,134		$	83,447		$	(30,298	)	$	81,616
Net income		-			-			-			792			-			792
Other comprehensive income		-			-			-			-			8,325			8,325
Dividends on common stock		-			-			-			(915	)		-			(915	)
Common stock issued		1,236			23			81			-			-			104
Stock-based compensation expense		-			-			72			-			-			72
*Balance, September 30, 2024*		3,520,353		$	17,356		$	11,287		$	83,324		$	(21,973	)	$	89,994

*Balance, June 30, 2025*		3,567,056		$	17,491		$	11,674		$	88,247		$	(22,671	)	$	94,741
Net income		-			-			-			2,924			-			2,924
Other comprehensive income		-			-			-			-			4,811			4,811
Dividends on common stock		-			-			-			(920	)		-			(920	)
Common stock issued		4,139			21			81			-			-			102
Common stock repurchased		(12,111	)		(61	)		(208	)		-			-			(269	)
Stock-based compensation expense		-			-			114			-			-			114
*Balance, September 30, 2025*		3,559,084		$	17,451		$	11,661		$	90,241		$	(17,860	)	$	101,493

Nine Months Ended September 30, 2025 and 2024.

	Common Stock						Additional Paid in			Retained			Accumulated Other Comprehensive
	Shares			Amount			Capital			Earnings			Loss			Total
*Balance December 31, 2023*		3,485,570		$	17,263		$	11,043		$	81,034		$	(31,017	)	$	78,323
Net income		-			-			-			5,025			-			5,025
Other comprehensive income		-			-			-			-			9,044			9,044
Dividends on common stock		-			-			-			(2,735	)		-			(2,735	)
Common stock issued		10,421			52			154			-			-			206
Net restricted common stock activity		24,362			-			-			-			-			-
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes		-			41			(41	)		-			-			-
Stock-based compensation expense		-			-			131			-			-			131
*Balance, September 30, 2024*		3,520,353		$	17,356		$	11,287		$	83,324		$	(21,973	)	$	89,994

*Balance December 31, 2024*		3,525,649		$	17,383		$	11,463		$	84,669		$	(27,377	)	$	86,138
Net income		-			-			-			8,341			-			8,341
Other comprehensive income		-			-			-			-			9,517			9,517
Dividends on common stock		-			-			-			(2,769	)		-			(2,769	)
Common stock issued		14,245			71			233			-			-			304
Common stock repurchased		(12,111	)		(61	)		(208	)								(269	)
Net restricted common stock activity		31,301			-			-			-			-			-
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		-			-			308			-			-			308
*Balance, September 30, 2025*		3,559,084		$	17,451		$	11,661		$	90,241		$	(17,860	)	$	101,493

See Notes to Consolidated Financial Statements

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F & M BANK CORP.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2025			2024
*Cash flows from operating activities*
Net income	$	8,341		$	5,025
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,004			1,127
Amortization of intangibles		23			22
Amortization of securities		500			554
Proceeds from loans held for sale		38,259			47,645
Loans held for sale originated		(36,404	)		(47,767	)
Gain on sale of loans held for sale		(860	)		(1,091	)
Provision for credit losses		1,622			1,268
Decrease (increase) in interest receivable		10			(32	)
Decrease (increase) in deferred tax asset		80			(7	)
Decrease (increase) in other assets		1,429			(1,623	)
Increase (decrease) in other liabilities		355			(1,675	)
Amortization of limited partnership investments		589			589
Amortization of debt issuance costs		25			33
Income from life insurance investment		(584	)		(558	)
Gain on sale of fixed assets		-			(12	)
Gain on the sale of assets held for sale		(43	)		-
Gain on the sale of OREO		(73	)		(21	)
Stock-based compensation expense		308			131
Net cash provided by operating activities		14,581			3,608

*Cash flows from investing activities*
Proceeds from maturity of investments available for sale		32,320			10,500
Purchases of investments available for sale		(40,863	)		(18,026	)
Proceeds from paydowns of investments available for sale		18,337			10,932
Investment in restricted stock, net		(5	)		2,105
Net increase in loans held for investment		(34,137	)		(10,268	)
Proceeds from the sale of fixed assets		-			372
Proceeds from the sale of OREO		150			76
Net purchase of property and equipment		(380	)		(219	)
Net cash used in investing activities		(24,578	)		(4,528	)

*Cash flows from financing activities*
Net change in deposits		40,236			85,052
Net change in short-term debt		-			(45,000	)
Dividends paid in cash		(2,769	)		(2,735	)
Proceeds from issuance of common stock		227			206
Purchases of common stock		(269	)		-
Net cash provided by financing activities		37,425			37,523

*Net increase in Cash and Cash Equivalents*		27,428			36,603
*Cash and cash equivalents, beginning of period*		56,507			23,717
*Cash and cash equivalents, end of period*	$	83,935		$	60,320
*Supplemental Cash Flow information:*
Cash paid for: Interest	$	20,199		$	22,100
Taxes		450			608
*Supplemental non-cash disclosures:*
Change in net unrealized loss on securities available for sale	$	12,047		$	11,446

See Notes to Consolidated Financial Statements

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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”), Farmers & Merchants Financial Services, Inc. (“FMFS”), VBS Mortgage, LLC (dba “F&M Mortgage”), and VSTitle, LLC (“VST”), with all significant intercompany accounts and transactions eliminated. FMFS was dissolved effective April 25, 2024, and its legal existence was subsequently terminated on June 7, 2024. The operations, assets, and liabilities of FMFS were transferred to the Bank. Effective on May 15, 2025, the operations, assets, and liabilities of 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, 2024.

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.

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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 – Securities Available for Sale

For securities available for sale, 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 a security available for sale is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At September 30, 2025 and December 31, 2024, there was no allowance for credit loss related to the securities available for sale portfolio.

Accrued interest receivable on securities available for sale totaled $1.3 million and $1.5 million at September 30, 2025 and December 31, 2024, 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 $3.6 million and $3.5 million at September 30, 2025 and December 31, 2024, 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.

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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.

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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, generally monitored by 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, generally monitored by 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 changing values 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. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

Allowance for Credit Losses – Unfunded Commitments

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

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company’s 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.

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 earnings per share.

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Recent Accounting Pronouncements

Accounting Standards Pending Adoption:

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide 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 these amendments to have a material effect on its consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company does not expect the adoption of ASU 2023-06 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.

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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):

September 30, 2025	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U. S. Treasuries	$	15,085	$	-	$	887	$	14,198
U. S. Government agencies		57,997		-		3,267		54,730
Municipal securities		32,621		25		1,823		30,823
Mortgage-backed securities		219,085		1,277		17,328		203,034
Corporate debt securities		27,800		1		1,163		26,638
Total Securities Available for Sale	$	352,588	$	1,303	$	24,468	$	329,423

December 31, 2024	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U. S. Treasuries	$	20,072	$	-	$	1,458	$	18,614
U. S. Government agencies		72,995				5,270		67,725
Municipal securities		40,674		-		2,467		38,207
Mortgage-backed securities		198,591		158		23,800		174,949
Corporate debt securities		30,550		-		2,375		28,175
Total Securities Available for Sale	$	362,882	$	158	$	35,370	$	327,670

The amortized cost and fair value of securities at September 30, 2025, by contractual maturity are shown below (dollars in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	26,973	$	26,498
Due after one year through five years		83,126		79,779
Due after five years		64,310		60,699
Due after ten years		178,179		162,447
Total	$	352,588	$	329,423

There were no sales of securities available for sale in the first nine months of 2025 or 2024.

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 $76.9 million and $9.0 million, as of September 30, 2025 and December 31, 2024, respectively.

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	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2025
U. S. Treasuries	$	-	$	-	$	14,198	$	887	$	14,198	$	887
U. S. Government agencies		-		-		54,730		3,267		54,730		3,267
Municipal securities		5,884		126		20,699		1,697		26,583		1,823
Mortgage-backed securities		4,575		6		125,814		17,322		130,389		17,328
Corporate debt securities		999		2		25,639		1,161		26,638		1,163
Total Securities Available for Sale	$	11,458	$	134	$	241,080	$	24,334	$	252,538	$	24,468

	Less than 12 Months				More than 12 Months				Total
December 31, 2024	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U. S. Treasuries	$	-	$	-	$	18,614	$	1,458	$	18,614	$	1,458
U. S. Government agencies		-		-		67,725		5,270		67,725		5,270
Municipal securities		9,971		139		28,236		2,328		38,207		2,467
Mortgage-backed securities		39,461		603		126,470		23,197		165,931		23,800
Corporate debt securities		1,463		37		26,712		2,338		28,175		2,375
Total Securities Available for Sale	$	50,895	$	779	$	267,757	$	34,591	$	318,652	$	35,370

At September 30, 2025 and December 31, 2024, 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 $22.1 million and $23.7 million at September 30, 2025 and December 31, 2024, 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 September 30, 2025 and December 31, 2024, 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 market value of $120.0 million pledged to the Federal Reserve Discount Window as of September 30, 2025. 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 nine months of 2025. 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 September 30, 2025, other investments consisted of restricted stock in the Federal Reserve Bank (“FRB”) (carrying basis of $1.1 million at September 30, 2025 and December 31, 2024), Federal Home Loan Bank (“FHLB”) (carrying basis of $925 thousand and $920 thousand at September 30, 2025 and December 31, 2024, respectively), in Farmer Mac stock (carrying basis of $4 thousand at September 30, 2025 and December 31, 2024), and in a correspondent bank (carrying value of $50 thousand at September 30, 2025 and December 31, 2024). Additionally, the Company has an equity investment in National Bankshares Inc. totaling $135 thousand at September 30, 2025 and December 31, 2024. Other investments are carried at cost.

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NOTE 3 LOANS AND CREDIT QUALITY

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

	September 30, 2025			December 31, 2024
1-4 Family residential construction	$	31,805		$	25,102
Other construction, land development and land		42,281			58,208
Secured by farmland		111,163			86,016
Home equity – open end		50,401			49,542
Real estate		233,859			213,081
Home equity – closed end		6,280			6,137
Multifamily		14,621			10,804
Owner-occupied commercial real estate		92,302			86,169
Other commercial real estate		114,375			98,189
Agricultural loans		18,562			17,928
Commercial and industrial		56,548			64,901
Credit cards		3,193			3,524
Automobile loans		83,458			104,271
Other consumer loans		9,621			11,915
Municipal loans		4,410			4,901
Gross loans		872,879			840,688
Unamortized net deferred loan fees		(571	)		(739	)
Less allowance for credit losses		7,848			8,129
Net loans	$	864,460		$	831,820

The table above does not include loans held for sale of $1.3 million and $2.3 million at September 30, 2025 and December 31, 2024, 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 $3.6 million and $3.5 million at September 30, 2025 and December 31, 2024, respectively. For the quarter and nine months ended September 30, 2025 and 2024, 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 $304.2 million and $306.7 million as of September 30, 2025, and December 31, 2024, respectively. The Company maintains a blanket lien on certain loans in its residential real estate, commercial, agricultural farmland, and home equity portfolios.

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Nonaccrual and Past Due Loans

The following tables present the aging of the recorded investment in loans held for investment by loan category as of the dates stated (dollars in thousands).

September 30, 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	$	-	$	-	$	-	$	-	$	31,805		$	31,805
Other construction, land development and land		157		-		-		-		42,124			42,281
Secured by farmland		51		-		-		1,305		109,807			111,163
Home equity – open end		76		-		-		562		49,763			50,401
Real estate		1,350		191		-		2,242		230,076			233,859
Home equity – closed end		31		-		-		-		6,249			6,280
Multifamily		-		-		-		-		14,621			14,621
Owner-occupied commercial real estate		540		1,153		-		2,608		88,001			92,302
Other commercial real estate		-		-		-		-		114,375			114,375
Agricultural loans		-		60		-		112		18,390			18,562
Commercial and industrial		318		33		-		-		56,197			56,548
Credit cards		39		1		-		-		3,153			3,193
Automobile loans		1,558		450		1		564		80,885			83,458
Other consumer loans		94		43		-		58		9,426			9,621
Municipal loans		-		-		-		-		4,410			4,410
Gross loans		4,214		1,931		1		7,451		859,282			872,879
Less: Unamortized net deferred loan fees		-		-		-		-		(571	)		(571	)
Total	$	4,214	$	1,931	$	1	$	7,451	$	858,711		$	872,308

December 31, 2024
	Accruing Loans 30-59 Days Past due		Accruing Loans 60-89 Days Past due		Accruing Loans 90 Days or More Past due		Nonaccrual Loans		Accruing Current Loans			Total Loans
1-4 Family residential construction	$	-	$	-	$	-	$	-	$	25,102		$	25,102
Other construction, land development and land		-		10		-		14		58,184			58,208
Secured by farmland		-		-		-		53		85,963			86,016
Home equity – open end		130		-		-		501		48,911			49,542
Real estate		1,799		877		-		916		209,489			213,081
Home equity – closed end		-		-		-		-		6,137			6,137
Multifamily		-		-		-		-		10,804			10,804
Owner-occupied commercial real estate		124		-		-		3,416		82,629			86,169
Other commercial real estate		-		-		-		785		97,404			98,189
Agricultural loans		-		-		-		171		17,757			17,928
Commercial and industrial		849		46		-		768		63,238			64,901
Credit cards		41		19		32		-		3,432			3,524
Automobile loans		2,153		304		-		397		101,417			104,271
Other consumer loans		95		10		-		24		11,786			11,915
Municipal loans		-		-		-		-		4,901			4,901
Gross loans		5,191		1,266		32		7,045		827,154			840,688
Less: Unamortized net deferred loan fees		-		-		-		-		(739	)		(739	)
Total	$	5,191	$	1,266	$	32	$	7,045	$	826,415		$	839,949

There were $7.5 million and $7.0 million in nonaccrual loans at September 30, 2025 and December 31, 2024, respectively. There was no income recognized on nonaccrual loans during the three months or nine months ended September 30, 2025 and 2024.

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The following table is a summary of the Company’s nonaccrual loans by major categories as of the dates stated (dollars in thousands).

	September 30, 2025						December 31, 2024
	Nonaccrual loans						Nonaccrual loans
	With no Allowance		With an Allowance		Total		With no Allowance		With an Allowance		Total
Other construction, land development and land	$	-	$	-	$	-	$	14	$	-	$	14
Secured by farmland		871		434		1,305		53		-		53
Home equity – open end		538		24		562		501		-		501
Real estate		2,140		102		2,242		916		-		916
Owner-occupied commercial real estate		2,608		-		2,608		2,147		1,269		3,416
Other commercial real estate		-		-		-		785		-		785
Agricultural loans		-		112		112		171		-		171
Commercial and industrial		-		-		-		768		-		768
Automobile loans		564		-		564		397		-		397
Other consumer loans		58		-		58		24		-		24
Total loans	$	6,779	$	672	$	7,451	$	5,776	$	1,269	$	7,045

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 table presents the amortized cost basis of loan modifications to borrowers experiencing financial difficulty for the nine months ended September 30, 2025 and 2024 (dollars in thousands).

Term Extensions for the Nine Months Ended September 30, 2025

	Amortized Cost Basis		% of Total Loan Type			Financial Effect
Automobile loans	$	35		0.04	%	Added a weighted-average of 11.2 months to the life of the loans.
Total Term Extensions	$	35

Other than Insignificant Payment Delays for the Nine Months Ended September 30, 2025

	Amortized Cost Basis		% of Total Loan Type			Financial Effect
Owner-occupied commercial real estate	$	735		0.80	%	Changed from amortizing to interest-only payments for 5 months.
Total Other than Insignificant Payment Delays	$	735

Amortized Cost of Basis of Loan Modifications Made to Borrowers Experiencing Financial Difficulty

For the Nine Months Ended September 30, 2024

	Amortized Cost Basis		% of Total Loan Type			Financial Effect
Owner-occupied commercial real estate	$	16		0.02	%	Added a weighted-average of 13.0 months to the life of the loans.
Automobile loans		53		0.05	%	Added a weighted-average of 4.1 months to the life of the loans.
Total Term Extension	$	69

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

	September 30, 2025
	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total
Real estate	$	-	$	-	$	-	$	2	$	2
Owner occupied commercial real estate		6,120		-		-		1,192		7,312
Automobile loans		47		21		-		10		78
Total modified loans	$	6,167	$	21	$	-	$	1,204	$	7,392

	December 31, 2024
	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total
Real estate	$	7	$	-	$	-	$	-	$	7
Owner occupied commercial real estate		6,653		-		-		-		6,653
Other commercial real estate		10		-		-		-		10
Automobile loans		62		49		-		-		111
Total modified loans	$	6,732	$	49	$	-	$	-	$	6,781

At September 30, 2025 and December 31, 2024, there were no unfunded commitments to borrowers with TLMs.

The following table presents the amortized cost of TLMs modified in the preceding twelve months that had a payment default during the periods stated (dollars in thousands).

	For the Nine Months Ended September 30, 2025
	Number of Loans		Amortized Cost		% of Amortized Cost to Gross Loans by Category
Term extension and deferral
Real estate		1	$	3		0.01	%
Automobile loans		4		29		0.03	%
Total term extension and deferral		5	$	32

Other than temporary payment delay
Owner occupied commercial real estate		1	$	1,192		1.29	%
Total other than temporary payment delay		1	$	1,192

Total		6	$	1,224

There were no TLMs modified in the preceding twelve months that had a payment default during the three and nine months ended September 30, 2024.

The Company’s credit loss model incorporates the impact of significant modifications made to borrowers experiencing financial difficulty that result in default during the period, both in loans evaluated individually and through the quantitative factors applied to pooled loans.

Collateral Dependent Disclosures

The collateral method is applied to individually evaluated loans for which foreclosure is probable. The collateral method is also applied to individually evaluated loans when borrowers are experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. 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.

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The following table presents an analysis of collateral-dependent loans of the Company as of the dates stated (dollars in thousands):

	September 30, 2025				December 31, 2024
	Real Estate		Business/Other Assets		Real Estate		Business/Other Assets
Secured by farmland	$	1,305	$	-	$	-	$	-
Home equity – open end		200		-		-		-
Real estate		1,024		-		-		-
Owner-occupied commercial real estate		2,543		-		3,416		-
Other commercial real estate		-		-		785		-
Agricultural loans		-		112		-		-
Commercial and industrial		-		-		-		605
Total loans	$	5,072	$	112	$	4,201	$	605

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:

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.

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

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

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

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The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of September 30, 2025 (dollars in thousands):

	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
1-4 Family residential construction
Pass	$	-	$	-	$	780	$	-	$	-	$	-	$	31,025	$	31,805
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total 1-4 Family residential construction		-		-		780		-		-		-		31,025		31,805
Current period gross write-offs		-		-		-		-		-		-		-		-

Other construction, land development and land
Pass		5,561		2,977		11,841		976		459		3,389		17,003		42,206
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		75		75
Total Other construction, land development and land		5,561		2,977		11,841		976		459		3,389		17,078		42,281
Current period gross write-offs		-		-		-		-		-		23		-		23

Secured by farmland
Pass		13,610		9,665		10,987		13,046		13,370		35,471		10,510		106,659
Watch		-		-		-		1,667		1,533		-		-		3,200
Substandard		-		-		-		319		871		-		114		1,304
Total Secured by farmland		13,610		9,665		10,987		15,032		15,774		35,471		10,624		111,163
Current period gross write-offs		-		-		-		-		-		-		-		-

Home equity – open end
Pass		-		-		-		-		-		121		49,619		49,740
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		661		661
Total Home equity - open end		-		-		-		-		-		121		50,280		50,401
Current period gross write-offs		-		-		-		-		-		-		-		-

Real estate
Pass		30,131		26,058		55,333		40,629		12,212		62,359		389		227,111
Watch		-		1,425		1,441		-		-		213		-		3,079
Substandard		-		-		292		83		801		2,493		-		3,669
Total Real estate		30,131		27,483		57,066		40,712		13,013		65,065		389		233,859
Current period gross write-offs		-		-		-		-		-		-		-		-

Home equity – closed end
Pass		569		681		2,382		198		59		2,336		-		6,225
Watch		-		-		-		-		-		-		-		-
Substandard		55		-		-		-		-		-		-		55
Total Home equity - closed end		624		681		2,382		198		59		2,336		-		6,280
Current period gross write-offs		-		-		-		-		-		-		-		-

Multifamily
Pass		3,080		2,692		-		2,577		1,260		2,294		2,718		14,621
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Multifamily		3,080		2,692		-		2,577		1,260		2,294		2,718		14,621
Current period gross write-offs		-		-		-		-		-		-		-		-

Owner-occupied commercial real estate
Pass		10,039		10,272		2,377		16,531		14,655		21,460		5,074		80,408
Watch		-		-		735		-		-		-		-		735
Substandard		65		1,153		-		-		-		9,893		48		11,159
Total Owner-occupied commercial real estate		10,104		11,425		3,112		16,531		14,655		31,353		5,122		92,302
Current period gross write-offs		-		-		-		-		-		-		-		-
Other commercial real estate
Pass		11,885		375		9,062		37,241		11,235		33,561		2,112		105,471
Watch		-		-		-		-		-		979		-		979
Substandard		-		7,840		-		-		-		85		-		7,925
Total Other commercial real estate		11,885		8,215		9,062		37,241		11,235		34,625		2,112		114,375
Current period gross write-offs		-		-		-		-		-		-		-		-

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	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
Agricultural loans
Pass		4,108		2,006		1,558		1,145		190		86		9,320		18,413
Watch		-		-		-		13		-		24		-		37
Substandard		-		-		112		-		-		-		-		112
Total Agricultural loans		4,108		2,006		1,670		1,158		190		110		9,320		18,562
Current period gross write-offs		-		-		-		171		-		-		-		171

Commercial and industrial
Pass		16,833		6,949		3,186		5,201		2,618		330		18,107		53,224
Watch		-		-		-		48		-		-		2,245		2,293
Substandard		42		-		311		-		-		-		678		1,031
Total Commercial and industrial		16,875		6,949		3,497		5,249		2,618		330		21,030		56,548
Current period gross write-offs		-		408		-		75		-		-		-		483

Credit cards
Pass		-		-		-		-		-		-		3,193		3,193
Substandard		-		-		-		-		-		-		-		-
Total Credit cards		-		-		-		-		-		-		3,193		3,193
Current period gross write-offs		-		-		-		-		-		-		53		53

Automobile loans
Pass		13,507		19,461		26,367		16,509		5,682		1,290		-		82,816
Watch		-		-		-		-		-		-		-		-
Substandard		-		154		135		213		85		55		-		642
Total Automobile loans		13,507		19,615		26,502		16,722		5,767		1,345		-		83,458
Current period gross write-offs		47		713		688		443		141		72		-		2,104

Other consumer loans
Pass		2,454		2,523		1,957		1,438		401		399		391		9,563
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		21		30		7		-		-		58
Total Other consumer loans		2,454		2,523		1,978		1,468		408		399		391		9,621
Current period gross write-offs		-		4		17		36		5		2		-		64

Municipal loans
Pass		-		-		-		-		525		3,885		-		4,410
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Municipal loans		-		-		-		-		525		3,885		-		4,410
Current period gross write-offs		-		-		-		-		-		-		-		-

Total loans	$	111,939	$	94,231	$	128,877	$	137,864	$	65,963	$	180,723	$	153,282		872,879
Less: Unamortized net deferred loan fees																(571	)
Loans held for investment															$	872,308

Current period gross write-offs	$	47	$	1,125	$	705	$	725	$	146	$	97	$	53	$	2,898

Table of Contents

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

	Term Loans by Year of Origination
	2024		2023		2022		2021		2020		Prior		Revolving		Total
1-4 Family residential construction
Pass	$	-	$	1,224	$	-	$	-	$	-	$	92	$	23,786	$	25,102
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total 1-4 Family residential construction		-		1,224		-		-		-		92		23,786		25,102

Other construction, land development and land
Pass		2,668		13,898		7,417		4,530		1,727		8,580		18,251		57,071
Watch		-		-		-		-		-		-		128		128
Substandard		-		-		-		-		-		525		484		1,009
Total Other construction, land development and land		2,668		13,898		7,417		4,530		1,727		9,105		18,863		58,208

Secured by farmland
Pass		5,462		10,038		13,283		12,908		25,209		8,413		8,074		83,387
Watch		155		-		1,667		-		-		754		-		2,576
Substandard		-		-		-		-		-		53		-		53
Total Secured by farmland		5,617		10,038		14,950		12,908		25,209		9,220		8,074		86,016

Home equity – open end
Pass		-		-		-		-		-		153		48,589		48,742
Watch		-		-		-		-		-		-		249		249
Substandard		-		-		-		-		-		-		551		551
Total Home equity - open end		-		-		-		-		-		153		49,389		49,542

Real estate
Pass		21,150		59,160		43,895		13,643		11,595		59,013		1,671		210,127
Watch		-		-		-		-		-		-		-		-
Substandard		-		203		86		528		-		2,137		-		2,954
Total Real estate		21,150		59,363		43,981		14,171		11,595		61,150		1,671		213,081

Home equity – closed end
Pass		727		2,469		252		87		786		1,816		-		6,137
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Home equity - closed end		727		2,469		252		87		786		1,816		-		6,137

Multifamily
Pass		2,130		-		4,854		1,368		866		1,586		-		10,804
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Multifamily

F&M BANK CORP 10-Q