fmbm_10q.htm

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 June 30, 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 August 10, 2026
Common Stock, par value ‑ $5 per share		3,586,733 shares

F & M BANK CORP.

Quarterly Report on Form 10-Q

For the quarterly period ended June 30, 2026

Table of Contents

		Page

Part I	Financial Information	3

Item 1.	Financial Statements	3

	Consolidated Balance Sheets – June 30, 2026 and December 31, 2025	3

	Consolidated Statements of Income – Three Months Ended June 30, 2026 and 2025	4

	Consolidated Statements of Income – Six Months Ended June 30, 2026 and 2025	5

	Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2026 and 2025	6

	Consolidated Statements of Changes in Shareholders’ Equity – Three Months Ended June 30, 2026 and 2025	7

	Consolidated Statements of Changes in Shareholders’ Equity – Six Months Ended June 30, 2026 and 2025	7

	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2026 and 2025	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44

Item 4.	Controls and Procedures	44

Part II	Other Information	45

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

Signatures		46

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)

	June 30,			December 31,
	2026			2025*
	*(Unaudited)*
Assets
Cash and due from banks	$	20,985		$	19,311
Money market funds and interest-bearing deposits in other banks		1,395			1,013
Federal funds sold		38,374			48,529
Cash and cash equivalents		60,754			68,853

Securities:
Available for sale, at fair value		337,468			345,339
Other investments, at cost		2,364			2,254

Loans held for sale, at fair value		2,647			3,191

Loans held for investment, net of deferred fees and costs		925,267			886,253
Less: allowance for credit losses		(8,085	)		(7,818	)
Net loans held for investment		917,182			878,435

Bank premises and equipment, net		21,851			21,629
Interest receivable		5,497			5,118
Goodwill		3,082			3,082
Bank owned life insurance		24,810			24,395
Deferred tax asset, net		6,642			6,979
Other assets		14,837			13,661
Total Assets	$	1,397,134		$	1,372,936

Liabilities
Deposits:
Noninterest bearing	$	294,083		$	279,398
Interest bearing		963,367			965,814
Total deposits		1,257,450			1,245,212

Long-term debt		9,926			9,917
Other liabilities		17,650			13,840
Total Liabilities		1,285,026			1,268,969

Commitments and contingencies

Shareholders’ Equity
Common stock, $5 par value, 6,000,000 shares authorized, 3,551,661 (2026) and 3,525,884 (2025) shares issued and outstanding		17,563			17,444
Common stock held by deferred compensation trust, at par, 34,970 (2026) and 31,176 (2025) shares		(175	)		(156	)
Additional paid in capital		11,942			11,743
Additional paid in capital attributed to deferred compensation trust		(762	)		(665	)
Retained earnings		98,876			92,205
Accumulated other comprehensive loss		(15,336	)		(16,604	)
Total Shareholders’ Equity		112,108			103,967
Total Liabilities and Shareholders’ Equity	$	1,397,134		$	1,372,936

*2025 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 per share data)

(Unaudited)

	Three Months Ended June 30,
*Interest and Dividend income*	2026			2025
Interest and fees on loans held for investment	$	14,860		$	13,961
Interest and fees on loans held for sale		53			30
Interest from federal funds sold		360			385
Interest and dividends on interest bearing deposits and other investments		70			58
Interest from debt securities		2,760			2,378
Total interest and dividend income		18,103			16,812

*Interest expense*
Total interest on deposits		5,573			6,168
Interest on short-term debt		-			1
Interest on long-term debt		197			116
Total interest expense		5,770			6,285

*Net interest income*		12,333			10,527

Provision for credit losses - loans		306			1,082
(Recovery of) provision for credit losses – unfunded commitments		(37	)		105
*Total Provision for Credit Losses*		269			1,187

*Net Interest Income After Provision for Credit Losses*		12,064			9,340

*Noninterest income*
Service charges on deposit accounts		372			307
Wealth management income		536			560
Mortgage banking income		639			358
Title insurance income		662			584
Income on bank owned life insurance		218			215
Low income housing partnership amortization		(175	)		(196	)
ATM and check card fees		904			875
Gain on sale of Bearing Insurance investment		4,836			-
Losses on sale of securities		(3,462	)		-
Other operating income		324			89
Total noninterest income		4,854			2,792

*Noninterest expense*
Salaries		4,337			3,704
Employee benefits		1,483			923
Occupancy expense		384			387
Equipment expense		259			298
FDIC assessment		204			246
Legal and professional expense		686			527
ATM and check card fees		387			229
Data processing fees		927			945
Other operating expenses		1,780			1,453
Total noninterest expense		10,447			8,712
*Income before income taxes*		6,471			3,420
Income tax expense		1,102			455
*Net Income*	$	5,369		$	2,965
*Per Common Share Data*
Net income (basic)	$	1.52		$	0.84
Net income (diluted)		1.50			0.83
Cash dividends on common stock		0.26			0.26
Weighted average common shares outstanding (basic)		3,550,516			3,540,114
Weighted average common shares outstanding (diluted)		3,584,485			3,564,133

See Notes to Consolidated Financial Statements

Table of Contents

F & M BANK CORP.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)

	Six Months Ended June 30,
*Interest and Dividend income*	2026			2025
Interest and fees on loans held for investment	$	29,103		$	27,426
Interest and fees on loans held for sale		78			55
Interest from federal funds sold		924			1,037
Interest and dividends on interest bearing deposits and other investments		94			88
Interest from debt securities		5,397			4,471
Total interest and dividend income		35,596			33,077

*Interest expense*
Total interest on deposits		11,445			12,869
Interest on short-term debt		-			4
Interest on long-term debt		390			231
Total interest expense		11,835			13,104

*Net interest income*		23,761			19,973

Provision for credit losses - loans		595			902
(Recovery of) provision for credit losses – unfunded commitments		(17	)		181
*Total Provision for Credit Losses*		578			1,083

*Net Interest Income After Provision for Credit Losses*		23,183			18,890

*Noninterest income*
Service charges on deposit accounts		715			620
Wealth management income		1,194			1,236
Mortgage banking income		1,131			960
Title insurance income		1,155			939
Income on bank owned life insurance		430			424
Low income housing partnership amortization		(350	)		(393	)
ATM and check card fees		1,681			1,639
Gain on sale of Bearing Insurance investment		4,836			-
Losses on sale of securities		(3,462	)		-
Other operating income		423			212
Total noninterest income		7,753			5,637

*Noninterest expense*
Salaries		8,637			7,831
Employee benefits		3,000			2,038
Occupancy expense		778			795
Equipment expense		557			626
FDIC assessment		417			511
Legal and professional expense		1,439			1,006
ATM and check card fees		758			556
Data processing fees		1,878			1,903
Other operating expenses		3,297			2,970
Total noninterest expense		20,761			18,236
*Income before income taxes*		10,175			6,291
Income tax expense		1,581			869
*Net Income*	$	8,594		$	5,422
*Per Common Share Data*
Net income (basic)	$	2.43		$	1.54
Net income (diluted)		2.41			1.53
Cash dividends on common stock		0.52			0.52
Weighted average common shares outstanding (basic)		3,539,773			3,524,684
Weighted average common shares outstanding (diluted)		3,572,356			3,547,513

See Notes to Consolidated Financial Statements

Table of Contents

F & M BANK CORP.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2026			2025		2026			2025

Net Income	$	5,369		$	2,965	$	8,594		$	5,422

Other comprehensive income:
Changes in pension plan benefits, net of deferred income tax benefit ($2) for the six months ended June 30, 2026		-			-		(8	)		-
Unrealized gain on available-for sale securities, net of income tax expense of $492 and $369 for the three months and $339 and $1,251 for the six months ended June 30, 2026 and 2025, respectively		4,588			1,169		4,011			4,706
Reclassification for loss included in net income, net of income tax benefit ($727) for the three and six months ended June 30, 2026		(2,735	)		-		(2,735	)		-

Total other comprehensive income		1,853			1,169		1,268			4,706

Total comprehensive income	$	7,222		$	4,134	$	9,862		$	10,128

See Notes to Consolidated Financial Statements

Table of Contents

F & M BANK CORP.

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands)

(Unaudited)

Three Months Ended June 30, 2026 and 2025.

	Common Stock					Additional Paid in		Retained			Deferred Compensation			Accumulated Other Comprehensive
	Shares			Amount		Capital		Earnings			Trust			Loss			Total
*Balance March 31, 2025*		3,539,945		$	17,466	$	11,476	$	86,209		$	(645	)	$	(23,840	)	$	90,666
Net income		-			-		-		2,965			-			-			2,965
Other comprehensive income		-			-		-		-			-			1,169			1,169
Dividends on common stock		-			-		-		(927	)		-			-			(927	)
Common stock issued		5,020			25		76		-			-			-			101
Net restricted common stock activity		(1,902	)		-		-		-			-			-			-
Deferred compensation trust activity		(2,394	)		-		-		-			(58	)		-			(58	)
Stock-based compensation expense		-			-		122		-			-			-			122
*Balance, June 30, 2025*		3,540,669		$	17,491	$	11,674	$	88,247		$	(703	)	$	(22,671	)	$	94,038

*Balance March 31, 2026*		3,552,002		$	17,549	$	11,705	$	94,506		$	(838	)	$	(17,189	)	$	105,733
Net income		-			-		-		5,369			-			-			5,369
Other comprehensive income		-			-		-		-			-			1,853			1,853
Dividends on common stock		-			-		-		(932	)		-			-			(932	)
Common stock issued		2,887			14		87		-			-			-			101
Deferred compensation trust activity		(3,228	)		-		-		(67	)		(99	)		-			(166	)
Stock-based compensation expense		-			-		150		-			-			-			150
*Balance, June 30, 2026*		3,551,661		$	17,563	$	11,942	$	98,876		$	(937	)	$	(15,336	)	$	112,108

Six Months Ended June 30, 2026 and 2025.

	Common Stock					Additional Paid in			Retained			Deferred Compensation			Accumulated Other Comprehensive
	Shares			Amount		Capital			Earnings			Trust			Loss			Total
Balance December 31, 2024		3,504,051		$	17,383	$	11,463		$	84,669		$	(586	)	$	(27,377	)	$	85,552
Net income		-			-		-			5,422			-			-			5,422
Other comprehensive income		-			-		-			-			-			4,706			4,706
Dividends on common stock		-			-		-			(1,844	)		-			-			(1,844	)
Common stock issued		10,110			50		152			-			-			-			202
Net restricted common stock activity		31,297			-		-			-			-			-			-
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes		-			58		(135	)		-			-			-			(77	)
Deferred compensation trust activity		(4,789	)		-		-			-			(117	)		-			(117	)
Stock-based compensation expense		-			-		194			-			-			-			194
*Balance, June 30, 2025*		3,540,669		$	17,491	$	11,674		$	88,247		$	(703	)	$	(22,671	)	$	94,038

*Balance December 31, 2025*		3,525,884		$	17,444	$	11,743		$	92,205		$	(821	)	$	(16,604	)	$	103,967
Net income		-			-		-			8,594			-			-			8,594
Other comprehensive income		-			-		-			-			-			1,268			1,268
Dividends on common stock		-			-		-			(1,857	)		-			-			(1,857	)
Common stock issued		6,226			31		174			-			-			-			205
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	)
Deferred compensation trust activity		(3,794	)		-		-			(66	)		(116	)		-			(182	)
Stock-based compensation expense		-			-		249			-			-						249
*Balance, June 30, 2026*		3,551,661		$	17,563	$	11,942		$	98,876		$	(937	)	$	(15,336	)	$	112,108

See Notes to Consolidated Financial Statements

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F & M BANK CORP.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2026			2025
*Cash flows from operating activities*
Net income	$	8,594		$	5,422
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		582			683
Amortization of intangibles		8			16
Amortization of securities		109			348
Loss on sale of securities		3,462			-
Proceeds from loans held for sale		57,675			24,563
Loans held for sale originated		(56,240	)		(24,008	)
Gain on sale of loans held for sale		(891	)		(552	)
Provision for credit losses		578			1,083
Increase in interest receivable		(379	)		(224	)
Decrease in deferred tax asset		-			80
(Increase) decrease in other assets		(1,927	)		307
(Decrease) increase in other liabilities		3,819			(240	)
Amortization of limited partnership investments		350			393
Amortization of debt issuance costs		9			21
Income from life insurance investment		(430	)		(424	)
Gain on sale of Bearing Insurance investment		(4,836	)		-
Gain on the sale of assets held for sale		(2	)		(43	)
Gain on the sale of OREO		-			(73	)
Stock-based compensation expense		249			194
Net cash provided by operating activities		10,730			7,546

*Cash flows from investing activities*
Proceeds from maturity of investments available for sale		6,298			21,360
Proceeds from sales of investments available for sale		26,309			-
Purchases of investments available for sale		(49,016	)		(40,863	)
Proceeds from paydowns of mortgage-backed securities		22,324			12,761
Investment in restricted stock, net		(110	)		(5	)
Proceeds from sale of Bearing Insurance investment		5,060			-
Net (increase) decrease in loans held for investment		(39,342	)		(9,543	)
Proceeds from the sale of assets held for sale		3			-
Proceeds from the sale of OREO		-			150
Net purchase of property and equipment		(805	)		(267	)
Net cash used by investing activities		(29,279	)		(16,407	)

*Cash flows from financing activities*
Net change in deposits		12,238			1,346
Dividends paid in cash		(1,857	)		(1,844	)
Proceeds from issuance of common stock		205			108
Repurchase of shares for tax withholding		(136	)		17
Net cash provided by (used by) financing activities		10,450			(373	)

*Net decrease in Cash and Cash Equivalents*		(8,099	)		(9,234	)
*Cash and cash equivalents, beginning of period*		68,853			56,507
*Cash and cash equivalents, end of period*	$	60,754		$	47,273
*Supplemental Cash Flow information:*
Cash paid for: Interest	$	12,186		$	13,539
Taxes		1,194			450
*Supplemental non-cash disclosures:*
Change in unrealized gain on securities available for sale	$	1,615		$	5,957

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”), and VSTitle, LLC (“VST”), with all significant intercompany accounts and transactions eliminated. 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 prior period amounts in the Consolidated Balance Sheet and Consolidated Statements of Changes in Shareholders’ Equity have been reclassified to conform to the current period presentation. These reclassifications had an immaterial impact on previously reported assets, per share data, and 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 – 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 June 30, 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 $1.54 million and $1.48 million at June 30, 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 $4.0 million and $3.6 million at June 30, 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.

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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 25%-30%. 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, 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 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.

Bearing Insurance

During second quarter 2026, the Company both recognized a one-time, pre-tax gain of $4.8 million from the April 2026 sale of Richmond-based Bearing Insurance (“Bearing”) and used the gain to complete a restructuring of their bond portfolio. In the restructuring, the Company sold $29.8 million in book value of securities available for sale (“AFS”), with a weighted average yield of 1.66%, and purchased approximately $29.4 million of securities AFS with a weighted average yield of approximately 4.92%, resulting in a pre-tax loss of approximately $3.5 million. The combination of the two non-recurring transactions resulted in a net pre-tax gain of $1.3 million.

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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, warrants and shares held by the deferred compensation trust. The Company does not have any convertible securities that would dilute its 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.

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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):

June 30, 2026	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U. S. Treasuries	$	14,973	$	-	$	752	$	14,221
U. S. Government agencies		41,998		-		1,336		40,662
Municipal securities		22,237		43		1,202		21,078
Mortgage-backed securities		253,195		441		16,028		237,608
Corporate debt securities		24,477		33		611		23,899
Total Securities Available for Sale	$	356,880	$	517	$	19,929	$	337,468

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 June 30, 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	$	32,180	$	31,792
Due after one year through five years		62,454		60,188
Due after five years through ten years		40,691		39,193
Due after ten years		221,555		206,295
Total	$	356,880	$	337,468

The following table shows realized gains or losses on the sale of investment securities during the three and six months ended June 30, 2026 and 2025, respectively.

	Three Months Ended June 30,					Six Months Ended June 30,
	2026			2025		2026			2025
Realized losses on sales of securities	$	(3,462	)	$	-	$	(3,462	)	$	-
Realized loss	$	(3,462	)	$	-	$	(3,462	)	$	-

The sale of investment securities in the three months ended June 30, 2026 was part of a restructuring of the investment securities portfolio. During the restructuring, the Company sold $29.8 million in book value of available for sale securities (“AFS”) with a weighted average yield of 1.66%, representing approximately 8.2% of the entire securities portfolio, and purchased approximately $29.4 million of securities AFS with a weighted average yield of approximately 4.92%.

There were no sales of available for sale securities in the first quarter of 2026 or in the first or second quarters of 2025.

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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 $69.5 million and $95.6 million, as of June 30, 2026 and December 31, 2025, respectively.

	Less than 12 Months				More than 12 Months				Total
June 30, 2026	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U. S. Treasuries	$	-	$	-	$	14,221	$	752	$	14,221	$	752
U. S. Government agencies		-		-		40,662		1,336		40,662		1,336
Municipal securities		2,621		40		13,323		1,162		15,944		1,202
Mortgage-backed securities		91,360		1,099		96,971		14,929		188,331		16,028
Corporate debt securities		2,454		23		19,412		588		21,866		611
Total Securities Available for Sale	$	96,435	$	1,162	$	184,589	$	18,767	$	281,024	$	19,929

	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 June 30, 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 $19.2 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 June 30, 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 $88.3 million pledged to the Federal Reserve Discount Window as of June 30, 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 six 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 June 30, 2026, other investments consisted of restricted stock in the Federal Reserve Bank (“FRB”) (carrying basis of $1.20 million at June 30, 2026 and $1.14 million at December 31, 2025), Federal Home Loan Bank (“FHLB”) (carrying basis of $975 thousand and $925 thousand at June 30, 2026 and December 31, 2025, respectively), and various other investments (carrying basis of $189 thousand at June 30, 2026 and December 31, 2025). Other investments are carried at cost.

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NOTE 3 LOANS

The following is a summary of the major categories of total loans outstanding at June 30, 2026 and December 31, 2025 (dollars in thousands):

	June 30, 2026			December 31, 2025
1-4 Family residential construction	$	22,997		$	31,118
Other construction, land development and land		43,927			39,187
Secured by farmland		126,864			115,000
Home equity – open end		57,243			51,393
Real estate		265,141			243,361
Home equity – closed end		5,948			5,980
Multifamily		25,865			18,854
Owner-occupied commercial real estate		92,564			96,651
Other commercial real estate		119,997			114,434
Agricultural loans		21,777			20,127
Commercial and industrial		60,621			56,885
Credit cards		3,487			3,387
Automobile loans		65,982			77,080
Other consumer loans		9,617			9,132
Municipal loans		3,823			4,219
Gross loans		925,853			886,808
Unamortized net deferred loan fees		(586	)		(555	)
Less allowance for credit losses		8,085			7,818
Net loans	$	917,182		$	878,435

The table above does not include loans held for sale of $2.6 million and $3.2 million at June 30, 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 $4.0 million and $3.6 million at June 30, 2026 and December 31, 2025, respectively. For the three and six months ended June 30, 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 $355.8 million and $310.7 million as of June 30, 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.

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The following tables detail the changes in the ACL for the three and six months ended June 30, 2026 and 2025 (dollars in thousands).

	For the three months ended June 30, 2026
	Beginning Balance		Charge-offs		Recoveries		(Recovery of) provision for loan credit losses			Ending Balance
1-4 Family residential construction	$	165	$	-	$	-	$	(25	)	$	140
Other construction, land development and land		722		-		63		(39	)		746
Secured by farmland		1,465		-		-		102			1,567
Home equity – open end		184		20		-		33			197
Real estate		644		-		-		94			738
Home equity – closed end		67		-		-		(5	)		62
Multifamily		859		-		-		(3	)		856
Owner-occupied commercial real estate		687		-		-		15			702
Other commercial real estate		250		-		-		8			258
Agricultural loans		104		-		-		(6	)		98
Commercial and industrial		1,038		29		57		(30	)		1,036
Credit cards		88		22		11		13			90
Automobile loans		1,504		643		464		123			1,448
Other consumer loans		127		17		5		26			141
Municipal loans		6		-		-		-			6
Total allowance for credit losses - loans	$	7,910	$	731	$	600	$	306		$	8,085
Allowance for credit losses – unfunded commitments	$	786	$	-	$	-	$	(37	)	$	749

	For the three months ended June 30, 2025
	Beginning Balance		Charge-offs		Recoveries		(Recovery of) provision for loan credit losses			Ending Balance
1-4 Family residential construction	$	252	$	-	$	-	$	19		$	271
Other construction, land development and land		1,658		9		9		(611	)		1,047
Secured by farmland		1,043		-		-		434			1,477
Home equity – open end		191		-		-		(21	)		170
Real estate		692		-		1		190			883
Home equity – closed end		83		-		-		(10	)		73
Multifamily		32		-		-		2			34
Owner-occupied commercial real estate		713		-		-		129			842
Other commercial real estate		83		-		-		7			90
Agricultural loans		25		-		-		112			137
Commercial and industrial		826		85		145		372			1,258
Credit cards		79		17		5		13			80
Automobile loans		1,894		734		191		423			1,774
Other consumer loans		191		41		3		23			176
Municipal loans		-		-		-		-			-
Total allowance for credit losses - loans	$	7,762	$	886	$	354	$	1,082		$	8,312
Allowance for credit losses – unfunded commitments	$	725	$	-	$	-	$	105		$	830

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	For the six months ended June 30, 2026
	Beginning Balance		Charge-offs		Recoveries		(Recovery of) provision for loan credit losses			Ending Balance
1-4 Family residential construction	$	193	$	-	$	-	$	(53	)	$	140
Other construction, land development and land		641		-		63		42			746
Secured by farmland		1,458		-		-		109			1,567
Home equity – open end		177		20		-		40			197
Real estate		629		12		-		121			738
Home equity – closed end		64		-		-		(2	)		62
Multifamily		656		-		-		200			856
Owner-occupied commercial real estate		691		-		-		11			702
Other commercial real estate		246		-		-		12			258
Agricultural loans		130		-		-		(32	)		98
Commercial and industrial		995		29		147		(77	)		1,036
Credit cards		90		36		21		15			90
Automobile loans		1,713		1,355		882		208			1,448
Other consumer loans		129		31		42		1			141
Municipal loans		6		-		-		-			6
Total allowance for credit losses - loans	$	7,818	$	1,483	$	1,155	$	595		$	8,085
Allowance for credit losses – unfunded commitments	$	766	$	-	$	-	$	(17	)	$	749

	For the six months ended June 30, 2025
	Beginning Balance		Charge-offs		Recoveries		(Recovery of) provision for loan credit losses			Ending Balance
1-4 Family residential construction	$	258	$	-	$	-	$	13		$	271
Other construction, land development and land		1,551		9		9		(504	)		1,047
Secured by farmland		946		-		-		531			1,477
Home equity – open end		197		-		24		(51	)		170
Real estate		606		-		3		274			883
Home equity – closed end		99		-		-		(26	)		73
Multifamily		190		-		-		(156	)		34
Owner-occupied commercial real estate		809		-		-		33			842
Other commercial real estate		105		-		-		(15	)		90
Agricultural loans		27		-		-		110			137
Commercial and industrial		982		85		147		214			1,258
Credit cards		87		32		11		14			80
Automobile loans		1,956		1,133		356		595			1,774
Other consumer loans		301		41		31		(115	)		176
Municipal loans		15		-		-		(15	)		-
Total allowance for credit losses - loans	$	8,129	$	1,300	$	581	$	902		$	8,312
Allowance for credit losses – unfunded commitments	$	649	$	-	$	-	$	181		$	830

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.

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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 June 30, 2026 (dollars in thousands):

	Term Loans by Year of Origination
	2026		2025		2024		2023		2022		Prior		Revolving		Total
1-4 Family residential construction
Pass	$	-	$	371	$	1,467	$	338	$	-	$	-	$	20,821	$	22,997
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total 1-4 Family residential construction		-		371		1,467		338		-		-		20,821		22,997
Current period gross write-offs		-		-		-		-		-		-		-		-

Other construction, land development and land
Pass		625		10,282		2,217		11,540		955		4,410		13,878		43,907
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		20		-		20
Total Other construction, land development and land		625		10,282		2,217		11,540		955		4,430		13,878		43,927
Current period gross write-offs		-		-		-		-		-		-		-		-

Secured by farmland
Pass		14,041		18,211		10,775		10,677		11,468		45,744		12,489		123,405
Watch		-		-		-		-		1,609		1,447		-		3,056
Substandard		-		-		-		-		296		107		-		403
Total Secured by farmland		14,041		18,211		10,775		10,677		13,373		47,298		12,489		126,864
Current period gross write-offs		-		-		-		-		-		-		-		-

Home equity – open end
Pass		-		-		-		-		-		134		56,359		56,493
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		107		643		750
Total Home equity - open end		-		-		-		-		-		241		57,002		57,243
Current period gross write-offs		-		-		-		-		-		20		-		20
Real estate
Pass		25,396		52,311		27,268		48,868		37,605		67,630		-		259,078
Watch		1,397		-		-		1,422		-		190		-		3,009
Substandard		-		-		-		361		79		2,614		-		3,054
Total Real estate		26,793		52,311		27,268		50,651		37,684		70,434		-		265,141
Current period gross write-offs		-		-		-		-		-		12		-		12

Home Equity – closed end
Pass		178		613		218		2,280		144		2,412		-		5,845
Watch		59		-		-		-		-		-		-		59
Substandard		-		44		-		-		-		-		-		44
Total Home Equity - closed end		237		657		218		2,280		144		2,412		-		5,948
Current period gross write-offs		-		-		-		-		-		-		-		-

Multifamily
Pass		6,400		6,835		2,655		-		4,691		3,116		2,168		25,865
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Multifamily		6,400		6,835		2,655		-		4,691		3,116		2,168		25,865
Current period gross write-offs		-		-		-		-		-		-		-		-

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	Term Loans by Year of Origination
	2026		2025		2024		2023		2022		Prior		Revolving		Total
Owner-occupied commercial real estate
Pass		6,212		20,393		8,139		1,563		10,617		30,634		4,802		82,360
Watch		-		-		-		-		-		-		-		-
Substandard		-		58		1,134		-		-		9,012		-		10,204
Total Owner-occupied commercial real estate		6,212		20,451		9,273		1,563		10,617		39,646		4,802		92,564
Current period gross write-offs		-		-		-		-		-		-		-		-
Other commercial real estate
Pass		9,710		14,898		365		6,727		36,567		40,191		2,865		111,323
Watch		-		-		-		-		-		940		-		940
Substandard		-		-		7,734		-		-		-		-		7,734
Total Other commercial real estate		9,710		14,898		8,099		6,727		36,567		41,131		2,865		119,997
Current period gross write-offs		-		-		-		-		-		-		-		-
Agricultural loans
Pass		3,966		3,216		1,559		1,066		692		146		11,044		21,689
Watch		-		-		-		-		9		-		-		9
Substandard		-		-		-		79		-		-		-		79
Total Agricultural loans		3,966		3,216		1,559		1,145		701		146		11,044		21,777
Current period gross write-offs		-		-		-		-		-		-		-		-

Commercial and industrial
Pass		4,393		16,754		6,098		2,030		3,786		1,962		25,168		60,191
Watch		-		-		-		-		33		-		-		33
Substandard		-		30		-		267		-		-		100		397
Total Commercial and industrial		4,393		16,784		6,098		2,297		3,819		1,962		25,268		60,621
Current period gross write-offs		-		-		-		12		17		-		-		29

Credit Cards
Pass		-		-		-		-		-		-		3,487		3,487
Substandard		-		-		-		-		-		-		-		-
Total Credit Cards		-		-		-		-		-		-		3,487		3,487
Current period gross write-offs		-		-		-		-		-		-		36		36

Automobile loans
Pass		8,479		13,294		13,272		17,688		10,006		2,810		-		65,549
Watch		-		-		-		-		-		-		-		-
Substandard		15		7		103		58		175		75		-		433
Total Automobile loans		8,494		13,301		13,375		17,746		10,181		2,885		-		65,982
Current period gross write-offs		57		177		437		456		144		84		-		1,355

Other consumer loans
Pass		3,171		2,637		1,614		1,086		624		392		44		9,568
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		6		17		19		7		-		49
Total Other consumer loans		3,171		2,637		1,620		1,103		643		399		44		9,617
Current period gross write-offs		-		3		8		8		5		7		-		31
Municipal loans
Pass		-		-		-		-		-		3,823		-		3,823
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Municipal loans		-		-		-		-		-		3,823		-		3,823
Current period gross write-offs		-		-		-		-		-		-		-		-

Total loans	$	84,042	$	159,954	$	84,624	$	106,067	$	119,375	$	217,923	$	153,868	$	925,853
Less: Unamortized net deferred loan fees																(586	)
Loans held for investment															$	925,267

Current period gross write-offs	$	57	$	180	$	445	$	476	$	166	$	123	$	36	$	1,483

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

	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
1-4 Family residential construction
Pass	$	-	$	-	$	338	$	-	$	-	$	116	$	30,664	$	31,118
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total 1-4 Family residential construction		-		-		338		-		-		116		30,664		31,118
Current period gross write-offs		-		-		-		-		-		-		-		-

Other construction, land development and land
Pass		5,691		2,701		11,877		969		427		3,252		14,195		39,112
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		75		75
Total Other construction, land development and land		5,691		2,701		11,877		969		427		3,252		14,270		39,187
Current period gross write-offs		-		-		-		-		-		23		-		23

Secured by farmland
Pass		17,063		9,423		10,887		12,838		13,122		34,648		13,469		111,450
Watch		-		-		-		1,609		1,507		-		-		3,116
Substandard		-		-		-		319		-		-		115		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		-		-		-		-		-		-		-		-

Table of Contents

	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
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

Commercial and industrial
Pass		18,025		6,615		2,710		4,675		2,359		251		20,980		55,615
Watch		-		-		-		43		-		-		150		193
Substandard		35		-		317		17		-		-		708		1,077
Total Commercial and industrial		18,060		6,615		3,027		4,735		2,359		251		21,838		56,885
Current period gross write-offs		-		408		-		75		-		-		-		483

Credit Cards
Pass		-		-		-		-		-		-		3,387		3,387
Substandard		-		-		-		-		-		-		-		-
Total Credit Cards		-		-		-		-		-		-		3,387		3,387
Current period gross write-offs		-		-		-		-		-		-		57		57

Automobile loans
Pass		16,255		17,479		23,351		14,122		4,512		868		-		76,587
Watch		-		-		-		-		-		-		-		-
Substandard		14		140		21		207		76		35		-		493
Total Automobile loans		16,269		17,619		23,372		14,329		4,588		903		-		77,080
Current period gross write-offs		97		904		1,082		644		186		109		-		3,022

Other consumer loans
Pass		3,215		2,166		1,669		1,128		268		336		307		9,089
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		19		14		8		2		-		43
Total Other consumer loans		3,215		2,166		1,688		1,142		276		338		307		9,132
Current period gross write-offs		9		34		38		58		5		2		-		146
Municipal loans
Pass		-		-		-		-		500		3,719		-		4,219
Watch		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Total Municipal loans		-		-		-		-		500		3,719		-		4,219
Current period gross write-offs		-		-		-		-		-		-		-		-

Total loans	$	152,248	$	90,326	$	119,498	$	133,405	$	62,020	$	172,223	$	157,088	$	886,808
Less: Unamortized net deferred loan fees																(555	)
Loans held for investment															$	886,253

Current period gross write-offs	$	106	$	1,346	$	1,120	$	948	$	223	$	435	$	57	$	4,235

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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 June 30, 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	$	-	$	-	$	-	$	-	$	22,997		$	22,997
Other construction, land development and land		155		-		-		20		43,752			43,927
Secured by farmland		25		-		-		403		126,436			126,864
Home equity – open end		178		-		-		460		56,605			57,243
Real estate		621		519		252		1,743		262,006			265,141
Home equity – closed end		61		-		-		-		5,887			5,948
Multifamily		-		-		-		-		25,865			25,865
Owner-occupied commercial real estate		509		-		-		616		91,439			92,564
Other commercial real estate		62		-		-		-		119,935			119,997
Agricultural loans		-		-		-		79		21,698			21,777
Commercial and industrial		90		-		-		-		60,531			60,621
Credit cards		30		12		6		-		3,439			3,487
Automobile loans		1,452		251		-		319		63,960			65,982
Other consumer loans		65		14		-		47		9,491			9,617
Municipal loans		-		-		-		-		3,823			3,823
Gross loans		3,248		796		258		3,687		917,864			925,853
Less: Unamortized net deferred loan fees		-		-		-		-		(586	)		(586	)
Loans held for investment	$	3,248	$	796	$	258	$	3,687	$	917,278		$	925,267

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

Table of Contents

There were $3.7 million and $6.0 million in nonaccrual loans at June 30, 2026 and December 31, 2025, respectively. There was no interest income recognized on nonaccrual loans during the three and six months ended June 30, 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).

	June 30, 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		-		403		403		-		434		434
Home equity – open end		353		107		460		462		-		462
Real estate		1,392		352		1,744		2,206		102		2,308
Owner-occupied commercial real estate		-		616		616		2,201		-		2,201
Agricultural loans		-		78		78		60		112		172
Commercial and industrial		-		-		-		29		-		29
Automobile loans		319		-		319		389		-		389
Other consumer loans		47		-		47		42		-		42
Total loans	$	2,131	$	1,556	$	3,687	$	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 loans 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
	June 30,		December 31,
	2026		2025
Secured by farmland	$	403	$	434
Home equity – open end		107		175
Real estate		352		868
Owner-occupied commercial real estate		616		2,201
Agricultural loans		78		112
Total loans	$	1,556	$	3,790

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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).

There were no loans modified for borrowers experiencing financial difficulty in the three months ended June 30, 2026. There were two loans that were modified for borrowers experiencing financial difficulty in the first quarter of 2026 that were paid off by the borrowers during the second quarter of 2026. There were no loans modified for borrowers experiencing financial difficulty in the three months or six months ended June 30, 2025.

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

	June 30, 2026
	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total
Real estate	$	44	$	-	$	-	$	-	$	44
Owner occupied commercial real estate		5,310		-		-		616		5,926
Automobile loans		15		2		-		13		30
Total modified loans	$	5,369	$	2	$	-	$	629	$	6,000

	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 June 30, 2026 and December 31, 2025, there were no unfunded commitments to borrowers with TLMs.

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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 three and six months ended June 30,
	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		-	$	-		0.00	%		1	$	5		0.01	%
Automobile loans		1		8		0.01	%		1		8		0.01	%
Total term extension and deferral		1	$	8					2	$	13

Other than temporary payment delay
Owner occupied commercial real estate		-	$	-		0.00	%		1	$	1,192		1.27	%
Total other than temporary payment delay		-	$	-					1	$	1,192

Total		1	$	8					3	$	1,205

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 certain 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.

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

	June 30, 2026			December 31, 2025
Lease Liabilities (included in other liabilities)	$	1,068		$	874
Right-of-use assets (included in other assets)	$	1,030		$	838
Weighted average remaining lease term	8.04 years			9.34 years
Weighted average discount rate		3.94	%		3.85	%

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Lease cost	2026		2025		2026		2025
Operating lease cost	$	25	$	29	$	53	$	59
Total lease cost	$	25	$	29	$	53	$	59

Cash paid for amounts included in the measurement of lease liabilities	$	38	$	35	$	74	$	69

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 June 30, 2026
Six months ending December 31, 2026	$	94
Twelve months ending December 31, 2027		138
Twelve months ending December 31, 2028		157
Twelve months ending December 31, 2029		161
Twelve months ending December 31, 2030		166
Thereafter		560
Total undiscounted cash flows	$	1,276
Discount		(208	)
Lease liabilities	$	1,068

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 June 30, 2026, the Bank met all capital adequacy requirements to which it was subject. Management is not aware of any conditions or events since the most recent regulatory notification that would change the Bank’s well-capitalized category.

“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 a bank is classified as “adequately capitalized”, regulatory approval is required to accept brokered deposits. If a bank is classified as “undercapitalized”, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As of June 30, 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
June 30, 2026	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based ratio	$	137,308		14.43	%	$	76,119		8.00	%	$	95,149		10.00	%
Tier 1 risk-based ratio		128,474		13.50	%		57,089		6.00	%		76,119		8.00	%
Common equity tier 1		128,474		13.50	%		42,817		4.50	%		61,847		6.50	%
Tier 1 leverage ratio		128,474		9.10	%		56,486		4.00	%		70,607		5.00	%

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	Actual					Minimum Capital Requirement					Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2025	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based ratio	$	130,263		14.04	%	$	74,241		8.00	%	$	92,801		10.00	%
Tier 1 risk-based ratio		121,679		13.11	%		55,680		6.00	%		74,241		8.00	%
Common equity tier 1		121,679		13.11	%		41,760		4.50	%		60,321		6.50	%
Tier 1 leverage ratio		121,679		8.73	%		55,752		4.00	%		69,690		5.00	%

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 June 30, 2026 related to changes in the market values of such securities 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.

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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):

June 30, 2026	Total		Level 1		Level 2		Level 3
Securities available for sale:
U.S. Treasury securities	$	14,221	$	-	$	14,221	$	-
U.S. Government agencies		40,662		-		40,662		-
Municipal securities		21,078		-		21,078		-
Mortgage-backed securities		237,608		-		237,608		-
Corporate debt securities		23,899		-		4,669		19,230
Total securities available for sale	$	337,468	$	-	$	318,238	$	19,230
Other assets:
Loans held for sale	$	2,647	$	-	$	2,647	$	-
Interest rate lock commitments (“IRLC”)		30		-		30		-
Forward sales commitments		9		-		9		-
Total other assets	$	2,686	$	-	$	2,686	$	-
Assets at Fair Value	$	340,154	$	-	$	320,924	$	19,230

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

The change in corporate debt securities to $19,230 at June 30, 2026 from $19,035 at December 31, 2025 was due to fair value adjustments of $195,000.

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 receivable 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.

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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 June 30, 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).

	June 30, 2026
			Fair Value Measurements Using:
	Balance		Level 1		Level 2		Level 3
Collateral-dependent loans, net of reserve	$	1,348	$	-	$	-	$	1,348

	December 31, 2025
			Fair Value Measurements Using:
	Balance		Level 1		Level 2		Level 3
Collateral-dependent loans, net of reserve	$	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

June 30, 2026

Valuation Technique

Significant Unobservable Inputs

Discount

Collateral Dependent Loans, net of reserve

1,348

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, net of reserve

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).

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

The carrying value of 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.

	June 30, 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	$	60,754	$	60,754	$	-	$	-	$	60,754
Securities		337,468		-		318,238		19,230		337,468
Other investments		2,364		-		-		2,364		2,364
Loans held for sale		2,647		-		2,647		-		2,647
Loans held for investment, net		917,182		-		-		914,110		914,110
Interest receivable		5,497		-		5,497		-		5,497
Bank owned life insurance		24,810		-		24,810		-		24,810
IRLC		30		-		30		-		30
Forward sales commitments		9		-		9		-		9
Financial Liabilities
Noninterest-bearing demand deposits	$	294,083	$	294,083	$	-	$	-	$	294,083
Interest checking deposits		148,807		-		148,807		-		148,807
Savings deposits		619,901		-		619,901		-		619,901
Time deposits		194,659		-		193,723		-		193,723
Long-term debt		9,926		-		-		10,364		10,364
Interest payable		1,010		-		1,010		-		1,010

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	December 31, 2025
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Balance
Financial Assets
Cash and cash equivalents	$	68,853	$	68,853	$	-	$	-	$	68,853
Securities		345,339		-		326,304		19,035		345,339
Other investments		2,254		-		-		2,254		2,254
Loans held for sale		3,191		-		3,191		-		3,191
Loans held for investment, net		878,435		-		-		871,151		871,151
Interest receivable		5,118		-		5,118		-		5,118
Bank owned life insurance		24,395		-		24,395		-		24,395
IRLC		37		-		37		-		37
Forward sales commitments		20		-		20		-		20
Financial Liabilities
Noninterest-bearing demand deposits	$	279,398	$	279,398	$	-	$	-	$	279,398
Interest checking deposits		148,624		-		148,624		-		148,624
Savings deposits		591,777		-		591,777		-		591,777
Time deposits		225,413		-		225,156		-		225,156
Long-term debt		9,917		-		-		10,085		10,085
Interest payable		1,361		-		1,361		-		1,361

NOTE 8 SUBSEQUENT EVENTS

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

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

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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, Augusta, and Frederick, 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. In the second quarter of 2026, the Virginia Bureau of Financial Institutions approved the Bank’s application to open a new branch in Fauquier County in the city of Warrenton.

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 judgments of the Company and its management about future events. These statements are based on estimates and assumptions, and our ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Our actual results could differ materially from those contemplated by these forward-looking statements.

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.

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The Company’s critical accounting policies used in the preparation of the Consolidated Financial Statements as of June 30, 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.

Results of Operations

Overview

Comparing the Three-Month Periods Ending June 30, 2026 and June 30, 2025

Net income for the second quarter of 2026 was $5.4 million, or $1.50 per diluted share, compared to $3.0 million, or $0.83 per diluted share, for the second quarter of 2025—an increase of $2.4 million, or $0.67 per diluted share. Return on average assets was 1.54% and return on average equity was 19.54% for the three months ended June 30, 2026, both improving from the prior-year period. The increase in net income was primarily the result of loan growth, which contributed to a $1.3 million increase in interest income, along with a $514,000 decrease in interest expense. Net interest income increased to $12.3 million for the three months ended June 30, 2026, from $10.5 million for the three months ended June 30, 2025. In addition, noninterest income increased $2.1 million, primarily due to the $4.8 million gain resulting from the sale of Bearing Insurance, in which the Company held an investment, and partially offset by a $3.5 million loss on the sale of investment securities. Noninterest expense increased $1.7 million, which was partially offset by a $918,000 decrease in the provision for credit losses.

Comparing the Six-Month Periods Ending June 30, 2026 and June 30, 2025

Net income for the six months ended June 30, 2026 was $8.6 million, or $2.41 per diluted share, compared to $5.4 million, or $1.53 per diluted share, for the six months ended June 30, 2025—an increase of $3.2 million, or $0.88 per diluted share. Return on average assets was 1.25% and return on average equity was 15.93% for the six months ended June 30, 2026, both improving from the prior-year period. The increase in net income was primarily the result of loan growth, which contributed to a $2.5 million increase in interest income, along with a $1.3 million decrease in interest expense. Net interest income increased to $23.8 million for the six months ended June 30, 2026, from $20.0 million for the six months ended June 30, 2025. In addition, noninterest income increased $2.1 million, primarily due to the $4.8 million gain resulting from the sale of the Company’s interest in Bearing Insurance and partially offset by a $3.5 million loss on the sale of investment securities. Noninterest expense increased $2.5 million, which was partially offset by a $505,000 decrease in the provision for credit losses.

Net Interest Income and Net Interest Margin

Three-Month Period Ended June 30, 2026

Net interest income for second quarter 2026 was $12.3 million, an increase of $1.8 million over second quarter 2025. Interest income for second quarter 2026 increased $1.3 million due to loan growth, while interest expense decreased $514,000 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 June 30, 2026 was 3.79%, up 31 basis points from the quarter ended June 30, 2025. The earning asset yield was unchanged at 5.56%. Cost of interest-bearing liabilities decreased by 36 basis points to 2.37%. Interest expense on deposits decreased $594,000 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 $81,000 due to higher interest rates on long-term debt and an increase of $2.9 million in average balances.

Six-Month Period Ended June 30, 2026

Net interest income for the first six months of 2026 was $23.8 million, an increase of $3.8 million compared to the first six months of 2025. Interest income for the first six months of 2026 increased $2.5 million due to loan growth, while interest expense decreased $1.3 million, driven by a shift from higher-cost time deposits to lower-cost interest checking and money market accounts. Net interest margin for the six months ended June 30, 2026 was 3.67%, up 35 basis points from the six months ended June 30, 2025. The earning asset yield increased one basis point to 5.50%. Cost of interest-bearing liabilities decreased by 40 basis points to 2.43%. Interest expense on deposits decreased $1.4 million 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 $159,000 due to higher interest rates on long-term debt and an increase of $2.9 million in average balances.

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The following tables show interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated (dollars in thousands):

	Three Months ended June 30,
	2026								2025
	Balance⁴			Interest		Rate¹			Balance⁴			Interest		Rate¹
ASSETS
Loans held for investment^2,3	$	914,531		$	14,860		6.52	%	$	838,332		$	13,961		6.68	%
Loans held for sale		3,407			53		6.24	%		2,815			30		4.27	%
Federal funds sold		39,418			360		3.66	%		34,694			385		4.45	%
Interest bearing deposits in banks and other investments		3,571			70		7.86	%		2,660			58		8.75	%

Investment securities⁴
Taxable		329,628			2,659		3.24	%		318,400			2,270		2.86	%
Tax exempt		14,990			101		2.70	%		16,538			108		2.62	%
Total investment securities		344,618			2,760		3.21	%		334,938			2,378		2.85	%

Total earning assets		1,305,545			18,103		5.56	%		1,213,439			16,812		5.56	%

Allowance for credit losses		(8,013	)							(7,739	)
Nonearning assets		96,480								96,681
Total assets	$	1,394,012							$	1,302,381

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Demand-interest bearing	$	149,413		$	551		1.48	%	$	131,489		$	526		1.60	%
Savings		624,544			3,645		2.34	%		545,713			3,636		2.67	%
Time deposits		190,890			1,377		2.89	%		239,162			2,006		3.36	%
Total interest-bearing deposits		964,847			5,573		2.32	%		916,364			6,168		2.70	%

Short‑term debt		-			-		-			-			1		-
Long-term debt		9,924			197		7.96	%		6,990			116		6.66	%
Total interest-bearing liabilities		974,771			5,770		2.37	%		923,354			6,285		2.73	%

Noninterest bearing deposits		290,611								272,206
Other liabilities		18,447								13,954
Total liabilities		1,283,829								1,209,514
Shareholders’ equity		110,183								92,867
Total liabilities and shareholders’ equity	$	1,394,012							$	1,302,381

Net interest earnings				$	12,333							$	10,527

Net yield on interest earning assets (NIM)							3.79	%							3.48	%

_______________

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.

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	Six Months ended June 30,
	2026								2025
	Balance⁴			Interest		Rate¹			Balance⁴			Interest		Rate¹
ASSETS
Loans held for investment^2,3	$	900,673		$	29,103		6.52	%	$	834,770		$	27,426		6.63	%
Loans held for sale		2,596			78		6.06	%		2,124			55		5.22	%
Federal funds sold		51,108			924		3.65	%		47,356			1,037		4.42	%
Interest bearing deposits in banks and other investments		3,427			94		5.53	%		2,609			88		6.80	%

Investment securities⁴
Taxable		330,837			5,189		3.16	%		310,701			4,258		2.76	%
Tax exempt		15,703			208		2.67	%		16,343			213		2.63	%
Total investment securities		346,540			5,397		3.14	%		327,044			4,471		2.76	%

Total earning assets		1,304,344			35,596		5.50	%		1,213,903			33,077		5.49	%

Allowance for credit losses		(7,905	)							(7,870	)
Nonearning assets		94,734								98,277
Total assets	$	1,391,173							$	1,304,310

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Demand-interest bearing	$	150,682		$	1,122		1.50	%	$	134,536		$	382		0.57	%
Savings		616,168			7,227		2.37	%		531,749			7,740		2.94	%
Time deposits		204,226			3,096		3.06	%		259,262			4,747		3.69	%
Total interest-bearing deposits		971,076			11,445		2.38	%		925,547			12,869		2.80	%

Short‑term debt		-			-		-			-			4		-
Long-term debt		9,921			390		7.93	%		6,985			231		6.67	%
Total interest-bearing liabilities		980,997			11,835		2.43	%		932,532			13,104		2.83	%

Noninterest bearing deposits		284,176								267,483
Other liabilities		17,206								13,806
Total liabilities		1,282,379								1,213,821
Shareholders’ equity		108,794								90,489
Total liabilities and shareholders’ equity	$	1,391,173							$	1,304,310

Net interest earnings				$	23,761							$	19,973

Net yield on interest earning assets (NIM)							3.67	%							3.32	%

_______________

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.

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Provision for Credit Losses

Three-Month Period Ended June 30, 2026

During second quarter 2026, the Bank recorded a provision for credit losses of $269,000, compared to a provision for credit losses of $1.2 million in second quarter 2025. The decrease in provision was primarily due to a $401,000 decrease in net charge-offs and a $904,000 decrease in nonperforming loans during second quarter 2026. In 2025, there was also an addition of $610,000 in reserves on individually analyzed loans. The provision also included a recovery of provision of $37,000 in the reserve for unfunded commitments that resulted from a decrease in outstanding loan commitments.

Six-Month Period Ended June 30, 2026

During the six months ended June 30, 2026, the Bank recorded a provision for credit losses of $578,000, compared to a provision for credit losses of $1.1 million during the six months ended June 30, 2025. The decrease in provision was primarily due to a $391,000 decrease in net charge-offs and a $2.1 million decrease in nonperforming loans during the first six months of 2026. The provision also included a recovery of provision of $17,000 in the reserve for unfunded commitments that resulted from a decrease in outstanding loan commitments.

At June 30, 2026, the ACL totaled $8.1 million, or 0.87% of gross loans outstanding.

Non-interest income

Three-Month Period Ended June 30, 2026

Non-interest income totaled $4.9 million for second quarter 2026, an increase of $2.1 million, compared to second quarter 2025. The increase was primarily due to the $4.8 million gain resulting from the sale of Bearing Insurance, which was partially offset by the $3.5 million loss on the restructuring of the Bank’s AFS securities portfolio in June 2026, and increases of $281,000 in mortgage banking income and $235,000 in other operating income. Non-interest income to average assets increased to 1.40% at June 30, 2026 compared to 0.86% at June 30, 2025.

Six-Month Period Ended June 30, 2026

Non-interest income totaled $7.8 million for the six months ended June 30, 2026, an increase of $2.1 million, compared to the six months ended June 30, 2025. The increase was primarily due to the $4.8 million gain resulting from the sale of Bearing Insurance, which was partially offset by the $3.5 million loss on the restructuring of the Bank’s AFS securities portfolio in June 2026. Also contributing to the increase in noninterest income were service charges on deposits, mortgage banking income, title insurance income, and card services and interchange income, all of which were higher than the first half of 2025. Non-interest income to average assets increased to 1.12% for the six months ended June 30, 2026, compared to 0.87% for the six months ended June 30, 2025.

Non-interest Expense

Three-Month Period Ended June 30, 2026

Non-interest expenses totaled $10.4 million for second quarter 2026, compared to $8.7 million for the second quarter 2025, an increase of $1.7 million. The increase was primarily attributable to increased compensation, due to increases in the number of full-time equivalent employees, legal and professional fees, ATM and check card fees, and other operating expenses, and was partially offset by a reduction in FDIC insurance expense. Non-interest expense to average assets for the quarter increased from 2.68% at June 30, 2025 to 3.01% at June 30, 2026.

Six-Month Period Ended June 30, 2026

Non-interest expenses totaled $20.8 million for the six months ended June 30, 2026, compared to $18.2 million for the six months ended June 30, 2025, an increase of $2.5 million. The increase was primarily attributable to increased compensation, due to increases in the number of full-time equivalent employees, legal and professional fees, ATM and check card fees, and other operating expenses, and was partially offset by a reduction in FDIC insurance expense. Year to date non-interest expense to average assets increased from 2.82% at June 30, 2025 to 3.01% at June 30, 2026. Income tax expense for the six months ended June 30, 2026 increased to $1.6 million, up from $869,000, due to increased income before income taxes and reversal of income tax credits.

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Balance Sheet Review

Overview

On June 30, 2026, assets totaled $1.4 billion, an increase of $24.2 million since December 31, 2025. Cash and cash equivalents decreased $8.1 million to $60.8 million, primarily due to a decrease in Federal funds sold during the first six months of 2026. Total loans increased by $39.0 million to $925.3 million, including increases of $21.7 million in residential mortgage loans, $7.0 million in multifamily loans, $5.8 million in home equity loans, $3.7 million in commercial and industrial loans, $5.6 million in nonowner‑occupied commercial real estate loans, $11.9 million in loans secured by farmland, and $4.7 million in other construction and land development loans. These increases were partially offset by decreases of $8.1 million in residential construction loans, $4.1 million in owner‑occupied commercial real estate loans, and $11.1 million in automobile loans. All remaining loan categories increased by a net $159,000. Investment securities decreased by $7.9 million due to sales of $29.8 million and purchases of $49.0 million, including the restructuring of the AFS securities portfolio in June 2026. Total deposits grew by $12.2 million to $1.3 billion, with noninterest bearing deposits increasing by $14.7 million and a decline of $2.4 million in interest-bearing deposits. Long-term debt remained consistent at $9.9 million. Total shareholders’ equity rose by $8.1 million to $112.1 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 June 30, 2026, the total AFS securities were $337.5 million, decreasing from $345.3 million on December 31, 2025.

This represents a decrease of $7.9 million, or 2.3%. The average balance of the AFS securities portfolio during the first six months of 2026 was $346.5 million, compared to $327.0 million during the same period in 2025. The average AFS securities portfolio accounted for 26.6% and 26.9% of average earning assets for the six months ended June 30, 2026, and 2025, respectively. The decrease in AFS securities is primarily due to sales of $29.8 million and purchases of $49.0 million, including the restructuring of the AFS securities portfolio in June 2026, as well as $23.2 million in paydowns of mortgage-backed securities. Net unrealized losses related to the fair value of AFS securities were $19.4 million as of June 30, 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, $22.3 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 $31.9 million in the remaining six months of 2026. The portfolio’s weighted average life is 4.70 years, with a modified duration of 3.73 years. The weighted average life may differ from the contractual maturities of the individual securities.

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 $925.3 million at June 30, 2026 and increased $39.0 million from $886.3 million at December 31, 2025. As a percentage of average earning assets, average loans were 69.1% for the six months ended June 30, 2026, compared with 68.8% for the six months ended June 30, 2025.

Loans held for sale totaled $2.6 million as of June 30, 2026, a decrease of $544,000 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.

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The Company’s loans held for investment portfolio is well-diversified, with first-lien, amortizing residential mortgage loans as the largest segment, representing 28.64% of total loans. Commercial real estate loans, including both owner-occupied and non-owner-occupied properties, represent $212.6 million, or 22.96% of the portfolio. Loans secured by farmland totaled $126.9 million, or 13.70% of the portfolio. Automobile loans, originated through the Company’s dealer finance division, totaled $66.0 million, accounting for 7.13% of the portfolio. Following is a breakdown of the loan portfolio composition as of June 30, 2026, and December 31, 2025 (dollars in thousands):

	June 30, 2026						December 31, 2025
Loan Segment	Balance			Percentage of Portfolio			Balance			Percentage of Portfolio
1-4 Family residential construction	$	22,997			2.48	%	$	31,118			3.51	%
Other construction, land development and land		43,927			4.74	%		39,187			4.42	%
Secured by farmland		126,864			13.70	%		115,000			12.97	%
Home equity – open end		57,243			6.18	%		51,393			5.80	%
Real estate		265,141			28.64	%		243,361			27.44	%
Home Equity – closed end		5,948			0.64	%		5,980			0.67	%
Multifamily		25,865			2.79	%		18,854			2.13	%
Owner-occupied commercial real estate		92,564			10.00	%		96,651			10.90	%
Other commercial real estate		119,997			12.96	%		114,434			12.90	%
Agricultural loans		21,777			2.35	%		20,127			2.27	%
Commercial and industrial		60,621			6.55	%		56,885			6.41	%
Credit Cards		3,487			0.38	%		3,387			0.38	%
Automobile loans		65,982			7.13	%		77,080			8.69	%
Other consumer loans		9,617			1.04	%		9,132			1.03	%
Municipal loans		3,823			0.42	%		4,219			0.48	%
Gross loans	$	925,853			100.00	%	$	886,808			100.00	%
Unamortized deferred net loan fees		(586	)					(555	)
Loans held for investment, net of deferred loan fees	$	925,267					$	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.

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 $269,000 was a combination of $306,000 provision for the allowance for loan credit losses, plus $37,000 recovery of provision for the allowance for unfunded commitments. The current quarter provision of $306,000 was driven by net loan charge-offs of $131,000 and a $28.4 million increase in loan balances in the current quarter.

As of June 30, 2026, year-to-date net charge-offs totaled $328,000, down from $719,000 during the same period ended June 30, 2025. Gross loans increased by $39.0 million in the first six months of 2026 and loans individually analyzed decreased $2.2 million to $1.6 million at June 30, 2026 from $3.8 million at December 31, 2025. As of June 30, 2026, the ACL was $8.1 million, or 0.87% 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 first six months of 2026, reflecting loan growth in line with existing portfolio risk characteristics and strong recovery performance.

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The reserve for unfunded commitments decreased from $766,000 at December 31, 2025, to $749,000 at June 30, 2026, primarily due to decreases in loan commitments of $1.0 million in multifamily loans, which have a higher historical rate of funding. This decrease was partially offset by increases in loan commitments of $3.9 million in home equity loans, $2.7 million in loans secured by farmland, $1.7 million in agricultural loans, and $1.5 million in nonowner-occupied commercial real estate.

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 $2.4 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), one owner-occupied commercial real estate loan ($1.0 million) becoming current during the first quarter, and the payoff of one real estate loan ($766,000) and the paydown of one owner-occupied commercial real estate loan ($275,000) in the second quarter. For more details on nonperforming loans by segment, see Note 4 — Allowance for Credit Losses in Notes to the Consolidated Financial Statements.

The following table summarizes the Company’s non-performing assets as of June 30, 2026, and December 31, 2025 (in thousands):

	June 30, 2026			December 31, 2025
Nonaccrual loans	$	3,687		$	6,037
Loans past due 90 days and accruing interest		258			7
Total nonperforming loans		3,945			6,044

Other real estate owned		-			-
Total nonperforming assets	$	3,945		$	6,044

Allowance for credit losses	$	8,085		$	7,818

Total Loans	$	925,267		$	886,253

Ratios:
Allowance for credit losses to Total Loans		0.87	%		0.88	%
Allowance for credit losses to Total nonperforming assets		204.94	%		129.35	%
Allowance for credit losses to Nonaccrual loans		219.28	%		129.50	%
Nonaccrual Loans to Total Loans		0.40	%		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 $1.26 billion and $1.25 billion at June 30, 2026 and December 31, 2025, respectively. Noninterest bearing deposits increased $14.7 million and interest bearing deposits decreased $2.4 million.

The following table shows the balance of each category of deposits as of the dates indicated (dollars in thousands).

	June 30, 2026					December 31, 2025
	Balance		% of total deposits			Balance		% of total deposits
Noninterest-bearing demand	$	294,083		23.4	%	$	279,398		22.5	%
Interest checking		148,807		11.8	%		148,624		11.9	%
Savings accounts		619,901		49.3	%		591,777		47.5	%
Time deposits		194,659		15.5	%		225,413		18.1	%
Total deposits	$	1,257,450				$	1,245,212

Estimated uninsured deposits totaled approximately $179.0 million and $167.4 million at June 30, 2026, and December 31, 2025, respectively.

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The following table shows the average balances of deposits and average interest rates paid as of the periods indicated (dollars in thousands).

	Three months ended					Six months ended
	June 30, 2026					June 30, 2026
	Average Balance		Rate			Average Balance		Rate
Noninterest-bearing demand	$	290,611		-		$	284,176		-
Interest-bearing:
Interest checking		149,413		1.48	%		150,682		1.50	%
Savings accounts		624,544		2.34	%		616,168		2.37	%
Time deposits		190,890		2.89	%		204,226		3.06	%
Total interest-bearing deposits		964,847		2.32	%		971,076		2.38	%
Total average deposits	$	1,255,458		1.78	%	$	1,255,252		1.84	%

The following table sets forth maturity ranges of time deposits, as of June 30, 2026, that meet or exceed the FDIC insurance limit (in thousands).

Maturity period:	June 30, 2026
3 months or less	$	3,576
Over 3 months through 6 months		5,668
Over 6 months through 12 months		26,589
Over 12 months		1,384
Total	$	37,217

Long-term borrowings

Long-term debt remained stable at $9.9 million from December 31, 2025 to June 30, 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 bear interest at 7.55% per annum from and including November 1, 2025 to, but excluding, November 1, 2030, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2026. From and including November 1, 2030 to but excluding November 1, 2035, or up to an early redemption date, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (SOFR) plus 424.5 basis points, payable quarterly in arrears. Beginning on November 1, 2030 through maturity, the Notes may be redeemed, at the Company’s option, on any scheduled interest payment date. The Notes will mature on November 1, 2035.

Shareholders’ Equity

Total Shareholders’ equity at June 30, 2026, was $112.1 million, compared to $104.0 million at December 31, 2025. Shareholders’ equity increased $8.1 million due to net income of $8.6 million, $205,000 related to shares issued, $249,000 in stock‑based compensation expense, and $1.3 million in other comprehensive income, partially offset by $1.9 million in dividends paid, $136,000 in net vesting of restricted stock, and $182,000 in deferred compensation trust activity. Other comprehensive income was the result of an improvement in unrealized losses 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, a corporate line of credit with a large correspondent bank, and debt and capital issuances. Management believes the Company’s current overall liquidity is sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

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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 June 30, 2026, liquid assets totaled $92.9 million, or 6.7% of total assets, and liquid earning assets totaled $71.9 million, or 5.5% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. The Bank is scheduled to receive $31.9 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 June 30, 2026 the Bank pledged investment securities with a collateral value totaling $88.3 million to the Federal Reserve System’s Discount Window. The Discount Window provides access to funding to help depository institutions manage their liquidity risks. The Bank did not borrow from the Discount Window during the first six 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 $205.2 million in available credit at June 30, 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 June 30, 2026 were $179.0 million or 14% of 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.

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.

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

	As of June 30, 2026	As of December 31, 2025
Change in Interest Rates (in Basis Points)	Percent Change in Earnings	Percent Change in Earnings
+ 400 basis points	-4.28%	-9.31%
+ 300 basis points	-3.08%	-6.75%
+ 200 basis points	-2.06%	-4.45%
+ 100 basis points	-1.10%	-2.18%
- 100 basis points	0.51%	1.78%
- 200 basis points	0.39%	2.95%
- 300 basis points	-0.42%	3.21%
- 400 basis points	0.66%	3.85%

The change in the Company’s liability sensitivity resulted from the shift in deposits from time deposits to savings and money market deposits that have a lower repricing beta assumption than time deposits.

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

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

	As of June 30, 2026	As of December 31, 2025
Change in Interest Rates (in Basis Points)	Percentage Change in EVE	Percentage Change in EVE
+ 400 basis points	-17.10%	-22.76%
+ 300 basis points	-13.08%	-17.78%
+ 200 basis points	-8.82%	-12.52%
+ 100 basis points	-4.66%	-7.34%
- 100 basis points	2.52%	2.83%
- 200 basis points	0.66%	2.38%
- 300 basis points	-4.47%	-1.22%
- 400 basis points	-9.48%	-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.

An asset-sensitive balance sheet structure implies that assets, such as loans and securities, will reprice faster than liabilities; consequently, net interest income should be positively affected in an increasing interest rate environment. Conversely, a liability-sensitive balance sheet structure implies that liabilities, such as deposits, will reprice faster than assets; consequently, net interest income should be positively affected in a decreasing interest rate environment. At June 30, 2026, the Company had $101.4 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.

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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 June 30, 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 June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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.

	Insider Trading Arrangements During the quarterly period ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408 of Regulation S-K).

Item 6.	Exhibits.

(a)	Exhibits
	10.1	Amendment to the F&M Bank Corp. 2020 Stock Incentive Plan, incorporated herein by reference from Exhibit 10.1 to F&M Bank Corp.’s Current Report on Form 8-K, filed May 27, 2026.
	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	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	101	The following materials from F&M Bank Corp.’s Quarterly Report on Form 10-Q for the period ended June 30, 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 June 30, 2026, formatted in Inline XBRL (included with Exhibit 101).

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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)
August 13, 2026