F & M Bank Corp. 10-K Analysis & Summary – 2025-03-28

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F & M Bank Corp.

10-K

Annual report

Filing date:

03/28/2025

TLDR:

F&M Bank Corp. reports a significant increase in net income for 2024, driven by higher net interest income and reduced noninterest expenses. The company’s asset quality remains strong, with capital ratios exceeding regulatory requirements.

ELI5:

F&M Bank Corp., a bank holding company, had a good year with more profit because they made more money from loans and spent less on expenses. The bank is in a healthy financial position and follows all the rules.

Accession #:

0001654954-25-003506

Published on

April 9, 2025

Analyst Summary

Net income increased by $4.5 million to $7.3 million in 2024, a 162.90% increase from 2023.
Net interest income rose by $2.2 million, or 7.02%, due to growth in interest-earning assets and higher interest rates.
Noninterest expense decreased by $4.3 million, or 11.19%, primarily due to cost savings from a voluntary early retirement program.
Total assets increased by $7.4 million, driven by loan growth and federal funds sold, partially offset by a decrease in the securities portfolio.
Deposits increased by $61.9 million, reflecting strong customer relationships and effective deposit gathering strategies.
The provision for credit losses increased to $2.3 million, mainly due to historical credit loss trends and qualitative factor adjustments in the automobile segment.
Nonperforming assets increased slightly, but the allowance for credit losses remains adequate.
The bank continues to maintain capital ratios well above regulatory minimums, ensuring financial stability.
The net interest margin increased 7 basis points from 2.70% for 2023 to 2.77% for 2024.

Potential Implications

Company Performance

Continued focus on loan growth and effective cost management could lead to sustained profitability.
Maintaining strong asset quality and capital ratios will support future growth and stability.
Strategic investments in technology and customer experience may drive further improvements in efficiency and customer satisfaction.

Stock Price

Improved financial performance and strong capital position could positively influence investor confidence and stock valuation.
Effective management of interest rate risk and credit risk will be crucial for maintaining stock price stability.
Successful execution of growth strategies and strategic initiatives may attract new investors and enhance shareholder value.

F&M Bank Corp. (FMBM) 10-K Filing Analysis – Fiscal Year Ended December 31, 2024

Executive Summary

This report analyzes F&M Bank Corp.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include a significant increase in net income driven by higher net interest income and reduced noninterest expenses. Asset quality remains stable, but net charge-offs have increased. The company maintains strong capital ratios. Overall, the company appears to be in a stable financial position. A “Hold” recommendation is appropriate at this time, pending further observation of net charge-off trends and the impact of potential future regulatory changes.

Company Overview

F&M Bank Corp. is a one-bank holding company operating primarily in the Shenandoah Valley of Virginia. It provides a range of commercial and retail banking services. The local economy is diverse with strong employment in the agricultural, manufacturing, service and governmental sectors. The company dissolved TEB Life Insurance Company (“TEB”) on November 8, 2023. Farmers & Merchants Financial Services, Inc. (“FMFS”) was formerly a wholly owned subsidiary of the Bank. FMFS was dissolved effective April 25, 2024, and its legal existence was subsequently terminated on June 7, 2024. The operations, assets, and liabilities of FMFS were transferred to the Bank.

Detailed Analysis

Financial Statement Analysis

Income Statement:

Net income increased significantly from $2.8 million in 2023 to $7.3 million in 2024.
Net interest income increased by 7.02% to $33.9 million.
Noninterest expenses decreased by 11.19% to $34.4 million.

Key Ratios (Based on Daily Average Balances):

Return on Average Assets (ROA): Increased from 0.22% to 0.55%.
Return on Average Equity (ROE): Increased from 3.87% to 8.86%.
Net Interest Margin (NIM): Increased slightly from 2.70% to 2.77%.

Balance Sheet:

Total assets increased slightly to $1.30 billion.
Loans held for investment increased to $839.9 million.
Deposits increased to $1.20 billion.
Borrowings decreased significantly.

Asset Quality:

Nonperforming loans to total loans increased slightly from 0.79% to 0.84%.
Allowance for credit losses to total loans decreased from 1.01% to 0.97%.
Net charge-offs to average loans increased from 0.19% to 0.31%.

Capital Ratios (Bank Only):

All capital ratios exceed regulatory requirements.
Leverage ratio increased from 8.13% to 8.23%.

Key Trends and Observations:

The increase in net income is primarily attributable to higher net interest income and lower noninterest expenses.
The increase in net charge-offs, particularly in the automobile loan portfolio, warrants monitoring.
The company’s strong capital position provides a buffer against potential losses.

Management’s Discussion and Analysis (MD&A) Insights

Management attributes the increase in net interest income to growth in interest-earning assets and the repricing of assets and liabilities into higher rates.
The decrease in noninterest expense is attributed to cost savings from a voluntary early retirement program and gains in the company’s pension plan.
Management acknowledges the risks associated with construction lending and commercial real estate lending.
The company is evaluating the expected impact of modified CRA regulations.

Red Flags and Uncommon Metrics

The increase in net charge-offs, especially in the automobile loan portfolio, is a potential red flag.
The company’s reliance on qualitative factors in determining the allowance for credit losses introduces subjectivity into the process.

Risk and Opportunity Assessment

Risks:

Credit risk, particularly in the automobile loan portfolio.
Interest rate risk, as evidenced by the sensitivity analysis of net interest income.
Regulatory risk, including potential changes to capital requirements and CRA regulations.
Cybersecurity threats, although no material incidents were reported in 2023.

Opportunities:

Continued growth in wealth management and mortgage banking income.
Potential for further cost savings through operational efficiencies.
Expansion into new markets.

Conclusion and Actionable Insights

F&M Bank Corp. demonstrated improved financial performance in 2024, driven by higher net interest income and reduced noninterest expenses. The company maintains strong capital ratios and a stable asset quality. However, the increase in net charge-offs, particularly in the automobile loan portfolio, warrants close monitoring.

Overall Assessment:

The company is in a stable financial position with a positive outlook.

Recommendation:

Hold. Monitor net charge-off trends and the impact of potential future regulatory changes.

Financial Analysis of F&M Bank Corp. (2024)

1. Commentary

F&M Bank Corp. demonstrated improved financial performance in 2024 compared to 2023. Net income significantly increased, driven by higher interest and non-interest income, coupled with reduced non-interest expenses. Asset quality metrics remained relatively stable, with slight increases in nonperforming loans. Capital ratios are strong, exceeding regulatory requirements, indicating a solid financial position. However, the decrease in the allowance for credit losses as a percentage of total loans warrants monitoring.

2. Financial Ratio and Metric Analysis

Profitability

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Gross Profit Margin	N/A (Banks do not typically report this)	N/A (Banks do not typically report this)	N/A	N/A
Operating Profit Margin	N/A (Requires additional calculations not directly provided)	N/A (Requires additional calculations not directly provided)	N/A	N/A
Net Profit Margin	5.59% (Net Income / Total Revenue)	2.67% (Net Income / Total Revenue)	109.36%	Community banks typically range from 5-15%
Return on Assets (ROA)	0.55%	0.22%	150.00%	Community banks typically range from 0.5-1.5%
Return on Equity (ROE)	8.86%	3.87%	128.94%	Community banks typically range from 8-15%
Earnings Per Share (EPS) – Basic and Diluted	$2.07	$0.80	158.75%	Varies widely; benchmark against peers is more relevant.

Liquidity

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Current Ratio	N/A (Not typically calculated for banks)	N/A (Not typically calculated for banks)	N/A	N/A
Quick Ratio (Acid-Test Ratio)	N/A (Not typically calculated for banks)	N/A (Not typically calculated for banks)	N/A	N/A
Cash Ratio	0.047 (Cash & Equivalents / Total Current Liabilities)	0.019 (Cash & Equivalents / Total Current Liabilities)	147.37%	Banks generally operate with low cash ratios.

Solvency/Leverage

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Debt-to-Equity Ratio	14.11% (Total Liabilities / Total Equity)	15.50% (Total Liabilities / Total Equity)	-8.97%	Community banks typically range from 50% to 200%
Debt-to-Assets Ratio	0.005 (Total Debt / Total Assets)	0.052 (Total Debt / Total Assets)	-90.38%	Community banks typically range from 5% to 15%
Interest Coverage Ratio (Times Interest Earned)	1.26 (Income before Income Taxes / Interest Expense)	0.08 (Income before Income Taxes / Interest Expense)	1475.00%	Generally, a ratio above 1.5 is considered healthy.

Activity/Efficiency

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Inventory Turnover	N/A (Not applicable for banks)	N/A (Not applicable for banks)	N/A	N/A
Days Sales Outstanding (DSO)	N/A (Not directly applicable for banks)	N/A (Not directly applicable for banks)	N/A	N/A
Days Payable Outstanding (DPO)	N/A (Not directly applicable for banks)	N/A (Not directly applicable for banks)	N/A	N/A
Asset Turnover	0.006 (Total Revenue / Total Assets)	0.005 (Total Revenue / Total Assets)	20.00%	Banks typically have low asset turnover ratios.

Valuation

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Price-to-Earnings Ratio (P/E)	11.59 (Assuming a market cap of $84.4 million)	28.13 (Assuming a market cap of $77.8 million)	-58.80%	Varies widely; benchmark against peers is more relevant.
Price-to-Book Ratio (P/B)	0.98 (Assuming a market cap of $84.4 million)	0.99 (Assuming a market cap of $77.8 million)	-1.01%	Community banks typically range from 0.8 to 1.5.
Price-to-Sales Ratio (P/S)	1.97 (Assuming a market cap of $84.4 million)	2.02 (Assuming a market cap of $77.8 million)	-2.48%	Varies widely; benchmark against peers is more relevant.
Enterprise Value to EBITDA (EV/EBITDA)	10.36 (Assuming a market cap of $84.4 million)	37.21 (Assuming a market cap of $77.8 million)	-72.16%	Varies widely; benchmark against peers is more relevant.

Growth Rates

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Revenue Growth	7.24%	N/A	N/A	Varies widely; benchmark against peers is more relevant.
Net Income Growth	162.83%	N/A	N/A	Varies widely; benchmark against peers is more relevant.
EPS Growth	158.75%	N/A	N/A	Varies widely; benchmark against peers is more relevant.

Other Relevant Metrics

Capital Ratios (Bank Only): The bank maintains strong capital ratios, significantly exceeding the minimum requirements. For example, the Total Capital ratio was 13.39% in 2024, compared to a minimum requirement of 10.50% to be well-capitalized.
Asset Quality Ratios: Nonperforming loans to total loans increased slightly from 0.79% in 2023 to 0.84% in 2024. The allowance for credit losses to total loans decreased from 1.01% to 0.97%.
Net Interest Margin (NIM): NIM increased from 2.70% in 2023 to 2.77% in 2024.