F&M BANK CORP (FMBM)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered solid linked-quarter improvement: net income rose to $2.46M and diluted EPS to $0.70, driven by higher net interest income, stronger noninterest income (wealth management), and a recovery of credit losses; ROAA/ROAE improved to 0.76%/11.31% .
• Net interest margin expanded 24 bps q/q to 3.15% as cost of funds fell 22 bps to 2.30% and earning asset yield ticked up 3 bps to 5.43%, reflecting disciplined deposit and funding management amid a modest decline in average earning assets .
• Tangible book value per share increased ~5% q/q to $24.73 (non-GAAP), supported by earnings and improved AOCI; deposits grew modestly to $1.20B as noninterest-bearing balances rose $11.1M q/q .
• Asset quality mixed: NPLs/loans increased to 1.08% (from 0.84% in Q4), but net charge-offs normalized to 0.09% of average loans (from 0.45% in Q4); ACLL/loans edged down to 0.94% .
• No formal EPS/revenue guidance or call transcript was available; dividend held at $0.26/share (5.21% annualized yield at the reference price), and management highlighted ~$35.2M of remaining 2025 bond paydowns/maturities as funding flexibility .

What Went Well and What Went Wrong

• What Went Well

  • Net interest margin expanded 24 bps q/q to 3.15% on lower cost of funds (−22 bps to 2.30%) and stable asset yields, lifting net interest income to $9.44M (+$0.33M q/q) despite lower average earning assets .
  • Noninterest income increased to $2.85M (+$0.17M q/q), led by a $187K improvement in wealth management, validating momentum in fee businesses from 2024 .
  • Tangible book value per share rose to $24.73 (non-GAAP) and CET1 increased to 13.50%, reflecting strong capital and improved OCI; management emphasized a “sound start in 2025” and focus on “generate sufficient and sustainable profit” .

• What Went Wrong

  • Interest income declined by $632K q/q as installment loan balances (auto/consumer) fell and Q4 included a one-time deferred-interest collection; average earning assets also declined due to bond maturities .
  • Noninterest expenses rose to $9.52M (+$1.34M q/q), reflecting the absence of Q4’s $500K fraud insurance proceeds and higher salaries/benefits (commissions/bonuses, pension swing), partially offset elsewhere .
  • Asset quality: NPLs/loans increased to 1.08% (from 0.84% in Q4), though net charge-offs eased and ACLL/loans decreased to 0.94% due to loan balance declines and individually analyzed loans requiring no reserves .

Financial Results

Headline P&L and profitability vs prior periods

Balance sheet, capital, and asset quality

Loan portfolio mix (selected segments, $MM)

Context and drivers

• NIM expansion reflected a 22 bp reduction in cost of funds to 2.30% and a 3 bp increase in asset yields to 5.43% as time deposits and short-term borrowings declined; interest income fell q/q given lower installment loan balances and a Q4 one-time deferred-interest collection .
• Noninterest expense rose q/q due to the absence of Q4’s $500K insurance recovery and higher commissions/bonuses and pension expense; salaries +$417K and benefits +$379K q/q .
• Asset quality: NPLs/loans up to 1.08%; ACLL/loans 0.94% with modest net charge-offs (0.09%) and increased individually analyzed loans requiring no reserve .

Guidance Changes

Note: No formal revenue/EPS/expense guidance was provided in the Q1 release .

Earnings Call Themes & Trends

No Q1 2025 earnings call transcript was available in our source set. Thematic progression below reflects management commentary from Q3 2024 and Q4 2024 press releases versus Q1 2025.

Management Commentary

• “F&M is off to a sound start in 2025… Net income increased on a quarter-to-quarter basis… The management team remains committed to… disciplined balance sheet control… effective management of cost of funds and net interest margin” .
• “Tangible book value of F&M shares increased 5%… to $24.73… I continue to believe our stock is a solid value for investors” (non-GAAP TBVPS) .
• “Across the organization, we are focused on our highest priority… to generate sufficient and sustainable profit… our financial strength and liquidity give us the capacity to make loans that support… the communities we serve” .

Q&A Highlights

• No Q1 2025 earnings call transcript was available; the press release provided the following clarifications:
  • NIM expansion was driven by a 22 bp q/q reduction in cost of funds alongside a slight increase in asset yields .
  • Expense dynamics reflected the absence of Q4’s $500K insurance recovery and higher commissions/bonuses and pension expense .
  • Credit normalization: net recovery of credit losses $(104)K, NCOs 0.09%, ACLL/loans 0.94% .

Estimates Context

• S&P Global shows no active consensus coverage for FMBM’s Q1 2025 EPS or revenue; as such, we cannot determine beats/misses versus Street expectations. Values retrieved from S&P Global.*

Key Takeaways for Investors

• Margin trajectory improving: NIM up 24 bps q/q to 3.15% as deposit and borrowing costs fell, supporting earnings despite softer interest income; sustainability hinges on continued deposit mix control as CDs reprice lower and wholesale borrowings remain minimal .
• Fee diversification gaining traction: wealth management revenue increased $187K q/q, contributing to noninterest income growth; continued momentum could cushion net interest income variability .
• Credit normalizing after Q3–Q4 volatility: net charge-offs down to 0.09% and a small net recovery recorded; watch NPL uptick to 1.08% and migration in CRE/auto books .
• Capital and book value strengthen: CET1 at 13.50% and TBVPS up to $24.73 (non-GAAP), offering balance sheet resilience and optionality for growth and capital returns .
• Liquidity ample with $179.8M FHLB capacity, $90M fed funds lines, and $35.2M remaining 2025 bond cash flows—providing flexibility to fund loan demand and manage funding costs .
• Dividend stable at $0.26/share (5.21% annualized yield at the reference price) signals confidence in earnings durability; lack of Street coverage creates potential for price dislocations around quarterly prints .
• Near-term focus: sustaining cost-of-funds improvements, stabilizing core loan growth (auto/C&I), and preserving asset quality should drive incremental ROA/ROE gains.

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Additional Detail and Drivers

• Net Interest Income/NIM: Net interest income rose to $9.44M as interest expense declined by $965K q/q on lower average time deposits and short-term borrowings; earning asset yield +3 bps to 5.43% while cost of funds −22 bps to 2.30% .
• Interest Income Mix: Interest income declined $632K q/q due to a $7.0M reduction in average installment loans (auto/consumer) and the absence of a Q4 deferred-interest collection from a large renewal; average earning assets declined on bond maturities .
• Noninterest Expenses: Up $1.34M q/q to $9.52M, reflecting the rollback of Q4’s $500K insurance proceeds, higher commissions/bonuses (+$417K) and pension swing (+$379K), partly offset elsewhere .
• Asset Quality: NPLs/loans 1.08% (from 0.84%); ACLL/loans 0.94% (from 0.97%); reserve for unfunded commitments rose to $724K (from $648K) .
• Balance Sheet: Loans fell $12.9M q/q, notably C&I (−$10.4M), auto (−$6.6M), non-owner CRE (−$5.5M); residential mortgage +$6.2M and farmland +$2.3M helped offset; deposits +$4.9M q/q with +$11.1M noninterest-bearing .
• OCI/AFS: Unrealized loss on securities improved $4.5M q/q (to $30.7M); AFS decreased $6.5M as $26.2M maturities/paydowns were partially reinvested ($15.4M purchases) .
• Dividend: $0.26/share declared Apr 24, 2025; payable May 30 to holders of record May 15; 5.21% annualized yield at $19.96 reference price .

Non-GAAP Note: Tangible book value per share is a non-GAAP financial measure. Reconciliation provided in the release .