Equibles

10-Q

NEW PEOPLES BANKSHARES INC (NWPP)

10-Q 2025-11-14 For: 2025-09-30
View Original
Added on April 06, 2026

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

WASHINGTON, D.C.

20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition

period from ____________ to _____________

Commission file

number: 000-33411

NEW PEOPLES BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia<br><br> <br>(State or other<br> jurisdiction of<br><br> <br>incorporation<br> or organization) 31-1804543<br><br> <br>(I.R.S. Employer<br><br> <br>Identification<br> No.)
67 Commerce Drive, Honaker, Virginia<br><br> <br>(Address of principal<br> executive offices) 24260<br><br> <br>(Zip Code)

(276) 873-7000

(Registrant’s<br> telephone number, including area code)

Securities

registered pursuant to Section 12(b) of the Act:

Title<br> of each class Trading<br> Symbol(s) Name<br> 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 [X] 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 ((§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] 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<br> accelerated filer  [ ] Accelerated<br> filer  [ ]
Non-accelerated filer  [X] Smaller<br> reporting company  [X]
Emerging<br> 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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

The

number of shares outstanding of the registrant’s common stock was 23,574,543 as of November 07, 2025.

NEW PEOPLES

BANKSHARES, INC.

INDEX

Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated<br> Balance Sheets - September 30, 2025 (Unaudited) and December 31, 202 3
Consolidated<br> Statements of Income – Three and nine months ended September 30, 2025 and 2024 (Unaudited) 4
Consolidated<br> Statements of Comprehensive Income – Three and nine months ended September 30, 2025 and 2024 (Unaudited) 5
Consolidated<br> Statements of Changes in Stockholders’ Equity – Three and nine months ended September 30, 2025 and 2024<br> (Unaudited) 6
Consolidated<br> Statements of Cash Flows – Nine months ended September 30, 2025 and 2024 (Unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
Item 4. Controls and Procedures 33
PART II OTHER INFORMATION
Item 1. Legal Proceedings 34
Item 1A. Risk Factors 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34
Item 3. Defaults upon Senior Securities 34
Item 4. Mine Safety Disclosures 35
Item 5. Other Information 35
Item 6. Exhibits 35
SIGNATURES 36

Part I Financial Information

Item 1 Financial<br> Statements

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED BALANCE

SHEETS

SEPTEMBER 30, 2025

AND DECEMBER 31, 2024

(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)

(UNAUDITED)

December 31,
2024
ASSETS
Cash and due from banks 13,686 $ 13,218
Interest-bearing deposits with banks 66,538 54,300
Federal funds sold 486 150
Total cash and cash equivalents 80,710 67,668
Investment securities available-for-sale, at fair value 96,153 95,984
Loans receivable 707,272 657,536
Allowance for credit losses (7,967 ) (7,684 )
Net loans 699,305 649,852
Bank premises and equipment, net 16,689 17,070
Other real estate owned 89 87
Accrued interest receivable 3,849 3,458
Deferred taxes, net 3,837 4,809
Insurance benefit receivable — 5,417
Right-of-use assets – operating leases 3,117 3,413
Other assets 6,975 7,167
Total assets 910,724 $ 854,925
LIABILITIES
Deposits:
Noninterest bearing 228,881 $ 224,938
Interest-bearing 570,495 525,044
Total deposits 799,376 749,982
Borrowed funds 21,986 24,986
Lease liabilities – operating leases 3,117 3,413
Accrued interest payable 1,491 1,442
Accrued expenses and other liabilities 5,226 4,361
Total liabilities 831,196 784,184
SHAREHBOLDERS’ EQUITY
Common stock - 2.00 par value; 50,000,000 shares authorized; 23,577,193 and<br> 23,636,724 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively 47,154 47,273
Additional paid-in-capital 14,390 14,451
Retained earnings 26,310 21,001
Accumulated other comprehensive loss (8,326 ) (11,984 )
Total shareholders’ equity 79,528 70,741
Total liabilities and shareholders’ equity 910,724 $ 854,925

All values are in US Dollars.

The accompanying notes

are an integral part of these consolidated financial statements.

3

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED

STATEMENTS OF INCOME

FOR THE THREE AND

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

For the Three Months Ended September 30, For the Nine Months Ended <br>September 30,
INTEREST AND DIVIDEND INCOME 2025 2024 2025 2024
Loans including fees $ 11,217 9,728 $ 31,669 $ 28,316
Federal funds sold 4 2 9 5
Interest-earning deposits with banks 644 1,164 1,999 2,999
Investments 702 610 2,115 1,723
Dividends on equity securities (restricted) 42 43 126 129
Total interest and dividend income 12,609 11,547 35,918 33,172
INTEREST EXPENSE
Deposits 3,674 3,832 10,573 10,490
Borrowed funds 298 534 884 1,601
Total interest expense 3,972 4,366 11,457 12,091
NET INTEREST INCOME 8,637 7,181 24,461 21,081
PROVISION FOR CREDIT LOSSES 189 49 602 478
NET INTEREST INCOME AFTER PROVISION FOR<br> CREDIT LOSSES 8,448 7,132 23,859 20,603
NONINTEREST INCOME
Service charges and fees 1,003 995 2,779 2,877
Card processing and interchange 958 937 2,811 2,803
Financial services fees 335 304 1,009 998
Net gain on sales of available for sale securities — 4 — 4
Net gain  on sale and disposal of premises and equipment — 3 2 23
Other noninterest income 203 183 747 574
Total noninterest income 2,499 2,426 7,348 7,279
NONINTEREST EXPENSES
Salaries and employee benefits 3,736 3,527 11,186 10,768
Occupancy and equipment expense 883 897 2,741 2,627
Data processing and telecommunications 660 628 1,959 1,889
Other operating expenses 2,098 1,777 5,976 5,360
Total noninterest expenses 7,377 6,829 21,862 20,644
INCOME BEFORE INCOME TAXES 3,570 2,729 9,345 7,238
INCOME TAX EXPENSE 812 621 2,147 1,660
NET INCOME $ 2,758 2,108 $ 7,198 $ 5,578
Earnings per share
Basic and diluted $ 0.12 0.09 $ 0.30 $ 0.24
Average Weighted Shares of Common Stock
Basic and diluted 23,590,909 23,658,248 23,608,168 23,695,385

The accompanying

notes are an integral part of these consolidated financial statements.

4

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

FOR THE THREE AND

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS)

(UNAUDITED)

For the Three Months Ended <br>September 30, For the Nine Months Ended <br>September 30,
2025 2024 2025 2024
NET INCOME $ 2,758 $ 2,108 $ 7,198 $ 5,578
Other comprehensive income:
Investment securities activity
Unrealized gains arising during the period 2,531 3,532 4,630 3,261
Reclassification adjustment for net gains included in net income — (4 ) — (4 )
Other comprehensive gains on investment securities 2,531 3,528 4,630 3,257
Related tax expense (531 ) (742 ) (972 ) (685 )
TOTAL OTHER COMPREHENSIVE INCOME 2,000 2,786 3,658 2,572
TOTAL COMPREHENSIVE INCOME $ 4,758 $ 4,894 $ 10,856 $ 8,150

The accompanying notes

are an integral part of these consolidated financial statements.

5

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE AND

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS INCLUDING SHARE DATA)

(UNAUDITED)

Common Stock Additional Paid-in- Capital Retained <br>Earnings Accumulated Other <br>Comprehensive Loss Total Shareholders’ Equity
Balance, June 30, 2024 23,676 $ 47,352 $ 14,479 $ 16,267 $ (11,867 ) $ 66,231
Net income — — — 2,108 — 2,108
Other comprehensive income, net of tax — — — — 2,786 2,786
Repurchase of common stock (24 ) (48 ) (16 ) — — (64 )
Balance, September 30, 2024 23,652 $ 47,304 $ 14,463 $ 18,375 $ (9,081 ) $ 71,061
Balance, December 31, 2023 23,746 $ 47,492 $ 14,514 $ 14,458 $ (11,653 ) $ 64,811
Net income — — — 5,578 — 5,578
Other comprehensive income, net of tax — — — — 2,572 2,572
Cash dividend declared (0.07 per share) — — — (1,661 ) — (1,661 )
Repurchase of common stock (94 ) (188 ) (51 ) — — (239 )
Balance, September 30, 2024 23,652 $ 47,304 $ 14,463 $ 18,375 $ (9,081 ) $ 71,061
Balance, June 30, 2025 23,601 $ 47,202 $ 14,416 $ 23,552 $ (10,326 ) $ 74,844
Net income — — — 2,758 — 2,758
Other comprehensive income, net of tax — — — — 2,000 2,000
Repurchase of common stock (24 ) (48 ) (26 ) — — (74 )
Balance, September 30, 2025 23,577 $ 47,154 $ 14,390 $ 26,310 $ (8,326 ) $ 79,528
Balance, December 31, 2024 23,637 $ 47,273 $ 14,451 $ 21,001 $ (11,984 ) $ 70,741
Net income — — — 7,198 — 7,198
Other comprehensive income, net of tax — — — — 3,658 3,658
Cash dividend declared (0.08 per share) — — — (1,889 ) — (1,889 )
Repurchase of common stock (60 ) (119 ) (61 ) — — (180 )
Balance, September 30, 2025 23,577 $ 47,154 $ 14,390 $ 26,310 $ (8,326 ) $ 79,528

All values are in US Dollars.

The accompanying notes

are an integral part of these consolidated financial statements.

6

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

FOR THE NINE MONTHS

ENDED SEPTEMBER 30, 2025 AND 2024

(IN THOUSANDS)

(UNAUDITED)

2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,198 $ 5,578
Adjustments to reconcile net income to net cash provided by <br>operating activities:
Depreciation and amortization 1,123 1,198
Provision for credit losses 602 478
Income on bank owned life insurance — (57 )
Gain on sale of mortgage loans (17 ) (9 )
Net gain on sale of securities available-for-sale — (4 )
Gain on sale or disposal of premises and equipment (2 ) (23 )
Gain on sale of other real estate owned (6 ) (44 )
Loans originated for sale (760 ) (329 )
Proceeds from sales of loans originated for sale 777 338
Net amortization/accretion of bond premiums/discounts 55 165
Deferred tax benefit — (261 )
Net change in:
Accrued interest receivable (391 ) (212 )
Other assets 427 (532 )
Accrued interest payable 49 504
Accrued expenses and other liabilities 477 106
Net cash provided by operating activities 9,532 6,896
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (50,009 ) (9,307 )
Purchase of securities available-for-sale (5,270 ) (14,011 )
Proceeds from repayments and maturities of securities available-for-sale 9,676 8,214
Proceeds from sales of securities available-for-sale — 2,134
Net purchase of equity securities (restricted) (20 ) (38 )
Payments for the purchase of premises and equipment and software (661 ) (1,687 )
Proceeds from sale of premises and equipment 2 1,188
Proceeds from sale of other real estate owned 50 164
Proceeds from bank owned life insurance benefit 5,417 —
Net cash used in investing activities (40,815 ) (13,343 )
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (3,000 ) —
Net change in noninterest bearing deposits 3,943 (2,126 )
Net change in interest-bearing deposits 45,451 49,223
Dividends paid (1,889 ) (1,661 )
Repurchase of common stock (180 ) (239 )
Net cash provided by financing activities 44,325 45,197
Net increase in cash and cash equivalents 13,042 38,750
Cash and cash equivalents, beginning of the period 67,668 64,977
Cash and cash equivalents, end of the period $ 80,710 $ 103,727
Supplemental disclosure of cash paid during the period for:
Interest $ 11,408 $ 11,587
Taxes 1,620 1,550
Supplemental disclosure of non-cash transactions:
Transfer of loans to other real estate owned 46 1,023
Change in unrealized losses on securities available-for-sale 4,630 3,257

The accompanying notes

are an integral part of these consolidated financial statements.

7

NEW PEOPLES BANKSHARES, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS

Nature of Operations– New Peoples Bankshares, Inc. (New Peoples or the Company) is a financial holding company whose principal activity is the ownership and management of a community bank, New Peoples Bank, Inc. (the Bank). New Peoples and the Bank are organized and incorporated under the laws of the Commonwealth of Virginia. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (the Federal Reserve). The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwest Virginia, southern West Virginia, western North Carolina and northeastern Tennessee. These services include commercial and consumer loans along with traditional deposit products such as checking and savings accounts.

NOTE 2 SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements conform to U. S. generally accepted accounting principles (GAAP) and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2025 and December 31, 2024, and the results of operations for the three- and nine-month periods ended September 30, 2025 and 2024. The Notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period.

The consolidated financial statements include New Peoples, the Bank, NPB Insurance Services, Inc., and NPB Web Services, Inc. (hereinafter, collectively referred to as the Company, we, us or our). All significant intercompany balances and transactions have been eliminated. In accordance with Accounting Standards Codification (ASC) 942, Financial Services – Depository and Lending, NPB Capital Trust I and 2 are not included in the consolidated financial statements.

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, 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 determination of the adequacy of the allowance for credit losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

Certain reclassifications have been made to prior period amounts to conform to current period presentation. None of these reclassifications are considered material and have no impact on net income or shareholders’ equity.

The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in the Company’s Annual report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2024 except for the following:

Accounting StandardsAdopted in 2025 –

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 was effective for the Company on January 1, 2025. The adoption of this standard had no material impact on the consolidated financial statements.

8

NOTE 3 EARNINGS

PER SHARE

Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the three- and nine-month periods ended September 30, 2025 and 2024, there were no potential common shares. Basic and diluted net income per common share calculations follow:

Schedule of basic and diluted net loss per common share calculations
(Dollars in thousands, except <br>per share data) For the three months <br>ended September 30, For the nine months <br>ended September 30,
2025 2024 2025 2024
Net income $ 2,758 $ 2,108 $ 7,198 $ 5,578
Weighted average shares outstanding 23,590,909 23,658,248 23,608,168 23,695,385
Weighted average dilutive shares outstanding 23,590,909 23,658,248 23,608,168 23,695,385
Basic and diluted earnings per share $ 0.12 $ 0.09 $ 0.30 $ 0.24

NOTE 4 CAPITAL

Capital Requirementsand Ratios

Banks and bank 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.

To qualify as a "Small Bank Holding Company" under federal regulations, a bank must have consolidated assets of $3.0 billion or less. The primary benefit of being deemed a "Small Bank Holding Company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became fully phased in on January 1, 2019. Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer required is 2.50%. At September 30, 2025, the Bank had a capital conservation buffer of 8.05%. Amounts recorded to accumulated other comprehensive income (loss) are not included in computing regulatory capital. Management believes as of September 30, 2025, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2025, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2025 and December 31, 2024, respectively.

9
Schedule of bank’s<br>actual capital amounts and ratios presented
Actual Minimum Capital Requirement Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
September 30, 2025:
Total capital to risk weighted assets 107,263 16.05 % $ 53,471 8.00 % $ 66,839 10.00 %
Tier 1 capital to risk weighted assets 98,907 14.80 % 40,103 6.00 % 53,471 8.00 %
Tier 1 capital to average assets 98,907 10.80 % 36,644 4.00 % 45,805 5.00 %
Common equity Tier 1 capital
to risk weighted assets 98,907 14.80 % 30,078 4.50 % 43,445 6.50 %
December 31, 2024:
Total capital to risk weighted assets 101,769 16.19 % $ 50,300 8.00 % $ 62,875 10.00 %
Tier 1 capital to risk weighted assets 93,907 14.94 % 37,725 6.00 % 50,300 8.00 %
Tier 1 capital to average assets 93,907 10.70 % 35,113 4.00 % 43,892 5.00 %
Common equity Tier 1 capital
to risk weighted assets 93,907 14.94 % 28,294 4.50 % 40,869 6.50 %

NOTE 5 INVESTMENT

SECURITIES

The amortized cost and estimated fair value of available-for-sale (“AFS”) securities as of September 30, 2025 and December 31, 2024 are as follows:

Schedule of securities amortized cost and estimated fair value
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
September 30, 2025
U.S.<br> Treasuries $ 7,105 $ 18 $ 199 $ 6,924
U.S.<br> Government Agencies 9,241 64 397 8,908
Taxable<br> municipals 24,229 6 4,415 19,820
Corporate<br> bonds 2,500 7 159 2,348
Mortgage-backed<br> securities 63,618 202 5,667 58,153
Total<br> securities available-for-sale $ 106,693 $ 297 $ 10,837 $ 96,153
December 31, 2024
U.S.<br> Treasuries $ 8,370 $ - $ 409 $ 7,961
U.S.<br> Government Agencies 9,380 11 586 8,805
Taxable<br> municipals 23,940 - 5,416 18,524
Corporate<br> bonds 2,499 - 246 2,253
Mortgage-backed<br> securities 66,965 11 8,535 58,441
Total<br> securities available-for-sale $ 111,154 $ 22 $ 15,192 $ 95,984

The following table details unrealized losses and related fair values in the AFS portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2025 and December 31, 2024.

Schedule of fair value and gross unrealized losses on investment securities
Less than 12 Months 12 Months or More Total
(Dollars in thousands) Fair Value Unrealized <br>Losses Fair <br>Value Unrealized <br>Losses Fair <br>Value Unrealized <br>Losses
September 30, 2025
U.S. Treasuries $ — $ — $ 5,906 $ 199 $ 5,906 $ 199
U.S. Government Agencies 204 — 4,585 397 4,789 397
Taxable municipals 1,344 177 17,646 4,238 18,990 4,415
Corporate bonds — — 1,841 159 1,841 159
Mortgage-backed securities 937 9 41,725 5,658 42,662 5,667
Total $ 2,485 $ 186 $ 71,703 $ 10,651 $ 74,188 $ 10,837
December 31, 2024
U.S. Treasuries $ 980 $ 20 $ 6,981 $ 389 $ 7,961 $ 409
U.S. Government Agencies 2,221 38 6,026 548 8,247 586
Taxable municipals 1,559 212 16,965 5,204 18,524 5,416
Corporate bonds 499 1 1,755 245 2,254 246
Mortgage-backed securities 14,982 311 42,018 8,224 57,000 8,535
Total $ 20,241 $ 582 $ 73,745 $ 14,610 $ 93,986 $ 15,192 
10

As of September 30, 2025, the available-for-sale portfolio included 165 investments for which the fair market value was less than amortized cost. As of December 31, 2024, the available-for-sale portfolio included 195 investments for which the fair market value was less than amortized cost. Management believes that all unrealized losses have resulted from temporary changes in the interest rates and current market conditions and are not a result of credit deterioration. Management does not plan to sell, and it is not likely that the Bank will be required to sell any of the securities referenced in the table above before recovery of their amortized cost. None of the individual securities have past due principal or interest payments, and a number of these securities have explicit or implicit payment guarantees. The remaining securities have credit ratings at or above that necessary to be considered “bank qualified.”

Investment securities

with a carrying value of $35.8 million and $35.2 million as of September 30, 2025 and December 31, 2024, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

There were no sales

of investment securities available-for-sale during the three or nine months ended September 30, 2025. During the three and nine months ended September 30, 2024, investment securities available-for-sale with a carrying value of $2.2 million were sold, realizing a net gain of $4,000.

The amortized cost and fair value of investment securities as of September 30, 2025, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Schedule of amortized cost and fair value of investment securities contractual maturity
Weighted
(Dollars in thousands) Amortized Fair Average
Securities<br> Available-for-Sale Cost Value Yield
Due<br> in one year or less $ 2,995 $ 2,963 0.96%
Due<br> after one year through five years 12,294 11,938 2.79%
Due<br> after five years through ten years 23,204 22,234 3.43%
Due<br> after ten years 68,200 59,018 2.29%
Total $ 106,693 $ 96,153 2.56%

The Bank, as a member

bank of the Federal Reserve Bank of Richmond (“Federal Reserve Bank”) and the Federal Home Loan Bank of Atlanta (FHLB), is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities, which are included in other assets on the consolidated balance sheet, are restricted from trading and are recorded at a cost of $2.7 million and $2.7 million as of September 30, 2025 and December 31, 2024, respectively. The stock has no quoted market value and no ready market exists. When evaluating these securities for impairment, their value is determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. Equity securities are viewed as long-term investments and management believes the Company has the ability and the intent to hold these securities until their value is recovered.

NOTE 6 LOANS

Loans receivable outstanding as of September 30, 2025 and December 31, 2024, are summarized as follows:

Schedule of loans receivable outstanding
September 30, December 31,
(Dollars in thousands) 2025 2024
Real estate secured:
Commercial $ 252,748 $ 243,646
Construction and land development 40,811 36,112
Residential 1-4 family 251,587 234,860
Multifamily 44,912 32,379
Farmland 24,504 16,921
Total real estate loans 614,562 563,918
Commercial 55,325 60,587
Agriculture 4,872 4,025
Consumer installment and all other loans 32,513 29,006
Total loans $ 707,272 $ 657,536 
11

Also included in

total loans above are deferred loan fees of $2.2 million and $2.0 million as of September 30, 2025 and December 31, 2024, respectively. Deferred loan costs were $2.1 million and $1.9 million, as of September 30, 2025 and December 31, 2024, respectively. Income from net deferred fees and costs is recognized over the lives of the respective loans as a yield adjustment. If loans repay prior to scheduled maturities any unamortized fees or costs are recognized at that time.

Loans receivable on nonaccrual status as of September 30, 2025 and December 31, 2024, are summarized as follows:

Schedule<br> of loans receivable nonaccrual status
September<br> 30, 2025 December<br> 31, 2024
With<br> No Allowance With<br> an Allowance Total With<br> No Allowance With<br> an Allowance Total
(Dollars in thousands)
Real<br> estate secured:
Commercial $ 7 $ - $ 7 $ 411 $ - $ 411
Construction<br> and land development 26 - 26 300 - 300
Residential<br> 1-4 family 1,965 39 2,004 2,232 178 2,410
Farmland 18 - 18 - - -
Total<br> real estate loans 2,016 39 2,055 2,943 178 3,121
Commercial 78 - 78 66 - 66
Agriculture - 752 752 16 - 16
Consumer<br> installment loans and other loans 67 - 67 56 14 70
Total<br> loans receivable on nonaccrual status $ 2,161 $ 791 $ 2,952 $ 3,081 $ 192 $ 3,273

Total interest income

not recognized (recognized) on nonaccrual loans for the three months ended September 30, 2025 and September 30, 2024 was $26,000 and ($18,000), respectively. Interest recognized during the three months ended September 30, 2024, resulted, primarily, from the resolution of a single loan secured by commercial real estate. Total interest income not recognized on nonaccrual loans for the nine months ended September 30, 2025 and September 30, 2024, was $88,000 and $51,000, respectively.

The Company evaluates loans that do not share risk characteristics on an individual basis utilizing the collateral or discounted cash flow methods. The following table presents the unpaid principal balance of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to those loans as of September 30, 2025 and December 31, 2024:

Schedule<br> of summary of impaired loans
September<br> 30, 2025 December<br> 31, 2024
Unpaid<br> Principal Balance Related<br> Allowance Unpaid<br> Principal Balance Related<br> Allowance
(Dollars in thousands)
Real<br> estate secured:
Commercial $ 3,036 $ - $ 396 $ -
Construction<br> and land development - - 300 -
Residential<br> 1-4 family 510 39 1,008 177
Total<br> real estate loans 3,546 39 1,704 177
Agriculture 752 54 - -
Consumer<br> installment loans and other loans - - 13 3
Total $ 4,298 $ 93 $ 1,717 $ 180 
12

The following table is an age analysis of past due loans receivable as of September 30, 2025, segregated by class:

Schedule of analysis of past due loans receivable
**<br><br>September 30, 2025<br> <br>(Dollars in thousands) Loans <br>30-59 <br>Days <br>Past <br>Due Loans <br>60-89 <br>Days <br>Past <br>Due Loans <br>90 or <br>More <br>Days <br>Past <br>Due Total <br>Past <br>Due <br>Loans Current <br>Loans Total <br>Loans
Real estate secured:
Commercial $ 368 $ 39 $ 7 $ 414 $ 252,334 $ 252,748
Construction and land <br>development — — — — 40,811 40,811
Residential 1-4 family 1,568 889 637 3,094 248,493 251,587
Multifamily — — — — 44,912 44,912
Farmland — — — — 24,504 24,504
Total real estate loans 1,936 928 644 3,508 611,054 614,562
Commercial 19 9 51 79 55,246 55,325
Agriculture — — 752 752 4,120 4,872
Consumer installment and all other loans 120 75 43 238 32,275 32,513
Total loans $ 2,075 $ 1,012 $ 1,490 $ 4,577 $ 702,695 $ 707,272

The following table is an age analysis of past due loans receivable as of December 31, 2024, segregated by class:

**<br><br>December 31, 2024<br> <br>(Dollars in thousands) Loans <br>30-59 <br>Days <br>Past <br>Due Loans <br>60-89 <br>Days <br>Past <br>Due Loans <br>90 or <br>More <br>Days <br>Past <br>Due Total <br>Past <br>Due <br>Loans Current <br>Loans Total <br>Loans
Real estate secured:
Commercial $ — $ 255 $ 156 $ 411 $ 243,235 $ 243,646
Construction and land <br>development 3 333 — 336 35,776 36,112
Residential 1-4 family 2,413 1,810 510 4,733 230,127 234,860
Multifamily — — — — 32,379 32,379
Farmland 207 — — 207 16,714 16,921
Total real estate loans 2,623 2,398 666 5,687 558,231 563,918
Commercial 166 77 — 243 60,344 60,587
Agriculture 37 — — 37 3,988 4,025
Consumer installment and all other loans 89 88 30 207 28,799 29,006
Total loans $ 2,915 $ 2,563 $ 696 $ 6,174 $ 651,362 $ 657,536

The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention

  • Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard

  • A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful

  • Loans classified doubtful have all the weaknesses inherent in loans classified as substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

    13

The following table presents the credit risk grade of loans by origination year as of September 30, 2025:

Schedule of credit risk grade of loans
As of December 31, 2024
(Dollars are in thousands) 2025 2024 2023 2022 2021 Prior Revolving Total
Commercial real estate
Pass $ 25,831 $ 21,223 $ 43,748 $ 46,030 $ 41,480 $ 71,922 $ 332 $ 250,566
Special mention — — — — — — — —
Substandard — — — — 2,174 8 — 2,182
Total commercial real estate $ 25,831 $ 21,223 $ 43,748 $ 46,030 $ 43,654 $ 71,930 $ 332 $ 252,748
Current period gross charge-offs $ — $ — $ — $ (1 ) $ — $ — $ — $ (1 )
Construction and Land Development
Pass $ 9,268 $ 21,844 $ 2,882 $ 2,139 $ 2,273 $ 2,379 $ — $ 40,785
Special mention — — — — — — — —
Substandard — 26 — — — — — 26
Total construction and land development $ 9,268 $ 21,870 $ 2,882 $ 2,139 $ 2,273 $ 2,379 $ — $ 40,811
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential 1-4 family
Pass $ 27,640 $ 19,330 $ 26,739 $ 26,029 $ 36,943 $ 77,720 $ 34,600 $ 249,001
Special mention — — — — — 485 — 485
Substandard — 104 116 51 — 1,725 105 2,101
Total residential 1-4 family $ 27,640 $ 19,434 $ 26,855 $ 26,080 $ 36,943 $ 79,930 $ 34,705 $ 251,587
Current period gross charge-offs $ — $ — $ (139 ) $ — $ — $ — $ — $ (139 )
Multifamily
Pass $ 15,344 $ 1,415 $ 4,583 $ 9,582 $ 6,507 $ 7,481 $ — $ 44,912
Special mention — — — — — — — —
Substandard — — — — — — — —
Total multifamily $ 15,344 $ 1,415 $ 4,583 $ 9,582 $ 6,507 $ 7,481 $ — $ 44,912
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Farmland
Pass $ 8,343 $ 2,644 $ 1,142 $ 1,846 $ 2,679 $ 6,465 $ 1,239 $ 24,358
Special mention — — — — — 128 — 128
Substandard — — — — — 18 — 18
Total farmland $ 8,343 $ 2,644 $ 1,142 $ 1,846 $ 2,679 $ 6,611 $ 1,239 $ 24,504
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial
Pass $ 11,486 $ 11,874 $ 10,030 $ 2,949 $ 1,515 $ 3,013 $ 14,377 $ 55,244
Special mention — — — — — 2 — 2
Substandard — 51 — — — — 28 79
Total commercial $ 11,486 $ 11,925 $ 10,030 $ 2,949 $ 1,515 $ 3,015 $ 14,405 $ 55,325
Current period gross charge-offs $ — $ (8 ) $ — $ — $ (23 ) $ — $ (10 ) $ (41 )
Agriculture
Pass $ 1,083 $ 716 $ 189 $ 206 $ 127 $ 123 $ 1,645 $ 4,089
Special mention — — — — — — 32 32
Substandard — — — — — — — —
Doubtful — 305 — — — — 446 751
Total agriculture $ 1,083 $ 1,021 $ 189 $ 206 $ 127 $ 123 $ 2,123 $ 4,872
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ (50 ) $ (50 )
Consumer and All Other
Pass $ 12,549 $ 9,661 $ 5,660 $ 1,580 $ 843 $ 982 $ 1,172 $ 32,447
Special mention — — — — — — — —
Substandard 9 35 20 2 — — — 66
Total consumer and all other $ 12,558 $ 9,696 $ 5,680 $ 1,582 $ 843 $ 982 $ 1,172 $ 32,513
Current period gross charge-offs $ (115 ) $ (32 ) $ (12 ) $ (5 ) $ (1 ) $ (2 ) $ (37 ) $ (204 )
Total $ 111,553 $ 89,228 $ 95,109 $ 90,414 $ 94,541 $ 172,451 $ 53,976 $ 707,272
Total current period gross charge-offs $ (115 ) $ (40 ) $ (151 ) $ (6 ) $ (24 ) $ (2 ) $ (97 ) $ (435 ) 
14

The following table presents the credit risk grade of loans by origination year as of December 31, 2024:

As of December 31, 2024
(Dollars<br> are in thousands) 2024 2023 2022 2021 2020 Prior Revolving Total
Commercial<br> real estate
Pass $ 20,653 $ 47,052 $ 43,553 $ 46,902 $ 27,155 $ 56,369 $ 1,541 $ 243,225
Special<br> mention — — — — — 9 — 9
Substandard — — 255 141 — 16 — 412
Total<br> commercial real estate $ 20,653 $ 47,052 $ 43,808 $ 47,043 $ 27,155 $ 56,394 $ 1,541 $ 243,646
Current<br> period gross charge-offs $ — $ — $ — $ (179 ) $ — $ — $ (1 ) $ (180 )
Construction<br> and Land Development
Pass $ 17,654 $ 5,078 $ 6,240 $ 3,019 $ 1,719 $ 2,089 $ — $ 35,799
Special<br> mention — — — — — 12 — 12
Substandard 301 — — — — — — 301
Total<br> construction and land development $ 17,955 $ 5,078 $ 6,240 $ 3,019 $ 1,719 $ 2,101 $ — $ 36,112
Current<br> period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential<br> 1-4 family
Pass $ 19,094 $ 27,861 $ 29,510 $ 38,329 $ 11,265 $ 78,424 $ 26,933 $ 231,416
Special<br> mention — — — — — 319 — 319
Substandard 104 257 42 723 238 1,647 114 3,125
Total<br> residential 1-4 family $ 19,198 $ 28,118 $ 29,552 $ 39,052 $ 11,503 $ 80,390 $ 27,047 $ 234,860
Current<br> period gross charge-offs $ — $ (38 ) $ — $ — $ — $ (37 ) $ — $ (75 )
Multifamily
Pass $ 1,564 $ 4,829 $ 10,313 $ 6,818 $ 2,505 $ 6,350 $ — $ 32,379
Special<br> mention — — — — — — — —
Substandard — — — — — — — —
Total<br> multifamily $ 1,564 $ 4,829 $ 10,313 $ 6,818 $ 2,505 $ 6,350 $ — $ 32,379
Current<br> period gross charge-offs $ — $ (53 ) $ — $ — $ — $ (42 ) $ — $ (95 )
Farmland
Pass $ 2,669 $ 1,333 $ 2,045 $ 2,812 $ 730 $ 7,186 $ — $ 16,775
Special<br> mention — — — — — 146 — 146
Substandard — — — — — — — —
Total<br> farmland $ 2,669 $ 1,333 $ 2,045 $ 2,812 $ 730 $ 7,332 $ — $ 16,921
Current<br> period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial
Pass $ 18,298 $ 13,490 $ 4,780 $ 2,305 $ 801 $ 2,560 $ 18,284 $ 60,518
Special<br> mention — — — — — 2 — 2
Substandard 1 — — 31 — — 35 67
Total<br> commercial $ 18,299 $ 13,490 $ 4,780 $ 2,336 $ 801 $ 2,562 $ 18,319 $ 60,587
Current<br> period gross charge-offs $ — $ (34 ) $ (55 ) $ — $ — $ — $ (73 ) $ (162 )
Agriculture
Pass $ 1,333 $ 322 $ 339 $ 232 $ 35 $ 195 $ 1,553 $ 4,009
Special<br> mention — — — — — — — —
Substandard — — — — — 16 — 16
Total<br> agriculture $ 1,333 $ 322 $ 339 $ 232 $ 35 $ 211 $ 1,553 $ 4,025
Current<br> period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Consumer<br> and All Other
Pass $ 14,500 $ 7,982 $ 2,706 $ 1,276 $ 424 $ 880 $ 1,158 $ 28,926
Special<br> mention — — — — — — — —
Substandard 17 22 20 19 2 — — 80
Total<br> consumer and all other $ 14,517 $ 8,004 $ 2,726 $ 1,295 $ 426 $ 880 $ 1,158 $ 29,006
Current<br> period gross charge-offs $ (163 ) $ (62 ) $ (14 ) $ (7 ) $ (9 ) $ — $ (24 ) $ (279 )
Total $ 96,188 $ 108,226 $ 99,803 $ 102,607 $ 44,874 $ 156,220 $ 49,618 $ 657,536
Total<br> current period gross charge-offs $ (163 ) $ (187 ) $ (69 ) $ (186 ) $ (9 ) $ (79 ) $ (98 ) $ (791 ) 
15

NOTE 7 ALLOWANCE

FOR CREDIT LOSSES FOR LOANS (“ACLL”)

In determining the amount of our allowance for credit losses, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

The following table presents a disaggregated analysis of activity in the allowance for credit losses for loans as of September 30, 2025 and December 31, 2024:

Schedule of allowance for credit losses for loans
Real<br> estate secured
(Dollars<br> are in thousands) Commercial Construction<br> and Land Development Residential<br> 1-4 family Multifamily Farmland Commercial Agriculture Consumer<br> and All Other Total
Three months ended September<br> 30, 2025
Beginning balance $ 2,561 $ 360 $ 2,998 $ 432 $ 182 $ 737 $ 62 $ 616 $ 7,948
Charge-offs (1 ) — (139 ) — — (23 ) — (89 ) (252 )
Recoveries — — 32 3 — 5 — 43 83
Provision<br> for credit losses 34 26 43 76 17 (60 ) 21 31 188
Ending balance $ 2,594 $ 386 $ 2,934 $ 511 $ 199 $ 659 $ 83 $ 601 $ 7,967
Real<br> estate secured
(Dollars<br> are in thousands) Commercial Construction<br> and Land Development Residential<br> 1-4 family Multifamily Farmland Commercial Agriculture Consumer<br> and All Other Total
Nine months ended  September<br> 30, 2025
Beginning balance $ 2,565 $ 322 $ 2,923 $ 382 $ 149 $ 751 $ 36 $ 556 $ 7,684
Charge-offs (1 ) — (139 ) — — (41 ) (50 ) (204 ) (435 )
Recoveries — 26 54 9 3 7 — 109 208
Provision<br> for credit losses 30 38 96 120 47 (58 ) 97 140 510
Ending balance $ 2,594 $ 386 $ 2,934 $ 511 $ 199 $ 659 $ 83 $ 601 $ 7,967
Real<br> estate secured
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
(Dollars<br> are in thousands) Commercial Construction<br> and Land Development Residential<br> 1-4 family Multifamily Farmland Commercial Agriculture Consumer<br> and All Other Total
Year ended December 30, 2024
Beginning balance $ — $ 104 $ 255 $ — $ — $ 1,930 $ 148 $ 2,437 $ 4,874
Charge-offs (180 ) — (75 ) (95 ) — (162 ) — (279 ) (791 )
Recoveries 106 44 100 — 297 9 — 157 713
Provision<br> for credit losses 2,639 174 2,643 477 (148 ) (1,026 ) (112 ) (1,759 ) 2,888
Ending balance $ 2,565 $ 322 $ 2,923 $ 382 $ 149 $ 751 $ 36 $ 556 $ 7,684

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

NOTE 8 MODIFICATIONS MADE TO BORROWERS

EXPERIENCING FINANCIAL DIFFICULTY

An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off against the allowance for credit losses, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

On February 15, 2025,

severe flash flooding occurred in Tazewell and Buchanan, Counties in Virgina. On September 27, 2024, Hurricane Helene passed through western North Carolina, southwest Virginia and northeast Tennessee, causing flood and wind damage in its path. To assist borrowers impacted by these natural disasters, we offered short-term payment deferrals of 3 months. As of December 31, 2024, 36 loans totaling $9.2 million were participating in the deferral program. One of these loans, a residential mortgage loan totaling $178,000, received an additional 3-month deferral due to the extent of damage to the property. As of September 30, 2025, the deferral periods have ended and 48 loans totaling $7.4 million participating in the deferral program have commenced regular payments. The loan totaling $178,000 was in default, and $138,000 was charged off during the quarter ended September 30, 2025. There were no loans modified to borrowers experiencing financial difficulties in the three and nine months ended September 30, 2025, other than those impacted by natural disasters.

16

NOTE 9 CREDIT

ALLOWANCE FOR UNFUNDED COMMITMENTS

The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The allowance for credit losses for off-balance-sheet credit exposures is adjusted through a provision for credit losses in the income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives, utilizing the same models and approaches for the Company's other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

As of September 30,

2025 and December 31, 2024, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities was $496,000 and $404,000, respectively. During the three and nine months ended September 30, 2025 and September 30, 2024, $0 and $92,000 and $22,000 and $25,000, respectively, were included in the Provision for Credit Losses.

NOTE 10 OTHER

REAL ESTATE OWNED

The following table summarizes the activity in other real estate owned for the nine months ended September 30, 2025 and the year ended December 31, 2024:

Schedule of activity in other real estate owned
September 30, December 31,
(Dollars in thousands) 2025 2024
Balance, beginning of period $ 87 $ 157
Additions 46 1,330
Proceeds from sales (50 ) (1,474 )
Adjustment of carrying value — (9 )
Net gains from sales 6 83
Balance, end of period $ 89 $ 87

As of September 30, 2025, there were no loans secured by residential real estate in the process of foreclosure.

NOTE 11 FAIR VALUES

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of Financial Accounting Standards Board (the FASB) ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market and in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market and in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

17

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed.

Level 3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy are as follows:

Investment Securities Available-for-sale - Investment securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s AFS securities, totaling $96.2 million and $96.0 million as of September 30, 2025 and December 31, 2024, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.

Collateral Dependent Loans with an ACL - In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.

Other Real Estate Owned –Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned. These assets are carried at the lower of their carrying value or fair value. Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3.

18

Assets and liabilities measured at fair value are as follows as of September 30, 2025 and December 31, 2024:

Schedule of summary of assets and liabilities measured at fair value
September 30, 2025<br> <br>(Dollars in thousands) Quoted market price in active markets <br>(Level 1) Significant other observable inputs <br>(Level 2) Significant unobservable inputs <br>(Level 3)
(On a recurring basis) <br>Available-for-sale investments
U.S. Treasuries $ — $ 6,924 $ —
U.S. Government Agencies — 8,908 —
Taxable municipals — 19,820 —
Corporate bonds — 2,348 —
Mortgage-backed securities — 58,153 —
(On a non-recurring basis) <br>Other real estate owned — — 89
Collateral dependent loans with ACL:
Agriculture — — 251
Total $ — $ 96,153 $ 340
**<br><br>December 31, 2024<br> <br>(Dollars in thousands) Quoted market price in active markets <br>(Level 1) Significant other observable inputs <br>(Level 2) Significant unobservable inputs <br>(Level 3)
--- --- --- --- --- --- ---
(On a recurring basis) <br>Available-for-sale investments
U.S. Treasuries $ — $ 7,961 —
U.S. Government Agencies — 8,805 $ —
Taxable municipals — 18,524 —
Corporate bonds — 2,253 —
Mortgage-backed securities — 58,441 —
(On a non-recurring basis) <br>Other real estate owned — — 87
Collateral dependent loans with ACL:
Consumer installment and all other loans — — 11
Total $ — $ 95,984 $ 98

Not included in the

tables above as of September 30, 2025 and December 31, 2024 is a residential 1-4 family mortgage loan totaling $178,000. $138,000 was charged off during the quarter ended September 30, 2025, and the loan has a specific allowance for credit loss allocation on the recorded investment of $40,000 and $178,000 as of September 30, 2025 and December 31, 2024, respectively.

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of September 30, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

19
Schedule of significant unobservable inputs In level 3 assets
(Dollars in thousands) Fair Value at<br> September 30, 2025 Fair Value at<br><br> <br>December 31,<br><br> <br>2024 Valuation Technique Significant Unobservable<br> Inputs General<br> Range of Significant Unobservable Input Values
Collateral<br> dependent loans with ACL:
Agriculture $ 251 $ - Appraised<br> Value Discounts<br> to reflect current market conditions, ultimate collectability, and estimated costs to sell 0<br> – 18%
Consumer<br> installment and all other - 11 Appraised<br> Value/Other estimates from Independent Sources Discounts<br> to reflect current market conditions, ultimate collectability, and estimated costs to sell 0<br> – 18%
Other<br> Real Estate Owned $ 89 $ 87 Appraised<br> Value/Comparable Sales/Other Estimates from Independent Sources Discounts<br> to reflect current market conditions and estimated costs to sell 0<br> – 18%

Fair Valueof Financial Instruments

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 following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. 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 amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, are as follows:

Schedule of estimated fair value of financial instruments
Fair Value Measurements
(Dollars in thousands) Carrying <br>Amount Fair <br>Value Quoted market price in active markets <br>(Level 1) Significant other observable inputs <br>(Level 2) Significant unobservable inputs <br>(Level 3)
September 30, 2025
Financial instruments – assets
Net loans $ 699,305 $ 689,528 $ — $ — $ 689,528
Financial instruments – liabilities
Time deposits 292,671 292,461 — 292,461 —
Borrowed funds 21,986 20,039 — 20,039 —
December 31, 2024
Financial instruments – assets
Net loans $ 649,852 $ 633,023 $ — $ — $ 633,023
Financial instruments – liabilities
Time deposits 268,739 268,509 — 268,509 —
Borrowed funds 24,986 23,071 — 23,071 — 
20

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the estimates.

Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments.

The carrying values of cash and due from banks, federal funds sold, deposits with no stated maturities, and accrued interest approximates fair value and are excluded from the table above.

NOTE 12 LEASING

ACTIVITIES

As

of September 30, 2025, the Bank leases four branch offices, one administrative office, one loan production office and sublets a lot adjacent to another branch office. The lease agreements have maturity dates ranging from 2028 to December 2041. It is assumed that there are currently no circumstances in which the leases would be terminated prior to expiration. The weighted average remaining life of the lease terms as of September 30, 2025 was 6.52 years.

The

discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded to the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted average discount rate for the leases as of September 30, 2025 was 3.36%.

For the three and

nine months ended September 30, 2025 and 2024, operating lease expenses were $145,000 and $435,000; and $139,000 and $428,000, respectively.

The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. As of September 30, 2025, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars are in thousands):

Schedule of future minimum rental commitments under the non-cancellable operating leases
2025 $ 144
2026 575
2027 596
2028 586
2029 492
Thereafter 1,243
Total<br> lease payments 3,636
Less:<br> imputed interest (519)
Total $ 3,117

NOTE

13 BORROWED FUNDS

Borrowed

funds totaled $21,986 and $24,986 as of September 30, 2025 and December 31, 2024, respectively. For additional information on borrowed funds, refer to Note 18 in Item 8 of Form 10-K for the year ended December 31, 2024. On January 7, 2025, a voluntary principal payment of $3.0 million was made on an outstanding trust preferred security. On June 30, 2025, a short-term advance of $5.0 million was drawn from FHLB and repaid in July 2025.

21

NOTE

14 REVENUE FROM CONTRACTS WITH CUSTOMERS

All our revenue from contracts with customers as defined in ASC 606 is recognized within noninterest income. Refer to Note 24 in our Annual Report on Form 10-K for the year ended December 31, 2024, for a description of how each revenue stream is accounted for under ASC 606. The following table presents noninterest income by revenue stream for the three and nine months ended September 30, 2025 and 2024:

Schedule of revenue from contracts with customers
For<br> the three months ended For<br> the nine months ended
September<br> 30, September<br> 30,
(Dollars in thousands) 2025 2024 2025
Service<br> charges and fees $ 1,003 $ 995 $ 2,779 2,877
Card<br> processing and interchange income 958 937 2,811 2,803
Financial<br> services fees 335 304 1,009 998
Other<br> noninterest income 203 190 749 601
Total<br> noninterest income $ 2,499 $ 2,426 $ 7,348 7,279

All values are in US Dollars.

NOTE 15 NONINTEREST EXPENSES

Other operating expenses, included as part of noninterest expenses, consisted of the following for the periods presented:

Schedule of noninterest expenses
For the three months ended <br>September 30, For the nine months ended <br>September 30,
(Dollars in thousands) 2025 2024 2025 2024
Other operating expenses $ 844 $ 853 $ 2,654 $ 2,613
ATM network expense 430 388 1,275 1,141
Legal, accounting, and professional
fees 248 223 719 673
Loan related expenses 224 120 478 315
Core system conversion related costs 104 — 106 —
FDIC insurance premiums 102 98 299 287
Advertising 62 41 218 169
Consulting fees 41 39 124 119
Printing and supplies 37 18 98 74
Other real estate owned expenses, net 6 (3 ) 5 (31 )
Total other operating expenses $ 2,098 $ 1,777 $ 5,976 $ 5,360

NOTE 16 RECENT

ACCOUNTING DEVELOPMENTS

The following is a summary of recent authoritative announcements:

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

In September 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-06, “Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” The amendments in this ASU are intended to improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods, including methods that entities may use to develop software in the future. Therefore, the amendments require that an entity capitalize software costs when both: Management has authorized and committed to funding the software project; and it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”). In evaluating the probable-to-complete recognition threshold, an entity is required to consider whether there is significant uncertainty associated with the development activities of the software. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption of ASU 2025-06 is permitted as of the beginning of an annual reporting period. The Company does not expect the adoption of ASU 2025-06 to have a material impact on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

22
Item 2. Management’s<br> Discussion and Analysis of Financial Condition and Results of Operations

Caution About Forward-Looking Statements

We make forward-looking statements in this quarterly report on Form 10-Q that are subject to risks and uncertainties. These forward-looking statements include statements regarding expectations, intentions, projections and beliefs concerning our profitability, liquidity, and allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Important factors that may cause actual results to differ from projections include:

  • the success or failure of our efforts to implement our business plan;

  • any required increase in our regulatory capital ratios;

  • satisfying other regulatory requirements that may arise from examinations, changes in the law and other similar factors;

  • deterioration of asset quality;

  • changes in the level of our nonperforming assets and charge-offs;

  • fluctuations of real estate values in our markets;

  • our ability to attract and retain talent;

  • demographical changes in our markets which negatively impact the local economy;

  • the uncertain outcome of current or future legislation or regulations or policies of state and federal regulators;

  • the successful management of interest rate risk;

  • the successful management of liquidity;

  • changes in general economic and business conditions in our market area and the United States in general;

  • credit risks inherent in making loans such as changes in a borrower’s ability to repay and our management of such risks;

  • competition with other banks and financial institutions, and companies outside of the banking industry, including online lenders and those companies that have substantially greater access to capital and other resources;

  • demand, development and acceptance of new products and services we have offered or may offer;

  • deposit flows and competition for deposits;

  • the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rate, market and monetary fluctuations;

  • the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues and other catastrophic events;

  • geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;

  • technology utilized by us, including the successful core operating system conversion in 2025;

  • the effects of cyber incidents or other failures, disruptions or breaches of our operational or security systems, or those of our third-party vendors or other service providers, including as a result of cyber threats or attacks;

  • our ability to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic funds transfer fraud;

  • our reliance on third-party vendors and correspondent banks;

  • changes in generally accepted accounting principles;

  • changes in governmental regulations, tax rates and similar matters; and,

  • other risks, which may be described, from time to time, in our filings with the SEC.

    23

Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical AccountingPolicies

For discussion of our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2024, and Note 2 Summary of Significant Accounting Policies, in Item 1 of this Form 10-Q. Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. Our most critical accounting policies relate to our allowance for credit losses.

The allowance for credit losses reflects the estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated, and additional provisions could be required. For further discussion of the estimates used in determining the allowance for credit losses, we refer you to the section on “Asset Quality” in this discussion.

Overview and Highlights

Quarter-to-date highlights include:

· Net<br> income for the three months ended September 30, 2025 was $2.8 million, or $0.12 per share,<br> an increase of $650,000, or 30.83%, from the $2.1 million or $0.09 per share reported for<br> the same period in 2024.
· Returns<br> on average assets and equity of 1.21% and 14.28% for the third quarter of 2025 compared to<br> 0.97% and 12.35% for the third quarter of 2024, respectively;
--- ---
· Net<br> interest margin was 3.93% for the third quarter of 2025 compared to 3.43% for the third quarter<br> of 2024;
--- ---
· Net<br> interest income was $8.6 million for the third quarter of 2025, an increase of $1.5 million<br> or 20.28%, compared to the third quarter of 2024;
--- ---
· Noninterest<br> income was $2.5 million, an increase of $73,000, or 3.01%, during the third quarter of 2025<br> compared to the third quarter of 2024; and
--- ---
· Noninterest<br> expense was $7.4 million, an increase of $548,000, or 8.02%, for the third quarter of 2025<br> compared to the third quarter of 2024.
--- ---

Comparison ofthe Three Months ended September 30, 2025, and 2024

Net interest income for the quarter ended September 30, 2025 was $8.6 million, an increase of $1.5 million, or 20.28%, when compared to the third quarter of 2024. Interest income increased $1.1 million to $12.6 million due to the combination of an increase of 22 basis points (“bps”) in the yield on earning assets to 5.73% and a $39.4 million increase in the average balance of earning assets when compared to 2024. The loan portfolio was the primary driver of both increases as the yield rose 26 bps to 6.31% while the average balance increased $66.1 million compared to the quarter ending September 30, 2024. Also contributing to the improvement in net interest income was the $394,000 decrease in interest expense to $4.0 million during the third quarter of 2025 as compared to $4.4 million in 2024. The reduction in interest expense is due to a number of factors including a 31 bp decrease in the cost of interest-bearing deposits to 2.59% due to maturing time deposits and money market accounts repricing in a lower interest-rate environment and declines in both the cost and average balance of borrowed funds. The decline in the average balance of borrowed funds was due to the decrease in the average balance related to a $10 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program that was repaid in October 2024 combined with $4.2 million in principal payments made on trust preferred securities in October 2024 and January 2025. In addition, the variable rate paid on the trust preferred securities decreased as overnight and short-term borrowing rates declined during the last half of 2024. As a result, the cost of total interest-bearing liabilities decreased 40 bps to 2.69% during the third quarter of 2025 as compared to the third quarter of 2024. The net interest margin increased 50 bps to 3.93% for the quarter ending September 30, 2025 as compared to 3.43% for the same period in 2024 due to the increase in the yield on earning assets and the decline in the cost of funds.

24

The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:

Net Interest Margin

Analysis

Average Balances,

Income and Expense, and Yields and Rates

Three Months Ended

September 30,

2025 2024
Average Income/ Yields/ Average Income/ Yields/
(Dollars are in thousands) Balance Expense Rates Balance Expense Rates
ASSETS
Loans<br> ^(1) (2)^ $ 705,820 $ 11,217 6.31% $ 639,707 $ 9,728 6.05%
Federal<br> funds sold 368 4 4.33% 117 2 5.45%
Interest<br> bearing deposits in other banks 59,234 644 4.31% 86,773 1,164 5.34%
Investment<br> securities ^(2)^ 108,527 744 2.74% 107,947 653 2.42%
Total<br> earning assets 873,949 12,609 5.73% 834,544 11,547 5.51%
Less:<br> Allowance for credit losses (8,011) (7,867)
Non-earning<br> assets 37,953 41,706
Total<br> assets $ 903,891 $ 868,383
LIABILITIES<br> AND SHAREHOLDERS’ EQUITY
Interest-bearing<br> demand deposits $ 71,615 $ 124 0.69% $ 72,521 $ 160 0.88%
Savings<br> and money market deposits 198,553 885 1.77% 174,313 811 1.85%
Time<br> deposits 292,176 2,665 3.62% 278,833 2,861 4.08%
Total<br> interest-bearing deposits 562,344 3,674 2.59% 525,667 3,832 2.90%
Other<br> borrowings 10,000 89 3.51% 20,000 211 4.13%
Trust<br> preferred securities 11,986 209 6.82% 16,186 323 7.81%
Total<br> borrowed funds 21,986 298 5.31% 36,186 534 5.77%
Total<br> interest-bearing liabilities 584,330 3,972 2.69% 561,853 4,366 3.09%
Non-interest-bearing<br> deposits 233,021 228,961
Other<br> liabilities 9,943 9,663
Total<br> liabilities 827,294 800,477
Shareholders’<br> equity 76,597 67,906
Total<br> liabilities and shareholders’ equity $ 903,891 $ 868,383
Net<br> interest income $ 8,637 $ 7,181
Net<br> interest margin 3.93% 3.43%
Net<br> interest spread 3.04% 2.42%
^(1)^<br> Nonaccrual loans and loans held for sale have been included in average loan balances.
^(2)^<br> Tax exempt income is not significant and has been treated as fully taxable.

Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed to rates and volume for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

25
(Dollars in thousands) Volume Effect Rate Effect Change in Interest Income/ Expense
Interest income:
Loans $ 1,052 $ 437 $ 1,489
Federal funds sold 2 — 2
Interest bearing deposits in other banks (324 ) (196 ) (520 )
Investment securities 4 87 91
Total earning assets 734 328 1,062
Interest expense:
Interest-bearing demand deposits (2 ) (34 ) (36 )
Savings and money market deposits 110 (36 ) 74
Time deposits 134 (330 ) (196 )
Other borrowings (94 ) (28 ) (122 )
Trust preferred securities (77 ) (37 ) (114 )
Total interest-bearing liabilities 71 (465 ) (394 )
Change in net interest income $ 663 $ 793 $ 1,456

The provision for credit losses charged to the income statement for the quarter ended September 30, 2025, was $189,000 compared to $49,000 for the three months ended September 30, 2024. The third quarter 2025 provision reflects the impact of the loan growth while the provision recorded in 2024 was impacted by the resolution of a loan relationship that had resulted in a $262,000 specific allowance allocation during the second quarter of 2024. The provision for credit losses on unfunded commitments was $0 for the third quarter of 2025 due to a slight reduction in commitments on construction loans offset by a small increase in the expected loss rate. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.

Noninterest income totaling $2.5 million for the quarter ended September 30, 2025 increased $73,000 compared to the quarter ended September 30, 2024. Modest increases in earnings from service charges, card processing, financial services revenue, and other miscellaneous income totaling $8,000, $21,000, $31,000, and $35,000, respectively, were partially offset by the $20,000 decrease in income from bank-owned life insurance policies which were either surrendered or paid out due to death in the fourth quarter of 2024.

Noninterest expense was $7.4 million for the quarter ended September 30, 2025 compared to $6.8 million for the quarter ended September 30, 2024. The $548,000 increase primarily resulted from increases in salaries and benefits of $209,000, other expenses related to the core conversion of $104,000, data processing costs of $38,000, ATM network expenses of $42,000, and loan-related expenses of $104,000. The increase in salaries and benefits is attributable to normal recurring salary adjustments, increases in incentive accruals based on the Company’s year-to-date performance and production, higher health insurance expenses, staffing costs for the Wytheville loan production office, and overtime associated with the core conversion. Other expenses related to the core conversion include professional and ancillary costs for other applications and systems impacted by the conversion as well as internal and external travel costs associated with testing and data validation. The increase in loan-related expenses is due to expenses associated with a home equity loan promotion during the second and third quarters of 2025.

Subsequent to quarter-end, there has been, and will be, additional costs associated with the core system conversion including additional costs related to overtime, meals and other expenses related to the installation, testing and training on the new system and the other ancillary systems impacted by the core conversion.

The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 66.24% during the third quarter of 2025 from 71.10% for the third quarter of 2024. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.

Income tax expense for the third quarter of 2025 totaled $812,000, an increase of $191,000, or 30.76%, from $621,000 recorded during the same period in 2024. This increase was in line with the increase in pre-tax income which increased $841,000 or 30.82% for the comparative three months ended September 30, 2025 and 2024. The effective tax rate for the three months ended September 30, 2025 was 22.75%,compared to 22.76% for the same period in 2024.

26

While the signing of the One Big Beautiful Bill Act on July 4, 2025, made many of the provisions of the 2017 Tax Cut and Jobs Act permanent, including the 21% corporate tax rate, and the reinstatement of bonus depreciation, it also put in place modifications to reduce or limit certain fringe benefits and charitable contribution deductions and modified information reporting rules by requiring increased compliance processes by businesses. Pending the release of final regulations later in 2025, a full assessment of the impact of this legislation on the Company cannot yet be determined.

Comparison ofthe Nine Months ended September 30, 2025 and 2024

Year-to-date highlights include:

· Net<br> income for the nine months ended September 30, 2025 was $7.2 million, or $0.30 per share,<br> an increase of $1.6 million, or 29.04%, from the $5.6 million or $0.24 per share reported<br> for the same period in 2024.
· Returns<br> on average assets and equity of 1.09% and 13.03% for the first nine months of 2025, compared<br> to 0.87% and 11.36% for the first nine months of 2024, respectively;
--- ---

For the nine months ended September 30, 2025, net interest income totaled $24.5 million, an increase of $3.4 million, or 16.03%, as compared to the nine months ended September 30, 2024. The net interest margin increased 39 bps to 3.83% as compared to 3.44% for the same period in 2024. Net interest income improved due to increased average earning assets, which increased $34.7 million, or 4.23%, to $854.5 million. In addition, the yield on earning assets improved 22 bps to 5.62% during the nine months ended September 30, 2025 compared to the same period in 2024. Interest expense for the nine months ended September 30, 2025 totaled $11.5 million, a decrease of $634,000, or 5.24%, from the same period in 2024. The decrease in interest expense is due primarily to the lower costs of interest-bearing deposits and borrowed funds as discussed above.

27

The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:

Net Interest Margin

Analysis

Average Balances,

Income and Expense, and Yields and Rates

Nine Months Ended

September 30,

2025 2024
Average Income/ Yields/ Average Income/ Yields/
(Dollars are in thousands) Balance Expense Rates Balance Expense Rates
ASSETS
Loans<br> ^(1) (2)^ $ 682,395 $ 31,669 6.20% $ 638,403 $ 28,316 5.93%
Federal<br> funds sold 262 9 4.38% 116 5 5.40%
Interest<br> bearing deposits in other banks 61,520 1,999 4.34% 74,798 2,999 5.36%
Investment<br> securities ^(2)^ 110,358 2,241 2.71% 106,537 1,852 2.32%
Total<br> earning assets 854,535 35,918 5.62% 819,854 33,172 5.40%
Less:<br> Allowance for credit losses (7,919) (7,581)
Non-earning<br> assets 37,425 39,950
Total<br> assets $ 884,041 $ 852,223
LIABILITIES<br> AND SHAREHOLDERS’ EQUITY
Interest-bearing<br> demand deposits $ 72,064 $ 389 0.72% $ 72,914 $ 456 0.84%
Savings<br> and money market deposits 193,514 2,495 1.72% 168,134 2,030 1.61%
Time<br> deposits 280,683 7,689 3.66% 271,491 8,004 3.94%
Total<br> interest-bearing deposits 546,261 10,573 2.59% 512,539 10,490 2.73%
Other<br> borrowings 10,018 266 3.51% 20,000 630 4.14%
Trust<br> preferred securities 12,052 618 6.76% 16,186 971 7.88%
Total<br> borrowed funds 22,070 884 5.28% 36,186 1,601 5.81%
Total<br> interest-bearing liabilities 568,331 11,457 2.69% 548,725 12,091 2.94%
Non-interest-bearing<br> deposits 232,139 228,350
Other<br> liabilities 9,736 9,569
Total<br> liabilities 810,206 786,644
Shareholders’<br> equity 73,835 65,579
Total<br> liabilities and shareholders’ equity $ 884,041 $ 852,223
Net<br> interest income $ 24,461 $ 21,081
Net<br> interest margin 3.83% 3.44%
Net<br> interest spread 2.93% 2.46%
^(1)^<br> Nonaccrual loans and loans held for sale have been included in average loan balances.
^(2)^<br> Tax exempt income is not significant and has been treated as fully taxable. 
28

Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed to rates and volume for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

(Dollars in thousands) Volume Effect Rate Effect Change in Interest Income/ Expense
Interest income:
Loans $ 1,988 $ 1,365 $ 3,353
Federal funds sold 5 (1 ) 4
Interest bearing deposits in other banks (482 ) (518 ) (1,000 )
Investment securities 68 321 389
Total earning assets 1,579 1,167 2,746
Interest expense:
Interest-bearing demand deposits (5 ) (62 ) (67 )
Savings and money market deposits 320 145 465
Time deposits 266 (581 ) (315 )
Other borrowings (279 ) (85 ) (364 )
Trust preferred securities (227 ) (126 ) (353 )
Total interest-bearing liabilities 75 (709 ) (634 )
Change in net interest income $ 1,504 $ 1,876 $ 3,380

For the nine months ended September 30, 2025, the provision for credit losses totaled $602,000 as compared to $478,000 recorded for the same period in 2024.

For the nine months ended September 30, 2025, noninterest income increased $69,000 to $7.3 million compared to the same period in 2024, mainly due to a branded card incentive payment of $141,000 in 2025 which was partially offset by a $98,000 decrease in service charges.

For the nine months ended September 30, 2025, noninterest expense totaled $21.9 million, an increase of $1.2 million, or 5.90%, over the same period in 2024. The components of the year-over-year increase are largely similar to those discussed for the current quarter. Additional items include $47,000 in costs incurred in “refreshing” a branch office and $42,000 in costs incurred for snow and ice removal to keep our branch locations open and safe during the winter storms in the first quarter of 2025.

Balance Sheet

Total assets as of September 30, 2025 were $910.7 million, an increase of $55.8 million, or 8.73% annualized, from $854.9 million as of December 31, 2024. Gross loans of $707.3 million as of September 30, 2025 reflected an increase of $49.7 million, or 10.11% annualized, from $657.5 million as of December 31, 2024. Liquid assets in the form of cash and cash equivalents increased $13.0 million, or 25.77% annualized, during the first nine months of 2025. Investment securities increased $169,000 during the first nine months of 2025 due to purchases of $5.3 million and a decrease in the unrealized loss on available-for-sale securities of $4.6 million which more than offset maturities, calls, payments and amortization of $9.7 million. There have been no sales of loans or investments during 2025 other than normal sales of mortgage loans originated for sale.

Commercial and residential real estate loans, the two largest categories of loans, increased $9.1 million and $16.7 million, respectively, from December 31, 2024 to September 30, 2025. Multi-family real estate loans increased $12.5 million. Consumer loans increased $3.5 million, which included the purchase of $2.8 million of individual loans during the nine months ended September 30, 2025. Farmland and Agriculture loans increased $7.6 million and $847,000, respectively, during the first nine months of 2025.

Deposits totaled $799.4 million as of September 30, 2025 compared to $750.0 million as of December 31, 2024. The increase of $49.4 million, or 8.81% annualized, was due to efforts to attract and retain time deposits and money market account relationships, including replacing a large, high-rate account with lower-cost brokered time deposits, combined with cyclical funds inflows. As a result of these efforts and seasonality, total time deposits increased $23.7 million, money market accounts increased $23.7 million, and noninterest bearing deposits increased $3.9 million during the first nine months of 2025. During the second quarter of 2025, $15.0 million of brokered time deposits were issued with maturities ranging from two months to two years. $10.0 million of these brokered time deposits matured in August and were not replaced. These deposits supplement liquidity, support loan closings and advances and bolster on-balance-sheet liquidity.

29

As of September 30, 2025, borrowed funds totaled $22.0 million, a decrease of $3.0 million from December 31, 2024. During the first quarter of 2025, a $3.0 million principal reduction was paid toward outstanding trust preferred securities. This repayment improved net interest income and the net interest margin during the current reporting periods and should positively impact future periods. On June 30, 2025, we took a short-term Federal Home Loan Bank advance of $5.0 million to bolster liquidity based on anticipated loan closings or advances. This advance was repaid in July.

During the nine months ended September 30, 2025, total shareholders’ equity increased $8.8 million to $79.5 million due to net income of $7.2 million and a decrease in the net unrealized loss on available-for-sale securities of $3.7 million. These increases to capital were offset by dividends paid to shareholders of $1.9 million and the repurchase of common stock totaling $180,000. Consequently, book value per share increased to $3.37 as of September 30, 2025 compared to $2.99 as of December 31, 2024. The Bank remains well capitalized per regulatory guidance.

As previously announced, the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2026. During the first nine months of 2025, the Company repurchased 59,531 shares at an average price of $3.02 per share. Since the commencement of the repurchase plan in 2022, 344,893 shares have been repurchased at an average price of $2.52 per share.

Asset Quality

The allowance for credit losses was $8.0 million, or 1.13% as a percentage of total loans, as of September 30, 2025 and $7.7 million, or 1.17%, as of December 31, 2024. The allowance for credit losses on unfunded commitments was $496,000 as of September 30, 2025 as compared to $404,000 as of December 31, 2024. The increase in the allowance for credit losses on unfunded commitments was due to an increase in loan commitments, specifically residential and commercial real estate construction loan commitments.

Annualized net charge-offs (recoveries) as a percentage of average loans were 0.04% during the first nine months of 2025 compared to 0.01% during the same period of 2024 and 0.10% during the third quarter of 2025. The higher charge-off rate during the third quarter was related to a partial charge-off of $138,000 on a loan that had been specifically provided for in 2024.

Nonperforming assets, which include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned, totaled $3.2 million as of September 30, 2025, a decrease of $164,000, or 4.88%, since year-end 2024. Nonaccrual loans decreased $321,000 during the first nine months of 2025 primarily due to the resolution of several large credits and a partial charge-off exceeding the impact of a single loan relationship totaling $802,000 placed in nonaccrual status in 2025. Nonperforming assets as a percentage of total assets were 0.35% as of September 30, 2025 and 0.39% as of December 31, 2024.

Other real estate owned increased $2,000 to $89,000 as of September 30, 2025 compared to December 31, 2024, due to the sale of a property during the first quarter of 2025 and the foreclosure on one property during the third quarter of 2025. Expenses associated with other real estate owned, including gains and losses on sales, were $6,000 for the three months ended September 30, 2025 compared to net recoveries of $3,000 during the three months ended September 30, 2024 due to gains on sales of foreclosed properties of $0 and $10,000 during the respective three-month periods in 2025 and 2024.

For detailed information on nonaccrual loans and other real estate owned as of September 30, 2025 and December 31, 2024, refer to Note 6 Loans and Note 10 Other Real Estate Owned in Item 1 of this Form 10-Q.

Loans rated substandard or below totaled $5.2 million as of September 30, 2025, an increase of $1.2 million from $4.0 million as of December 31, 2024 due to two loan relationships totaling $2.9 million that were downgraded during the first nine months of 2025. The Company is working with one of these borrowers to bring the classified portion of the loan totaling $2.2 million into compliance with applicable loan covenants and does not anticipate any loss will result from this loan. Total past due loans decreased to $4.6 million as of September 30, 2025 from $6.2 million as of December 31, 2024.

30

The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known impairments within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the first nine months of 2025, we maintained the adjustments to our qualitative factors initiated in 2024 to consider risk factors associated with commercial real estate and residential mortgage loans; however, we removed the qualitative factor related to Hurricane Helene which occurred in September 2024. Those changes, along with recoveries of loans previously charged off and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a provision for credit losses of $602,000, of which $510,000 was a provision for the loan portfolio and $92,000 was a provision for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of September 30, 2025 and December 31, 2024:

Selected Credit Ratios
September 30, December 31,
(Dollars in thousands) 2025 2024
Allowance<br> for credit losses - loans $ 7,967 $ 7,684
Total<br> loans 707,272 657,536
Allowance<br> for credit losses to total loans 1.13% 1.17%
Nonaccrual<br> loans $ 2,952 $ 3,273
Nonaccrual<br> loans to total loans 0.42% 0.50%
Ratio<br> of allowance for credit losses loans to nonaccrual loans 2.70X 2.35X
Charge-offs,<br> net of recoveries $ 227 $ 78
Average<br> loans $ 682,395 $ 641,022
Net<br> charge-offs to average loans^1^ 0.04% 0.01%

^1^- Annualized

Deferred Tax Assetand Income Taxes

Due to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset of $1.6 million is recorded as of September 30, 2025 and December 31, 2024, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $2.2 million and $3.2 million, as of September 30, 2025 and December 31, 2024, respectively. Our income tax expense was computed at the federal corporate income tax rate of 21% of taxable income and a blended state tax rate of 2.4%. We have no significant nontaxable income or nondeductible expenses.

Capital Resources

The Company meets the eligibility criteria to be classified as a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement issued in February 2015 and is therefore not obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.

The Bank’s capital ratios along with the minimum regulatory thresholds to be considered well-capitalized are presented in Note 4 in Item 1 of this Form 10-Q.

As of September 30, 2025, the Bank remains well capitalized under the regulatory framework for prompt corrective action. The ratios mentioned above for the Bank comply with the Federal Reserve rules to align with the Basel III Capital requirements.

Book value per common share was $3.37 and $2.99 as of September 30, 2025 and December 31, 2024, respectively. The increase in book value was due largely to net earnings for the year of $7.2 million combined with a decrease in the unrealized loss on available for sale investment securities, net of the tax effects, for the year of $3.7 million, which more than offset the dividend payment of $0.08 per share and the repurchase of common shares of $180,000 during the first nine months of 2025.

31

Other key performance indicators are as follows:

Three months ended <br>September 30, Nine months ended <br>September 30,
2025 2024 2025 2024
Return on average assets^1^ 1.21 % 0.97 % 1.09 % 0.87 %
Return on average shareholders’ equity^1^ 14.28 % 12.35 % 13.03 % 11.36 %
Average equity to average assets 8.47 % 7.82 % 8.35 % 7.70 %

^^

^1^- Annualized

Under current economic conditions, we believe it is prudent to continue to retain capital sufficient to support planned asset growth while being able to absorb potential losses that may occur if asset quality deteriorates, and based upon projections, we believe our current capital levels will be sufficient.

During the first quarter of 2025, the Company paid a cash dividend of $0.08 per common share to our shareholders. Future payments of cash dividends will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.

On April 28, 2022, the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock. As previously reported, this plan was extended by the Board of Directors through March 31, 2026. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of September 30, 2025, the Company has repurchased 344,893 shares at an average price of $2.52 per share since inception of the plan. During the quarter ended September 30, 2025, the Company repurchased 23,685 shares at an average price of $3.07 per share. There is no assurance that the Company will purchase any additional shares under this program.

Liquidity

We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale investments. Collectively, those balances were $141.1 million as of September 30, 2025, up from $128.5 million as of December 31, 2024. The increase is primarily due to deposit growth, including brokered certificates of deposit. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs

As of September 30, 2025, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $35.8 million, which is net of the $60.4 million of securities pledged as collateral. Generally, the investment portfolio serves as a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB). Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds. Total investment securities increased $169,000, or 0.24% annualized, during the first nine months of 2025 from $96.0 million as of December 31, 2024, to $96.2 million as of September 30, 2025. The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged.

Our loan to deposit ratio was 88.48% and 87.67% as of September 30, 2025 and December 31, 2024, respectively.

Available third-party sources of liquidity as of September 30, 2025 include the following: a line of credit with the FHLB, access to brokered certificates of deposit markets and the discount window at the Federal Reserve Bank. We also have the ability to borrow $30.0 million in unsecured federal funds through credit facilities extended by correspondent banks.

We have used our line of credit with the FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public funds. No draws on these letters of credit have been issued. The letters of credit are considered to be draws on our FHLB line of credit. In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other general liquidity needs; and, in June 2025, we borrowed an additional $5.0 million which was repaid in July 2025. An additional $199.3 million was available as of September 30, 2025 on the $223.3 million line of credit. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.

32

As of September 30, 2025, we held brokered time deposits of $8.0 million, an increase of $5.0 million from December 31, 2024. These added brokered deposits supplemented liquidity and supported loan closings and advances and bolstered on-balance-sheet liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $7.9 million and $7.0 million as of September 30, 2025 and December 31, 2024, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of September 30, 2025, approximately $17.1 million were placed in this product as compared to $23.7 million at December 31, 2024. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.

Additional liquidity is available through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, while we do not anticipate using this as a primary funding source, securities with an estimated market value of $28.5 million were pledged as of September 30, 2025.

Time deposits of $250,000 or more were approximately 6.55% of total deposits at September 30, 2025 and 6.84% of total deposits at December 31, 2024.

In January 2025, we made a voluntary principal payment of $3.0 million on an outstanding trust preferred security. We may consider making future principal payments based on our available liquidity and considering other funding opportunities that may be available.

With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. With the current economic uncertainty resulting from inflation, the impact of proposed tariffs and the wars in Ukraine and Gaza, we continue monitoring our liquidity position, specifically cash on hand in order to meet customer demands. Additionally, our contingency funding plan is reviewed quarterly with our Asset Liability Committee.

Off Balance Sheet Items and ContractualObligations

There have been no material changes during the nine months ended September 30, 2025 to the off-balance sheet items and the contractual obligations disclosed in our 2024 Form 10-K.

Item 3. Quantitative<br> and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls<br> and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer (our CEO) and our Executive Vice President and Chief Financial Officer (our CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were operating effectively in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

33

Changes in InternalControl Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2025, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal<br> Proceedings

In the course of operations, we may become a party to legal proceedings in the normal course of business. At September 30, 2025, we do not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or any of its subsidiaries or to which the property of the Company or any of its subsidiaries is subject, in the opinion of management, will materially impact the financial condition or liquidity of the Company.

Item 1A. Risk<br> Factors

Not Applicable.

Item 2. Unregistered<br> Sales of Equity Securities and Use of Proceeds
(a) Sales<br> of Unregistered Securities – None
--- ---
(b) Use<br> of Proceeds – Not Applicable
--- ---
(c) Issuer<br> Purchases of Securities
--- ---

Stock Repurchase Program

The Company has an approved one-year stock repurchase program that authorizes the repurchase of up to 500,000 of the Company’s common shares that was extended through March 31, 2026. Repurchases may be made through open-market purchases or in privately negotiated transactions. Shares repurchased will be returned to the status of authorized and unissued shares of common stock. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company.

Shares of the Company’s common stock were repurchased during the three months ended September 30, 2025, as detailed below. Under the terms of the stock repurchase program, the Company has the remaining authority to repurchase up to 155,107 shares of common stock.

Period Beginning on First Day of Month Ended Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs
July<br> 31, 2025 - $ - - 178,792
August<br> 31, 2025 16,064 $ 3.06 16,064 162,728
September<br> 30, 2025 7,621 $ 3.09 7,621 155,107
Total 23,685 $ 3.07 23,685
Item 3. Defaults<br> Upon Senior Securities
--- ---

None.

34
Item 4. Mine<br> Safety Disclosures

Not Applicable.

Item 5. Other<br> Information

Trading Arrangements – During the three months ended September 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

Item 6. Exhibits

The following exhibits are filed as part of this report or are incorporated by reference:

No. Description
3.1 Amended<br> Articles of Incorporation of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarterly<br> period ended June 30, 2008 filed on August 11, 2008).
3.2 Bylaws<br> of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.2 to Form 8-K filed on August 26, 2020).
4.1 Specimen<br> Common Stock Certificate of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarterly<br> period ended June 30, 2012 filed on August 14, 2012).
4.2 Description<br> of New Peoples Bankshares, Inc.’s Securities (incorporated by reference to Exhibit 4.2 to Form 10-K for the year ended December<br> 31, 2024, filed on March 31, 2025).
10.1* Employment<br> Agreement dated June 25, 2025 between New Peoples Bankshares, Inc., New Peoples Bank, Inc. and James W. Kiser (incorporated by reference<br> to Form 8-K filed June 30, 2025)
31.1 Certification<br> by Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2 Certification<br> by Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32 Certification<br> by Chief Executive Officer and Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101 The<br> following materials for the Company’s Form 10-Q for the quarterly period ended September<br> 30, 2025, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements<br> of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated<br> Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash<br> Flows, and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text.

* Denotes management contract

35

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.

NEW PEOPLES BANKSHARES, INC.
(Registrant)
By: /s/ JAMES W. KISER
James W. Kiser
President and Chief Executive Officer
Date: November 14, 2025
By: /s/ CHRISTOPHER G. SPEAKS
Christopher G. Speaks
Executive Vice President and Chief Financial Officer
Date: November 14, 2025 
36

Exhibit 31.1

CERTIFICATIONS

I, James W. Kiser, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of New Peoples Bankshares, Inc.;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.       The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November<br> 14, 2025 /s/<br> JAMES W. KISER
James<br> W. Kiser
President<br> & Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Christopher G. Speaks, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of New Peoples Bankshares, Inc.;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.       The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November<br> 14, 2025 /s/<br> CHRISTOPHER G. SPEAKS
Christopher<br> G. Speaks
Executive<br> Vice President & Chief Financial Officer

Exhibit 32

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, as the Chief Executive Officer and Chief Financial Officer, respectively, of New Peoples Bankshares, Inc., certify that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the period ended September 30, 2025, which accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of New Peoples Bankshares, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and shall not be relied upon for any other purpose. The undersigned expressly disclaim any obligation to update the foregoing certification except as required by law.

Date:  November<br> 14, 2025 /s/<br> JAMES W. KISER
James<br> W. Kiser
President & Chief Executive Officer
Date:  November<br> 14, 2025 /s/<br> CHRISTOPHER G. SPEAKS
Christopher<br> G. Speaks
Executive<br> Vice President & Chief Financial Officer

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