Equibles

10-Q

NEW PEOPLES BANKSHARES INC (NWPP)

10-Q 2025-08-14 For: 2025-06-30
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 June 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 23,598,399 as of August 07, 2025.

NEW PEOPLES

BANKSHARES, INC.

INDEX

Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 2025 (Unaudited) and December 31, 202 3
Consolidated Statements of Income – Three and six months ended June 30, 2025 and 2024 (Unaudited) 4
Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2025 and 2024 (Unaudited) 5
Consolidated Statements of Changes in Stockholders’ Equity – Three and six months ended June , 2025 and 2024 (Unaudited) 6
Consolidated Statements of Cash Flows – Three months and six ended June 300, 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 32
Item 4. Controls and Procedures 32
PART II OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 1A. Risk Factors 33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33
Item 3. Defaults upon Senior Securities 33
Item 4. Mine Safety Disclosures 33
Item 5. Other Information 34
Item 6. Exhibits 34
SIGNATURES 35

Part I Financial Information

Item 1 Financial<br> Statements

NEW PEOPLES BANKSHARES,

INC.

CONSOLIDATED BALANCE

SHEETS

JUNE 30, 2025 AND

DECEMBER 31, 2024

(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)

(UNAUDITED)

December 31,
2024
ASSETS
Cash and due from banks 18,838 $ 13,218
Interest-bearing deposits with banks 53,195 54,300
Federal funds sold 126 150
Total cash and cash equivalents 72,159 67,668
Investment securities available-for-sale, at fair value 96,749 95,984
Loans receivable 695,815 657,536
Allowance for credit losses (7,948 ) (7,684 )
Net loans 687,867 649,852
Bank premises and equipment, net 16,896 17,070
Other real estate owned 57 87
Accrued interest receivable 3,581 3,458
Deferred taxes, net 4,368 4,809
Insurance benefit receivable — 5,417
Right-of-use assets – operating leases 3,234 3,413
Other assets 8,019 7,167
Total assets 892,930 $ 854,925
LIABILITIES
Deposits:
Noninterest bearing 233,567 $ 224,938
Interest-bearing 548,342 525,044
Total deposits 781,909 749,982
Borrowed funds 26,986 24,986
Lease liabilities – operating leases 3,234 3,413
Accrued interest payable 1,427 1,442
Accrued expenses and other liabilities 4,530 4,361
Total liabilities 818,086 784,184
SHAREHOLDERS’ EQUITY
Common stock - 2.00 par value; 50,000,000 shares authorized; 23,600,878 and<br> 23,636,724 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively 47,202 47,273
Additional paid-in-capital 14,416 14,451
Retained earnings 23,552 21,001
Accumulated other comprehensive loss (10,326 ) (11,984 )
Total shareholders’ equity 74,844 70,741
Total liabilities and shareholders’ equity 892,930 $ 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

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

For the Three Months Ended June 30, For the Six Months Ended <br>June 30,
2025 2024 2025 2024
INTEREST AND DIVIDEND INCOME
Loans including fees $ 10,540 9,374 $ 20,452 $ 18,587
Federal funds sold 3 2 5 3
Interest-earning deposits with banks 663 1,009 1,355 1,835
Investments 711 583 1,413 1,113
Dividends on equity securities (restricted) 41 43 84 86
Total interest and dividend income 11,958 11,011 23,309 21,624
INTEREST EXPENSE
Deposits 3,450 3,508 6,899 6,658
Borrowed funds 294 533 586 1,066
Total interest expense 3,744 4,041 7,485 7,724
NET INTEREST INCOME 8,214 6,970 15,824 13,900
PROVISION FOR CREDIT LOSSES 154 472 413 429
NET INTEREST INCOME AFTER PROVISION FOR<br> CREDIT LOSSES 8,060 6,498 15,411 13,471
NONINTEREST INCOME
Service charges and fees 899 967 1,776 1,882
Card processing and interchange 988 971 1,853 1,866
Financial services fees 356 372 674 694
Net gain  on sale and disposal of premises and equipment 1 53 2 20
Other noninterest income 192 169 544 391
Total noninterest income 2,436 2,532 4,849 4,853
NONINTEREST EXPENSES
Salaries and employee benefits 3,652 3,594 7,450 7,241
Occupancy and equipment expense 874 861 1,858 1,730
Data processing and telecommunications 665 617 1,299 1,261
Other operating expenses 2,022 1,766 3,878 3,583
Total noninterest expenses 7,213 6,838 14,485 13,815
INCOME BEFORE INCOME TAXES 3,283 2,192 5,775 4,509
INCOME TAX EXPENSE 751 508 1,335 1,039
NET INCOME $ 2,532 1,684 $ 4,440 $ 3,470
Earnings per share
Basic and diluted $ 0.11 0.07 $ 0.19 $ 0.15
Average Weighted Shares of Common Stock
Basic and diluted 23,607,372 23,692,984 23,616,941 23,714,675

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

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

(IN THOUSANDS)

(UNAUDITED)

For the Three Months Ended <br>June 30, For the Six Months Ended <br>June 30,
2025 2024 2025 2024
NET INCOME $ 2,532 $ 1,684 $ 4,440 $ 3,470
Other comprehensive income (loss):
Investment securities activity
Unrealized gains (losses) arising during the period (280 ) 786 2,099 (271 )
Related tax (expense) benefit 58 (165 ) (441 ) 57
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (222 ) 621 1,658 (214 )
TOTAL COMPREHENSIVE INCOME $ 2,310 $ 2,305 $ 6,098 $ 3,256

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

SIX MONTHS ENDED JUNE 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, December 31, 2023 23,746 $ 47,492 $ 14,514 $ 14,458 $ (11,653 ) $ 64,811
Net income — — — 1,786 — 1,786
Other comprehensive loss, net of tax — — — — (835 ) (835 )
Cash dividend declared (0.07 per share) — — — (1,661 ) — (1,661 )
Repurchase of common stock (34 ) (69 ) (16 ) — — (85 )
Balance, March 31, 2024 23,712 $ 47,423 $ 14,498 $ 14,583 $ (12,488 ) $ 64,016
Net income — — — 1,684 — 1,684
Other comprehensive income, net of tax — — — — 621 621
Repurchase of common stock (36 ) (71 ) (19 ) — — (90 )
Balance June 30, 2024 23,676 $ 47,352 $ 14,479 $ 16,267 $ (11,867 ) $ 66,231
Balance, December 31, 2024 23,637 $ 47,273 $ 14,451 $ 21,001 $ (11,984 ) $ 70,741
Net income — — — 1,908 — 1,908
Other comprehensive income, net of tax — — — — 1,880 1,880
Cash dividend declared (0.08 per share) — — — (1,889 ) — (1,889 )
Repurchase of common stock (23 ) (45 ) (23 ) — — (68 )
Balance, March 31, 2025 23,614 $ 47,228 $ 14,428 $ 21,020 $ (10,104 ) $ 72,572
Net income — — — 2,532 — 2,532
Other comprehensive loss, net of tax — — — — (222 ) (222 )
Repurchase of common stock (13 ) (26 ) (12 ) — — (38 )
Balance June 30, 2025 23,601 $ 47,202 $ 14,416 $ 23,552 $ (10,326 ) $ 74,844

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 SIX MONTHS

ENDED JUNE 30, 2025 AND 2024

(IN THOUSANDS)

(UNAUDITED)

2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,440 $ 3,470
Adjustments to reconcile net income to net cash provided by <br>operating activities:
Depreciation and amortization 745 827
Provision for (recovery of) credit losses 413 429
Income on bank owned life insurance — (37 )
Gain on sale of mortgage loans (9 ) (4 )
Gain on sale or disposal of premises and equipment (2 ) (20 )
Gain on sale of other real estate owned (6 ) (34 )
Loans originated for sale (380 ) (105 )
Proceeds from sales of loans originated for sale 389 109
Net amortization/accretion of bond premiums/discounts 37 125
Deferred tax benefit — (260 )
Net change in:
Accrued interest receivable (123 ) 14
Other assets (542 ) (744 )
Accrued interest payable (15 ) 473
Accrued expenses and other liabilities (102 ) (300 )
Net cash provided by operating activities 4,845 3,943
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (38,350 ) (1,798 )
Purchase of securities available-for-sale (4,770 ) (8,048 )
Proceeds from repayments and maturities of securities available-for-sale 6,067 5,188
Net purchase of equity securities (restricted) (258 ) (36 )
Payments for the purchase of premises and equipment and software (444 ) (1,488 )
Proceeds from sale of premises and equipment 2 1,033
Proceeds from sale of other real estate owned 50 108
Proceeds from bank owned life insurance benefit 5,417 —
Net cash used in investing activities (32,286 ) (5,041 )
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings 5,000 —
Repayment of long-term debt (3,000 ) —
Net change in noninterest bearing deposits 8,629 (7,259 )
Net change in interest-bearing deposits 23,298 34,020
Dividends paid (1,889 ) (1,661 )
Repurchase of common stock (106 ) (175 )
Net cash provided by financing activities 31,932 24,925
Net increase in cash and cash equivalents 4,491 23,827
Cash and cash equivalents, beginning of the period 67,668 64,977
Cash and cash equivalents, end of the period $ 72,159 $ 88,804
Supplemental disclosure of cash paid during the period for:
Interest $ 7,500 $ 7,251
Taxes 880 1,000
Supplemental disclosure of non-cash transactions:
Transfer of loans to other real estate owned 14 20
Change in unrealized losses on securities available-for-sale 2,099 (271 )

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 June 30, 2025 and December 31, 2024, and the results of operations for the three- and six-month periods ended June 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 six-month periods ended June 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 June 30, For the six months <br>ended June 30,
2025 2024 2025 2024
Net income $ 2,532 $ 1,684 $ 4,440 $ 3,470
Weighted average shares outstanding 23,607,372 23,692,984 23,616,941 23,714,675
Weighted average dilutive shares outstanding 23,607,372 23,692,984 23,616,941 23,714,675
Basic and diluted earnings per share $ 0.11 $ 0.07 $ 0.19 $ 0.15

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 June 30, 2025, the Bank had a capital conservation buffer of 7.86%. Amounts recorded to accumulated other comprehensive income (loss) are not included in computing regulatory capital. Management believes as of June 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 June 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.

In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a three-year period the Day 1 adverse regulatory capital effects of the Current Expected Credit Loss (“CECL”) accounting standard. Additionally, in March 2020, the U.S. federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years. The final rule was adopted and became effective in September 2020. The Company implemented the CECL model commencing January 1, 2023, and elected not to phase in the effect of CECL on regulatory capital.

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

9
Schedule of bank’s<br>actual capital amounts and ratios presented
Actual Minimum<br> Capital Requirement Minimum<br> to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
June 30, 2025:
Total<br> capital to risk weighted assets $ 104,547 15.81% $  52,908 8.00% $  66,135 10.00%
Tier<br> 1 capital to risk weighted assets 96,278 14.56% 39,681 6.00% 52,908 8.00%
Tier<br> 1 capital to average assets 96,278 10.74% 35,862 4.00% 44,827 5.00%
Common<br> equity Tier 1 capital
to<br> risk weighted assets 96,278 14.56% 29,761 4.50% 42,988 6.50%
****<br><br> <br>December 31, 2024:
Total<br> capital to risk weighted assets $ 101,769 16.19% $   50,300 8.00% $<br>  62,875 10.00%
Tier<br> 1 capital to risk weighted assets 93,907 14.94% 37,725 6.00% 50,300 8.00%
Tier<br> 1 capital to average assets 93,907 10.70% 35,113 4.00% 43,892 5.00%
Common<br> equity Tier 1 capital
to<br> 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 June 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
June 30, 2025
U.S.<br> Treasuries $ 7,113 $ 1 $ 268 $ 6,846
U.S.<br> Government Agencies 10,208 34 463 9,779
Taxable<br> municipals 24,241 - 5,077 19,164
Corporate<br> bonds 2,500 3 201 2,302
Mortgage<br> backed securities 65,758 92 7,192 58,658
Total<br> securities available-for-sale $ 109,820 $ 130 $ 13,201 $ 96,749
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<br> backed 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 June 30, 2025 and December 31, 2024.

Schedule of fair value and gross unrealized losses on investment securities
Less<br> than 12 Months 12<br> Months or More Total
(Dollars in thousands) Fair<br> Value Unrealized<br><br> <br>Losses Fair<br><br> <br>Value Unrealized<br><br> <br>Losses Fair<br><br> <br>Value Unrealized<br><br> <br>Losses
June 30, 2025
U.S.<br> Treasuries $ - $ - $ 6,113 $ 268 $ 6,113 $ 268
U.S.<br> Government Agencies 1,503 11 5,623 452 7,126 463
Taxable<br> municipals 2,094 205 22,147 4,872 24,241 5,077
Corporate<br> bonds - - 2,000 201 2,000 201
Mortgage<br> backed securities 9,488 170 47,414 7,022 56,902 7,192
Total $ 13,085 $ 386 $ 83,297 $ 12,815 $ 96,382 $ 13,201
December 31, 2024
U.S.<br> Treasuries $ 980 $ 20 $ 6,981 $ 389 $ 7,961 $ 409
U.S.<br> Government Agencies 2,221 38 6,026 548 8,247 586
Taxable<br> municipals 1,559 212 16,965 5,204 18,524 5,416
Corporate<br> bonds 499 1 1,755 245 2,254 246
Mortgage<br> 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 June 30, 2025, the available-for-sale portfolio included 179 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 are past due as to 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 $35.5 million and $35.2 million as of June 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 available-for-sale investment securities during the three or six months ended June 30, 2025 and 2024.

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

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 $ 3,739 $ 3,677 1.41%
Due<br> after one year through five years 12,357 11,895 2.88%
Due<br> after five years through ten years 23,553 22,118 3.32%
Due<br> after ten years 70,171 59,059 2.32%
Total $ 109,820 $ 96,749 2.57%

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 $3.0 million and $2.7 million as of June 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 June 30, 2025, and December 31, 2024, are summarized as follows:

Schedule of loans receivable outstanding
(Dollars in thousands) June 30, <br>2025 December 31, 2024
Real estate secured:
Commercial $ 250,962 $ 243,646
Construction and land development 39,671 36,112
Residential 1-4 family 249,221 234,860
Multifamily 37,715 32,379
Farmland 20,704 16,921
Total real estate loans 598,273 563,918
Commercial 60,320 60,587
Agriculture 5,259 4,025
Consumer installment and all other loans 31,963 29,006
Total loans $ 695,815 $ 657,536

Also included in

total loans above are deferred loan fees of $2.2 million and $2.0 million as of June 30, 2025 and December 31, 2024, respectively. Deferred loan costs were $2.0 million and $1.9 million, as of June 30, 2025 and

11

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 June 30, 2025, and December 31, 2024, are summarized as follows:

Schedule<br> of loans receivable nonaccrual status
June<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 $ 193 $ - $ 193 $ 411 $ - $ 411
Construction<br> and land development 28 - 28 300 - 300
Residential<br> 1-4 family 2,239 178 2,417 2,232 178 2,410
Farmland 19 - 19 - - -
Total<br> real estate loans 2,479 178 2,657 2,943 178 3,121
Commercial 53 - 53 66 - 66
Agriculture - 752 752 16 - 16
Consumer<br> installment loans and other loans 26 - 26 56 14 70
Total<br> loans receivable on nonaccrual status $ 2,558 $ 930 $ 3,488 $ 3,081 $ 192 $ 3,273

Total interest income not recognized on nonaccrual loans for the three and six months ended June 30, 2025, and June 30, 2024, was $24,000 and $62,000 and $43,000

and $69,000, 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 June 30, 2025 and December 31, 2024:

Schedule<br> of summary of impaired loans
June<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 $ 3,242 $ - $ 396 $ -
Residential<br> 1-4 family 660 178 1,008 177
Total<br> real estate loans 3,902 178 1,704 177
Agriculture 752 28 - -
Consumer<br> installment loans and other loans - - 13 3
Total $ 4,654 $ 206 $ 1,717 $ 180

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

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Schedule of analysis of past due loans receivable
**<br><br>June 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 $ — $ 7 $ 186 $ 193 $ 250,769 $ 250,962
Construction and land <br>development 90 — — 90 39,581 39,671
Residential 1-4 family 1,931 342 755 3,028 246,193 249,221
Multifamily — — — — 37,715 37,715
Farmland — — — — 20,704 20,704
Total real estate loans 2,021 349 941 3,311 594,962 598,273
Commercial 62 — 24 86 60,234 60,320
Agriculture — — 752 752 4,507 5,259
Consumer installment and all other loans 169 23 14 206 31,757 31,963
Total loans $ 2,252 $ 372 $ 1,731 $ 4,355 $ 691,460 $ 695,815

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

****<br>December 31, 2024 <br>(Dollars<br> in thousands) Loans<br> <br>30-59 <br>Days <br>Past <br>Due Loans<br> <br>60-89 <br>Days <br>Past <br>Due Loans<br> <br>90 or <br>More <br>Days <br>Past <br>Due Total<br> <br>Past <br>Due <br>Loans Current<br> <br>Loans Total<br> <br>Loans
Real<br> estate secured:
Commercial $ — $ 255 $ 156 $ 411 $ 243,235 $ 243,646
Construction<br> and land <br>development 3 333 — 336 35,776 36,112
Residential<br> 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<br> 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<br> installment <br>and all other loans 89 88 30 207 28,799 29,006
Total<br> 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 June 30, 2025:

Schedule of credit risk grade of loans
As of June 30, 2025
(Dollars are in thousands) 2025 2024 2023 2022 2021 Prior Revolving Total
Commercial real estate
Pass $ 19,176 $ 19,884 $ 45,051 $ 45,934 $ 41,956 $ 76,219 $ 351 $ 248,571
Special mention — — — — — — — —
Substandard — — — 186 2,197 8 — 2,391
Total commercial real estate $ 19,176 $ 19,884 $ 45,051 $ 46,120 $ 44,153 $ 76,227 $ 351 $ 250,962
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Construction and Land Development
Pass $ 5,511 $ 22,934 $ 3,254 $ 2,171 $ 2,282 $ 3,491 $ — $ 39,643
Special mention — — — — — — — —
Substandard — 28 — — — — — 28
Total construction and land development $ 5,511 $ 22,962 $ 3,254 $ 2,171 $ 2,282 $ 3,491 $ — $ 39,671
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential 1-4 family
Pass $ 19,084 $ 20,398 $ 28,267 $ 27,013 $ 38,678 $ 81,746 $ 31,311 $ 246,497
Special mention — — — — — 287 — 287
Substandard — 104 255 — — 1,930 148 2,437
Total residential 1-4 family $ 19,084 $ 20,502 $ 28,522 $ 27,013 $ 38,678 $ 83,963 $ 31,459 $ 249,221
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Multifamily
Pass $ 7,648 $ 1,454 $ 4,611 $ 9,682 $ 6,575 $ 7,745 $ — $ 37,715
Special mention — — — — — — — —
Substandard — — — — — — — —
Total multifamily $ 7,648 $ 1,454 $ 4,611 $ 9,682 $ 6,575 $ 7,745 $ — $ 37,715
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Farmland
Pass $ 5,048 $ 2,648 $ 1,334 $ 1,993 $ 2,707 $ 6,821 $ — $ 20,551
Special mention — — — — — 134 — 134
Substandard — — — — — 19 — 19
Total farmland $ 5,048 $ 2,648 $ 1,334 $ 1,993 $ 2,707 $ 6,974 $ — $ 20,704
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial
Pass $ 11,499 $ 13,661 $ 11,115 $ 3,394 $ 1,768 $ 3,139 $ 15,688 $ 60,264
Special mention — — — — — 2 — 2
Substandard — — — — 24 — 30 54
Total commercial $ 11,499 $ 13,661 $ 11,115 $ 3,394 $ 1,792 $ 3,141 $ 15,718 $ 60,320
Current period gross charge-offs $ — $ (8 ) $ — $ — $ — $ — $ (10 ) $ (18 )
Agriculture
Pass $ 846 $ 804 $ 198 $ 281 $ 141 $ 131 $ 2,106 $ 4,507
Special mention — — — — — — — —
Substandard — — — — — — — —
Doubtful — 305 — — — — 447 752
Total agriculture $ 846 $ 1,109 $ 198 $ 281 $ 141 $ 131 $ 2,553 $ 5,259
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ (50 ) $ (50 )
Consumer and All Other
Pass $ 9,562 $ 11,244 $ 6,191 $ 1,905 $ 972 $ 938 $ 1,126 $ 31,938
Special mention — — — — — — — —
Substandard — 2 13 10 — — — 25
Total consumer and all other $ 9,562 $ 11,246 $ 6,204 $ 1,915 $ 972 $ 938 $ 1,126 $ 31,963
Current period gross charge-offs $ (65 ) $ (16 ) $ (12 ) $ (5 ) $ (1 ) $ (2 ) $ (14 ) $ (115 )
Total $ 78,374 $ 93,466 $ 100,289 $ 92,569 $ 97,300 $ 182,610 $ 51,207 $ 695,815
Total current period gross charge-offs $ (65 ) $ (24 ) $ (12 ) $ (5 ) $ (1 ) $ (2 ) $ (74 ) $ (183 ) 
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 June 30, 2025 and December 31, 2024:

Schedule of allowance for credit losses for loans
Real estate secured
(Dollars are in thousands) Commercial Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total
Three months ended June 30, 2025
Beginning balance $ 2,592 $ 316 $ 2,909 $ 372 $ 155 $ 771 $ 114 $ 603 $ 7,832
Charge-offs - - - - - - (50) (55) (105)
Recoveries - 11 12 3 - 1 - 39 66
Provision for credit losses (31) 33 77 57 27 (35) (2) 29 155
Ending balance $ 2,561 $ 360 $ 2,998 $ 432 $ 182 $ 737 $ 62 $ 616 $ 7,948
Real estate secured
(Dollars are in thousands) Commercial Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total
Six months ended June 30, 2025
Beginning balance $ 12,565 $ 322 $ 2,923 $ 382 $ 149 $ 751 $ 36 $ 556 $ 7,684
Charge-offs - - - - - (18) (50) (115) (183)
Recoveries - 26 22 6 3 2 - 66 125
Provision for credit losses (4) 12 53 44 30 2 76 109 322
Ending balance $ 2,561 $ 360 $ 2,998 $ 432 $ 182 $ 737 $ 62 $ 616 $ 7,948
Real estate secured
(Dollars are in thousands) Commercial Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer 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 for credit losses 2,639 174 2,643 477 (148) (1,026) (112) (1,759) 2,888
Ending balance $ 12,565 $ 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 June 30, 2025, the deferral periods have ended and 51 loans totaling $7.9 million participating in the deferral program have commenced regular payments. One loan totaling $178,000, which was extended beyond the terms of the short-term deferral program, was in default. 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. There were no loans modified to borrowers experiencing financial difficulties in the three and six months ended June 30, 2025.

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 June 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 six months ended June 30, 2025 and June 30, 2024, $0 and $92,000 and $50,000 and $3 was 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 six months ended June 30, 2025, and the year ended December 31, 2024:

Schedule of activity in other real estate owned
(Dollars in thousands) June 30, <br>2025 December 31, 2024
Balance, beginning of period $ 87 $ 157
Additions 14 1,330
Proceeds from sales (50 ) (1,474 )
Adjustment of carrying value — (9 )
Net gains from sales 6 83
Balance, end of period $ 57 $ 87

As of June 30, 2025 four loans secured

by residential real estate, totaling $278,000 were 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 $96.7 million and $96.0 million as of June 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 June 30, 2025 and December 31, 2024:

Schedule of summary of assets and liabilities measured at fair value
June 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 $ — $ 6,846 $ —
U.S. Government Agencies — 9,779 —
Taxable municipals — 19,164 —
Corporate bonds — 2,302 —
Mortgage-backed securities — 58,658 —
(On a non-recurring basis) <br>Other real estate owned — — 57
Collateral dependent loans with ACL:
Agriculture — — 277
Total $ — $ 96,749 $ 334
**<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 June 30, 2025 and December 31, 2024 is a residential 1-4 family mortgage loan totaling $178,000 that has a specific allowance for credit loss allocation of 100%.

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 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> June 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 $ 277 $ - 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 $ 57 $ 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 June 30, 2025, and December 31, 2024, are as follows:

Schedule of estimated fair value of financial instruments
Fair<br> Value Measurements
(Dollars in thousands) Carrying<br><br> <br>Amount Fair<br><br> <br>Value Quoted<br> market price in active markets<br><br> <br>(Level 1) Significant other<br> observable inputs<br><br> <br>(Level 2) Significant unobservable<br> inputs<br><br> <br>(Level 3)
June 30, 2025
Financial<br> instruments – assets
Net<br> loans $ 687,867 $ 673,725 $ - $ - $ 673,725
Financial<br> instruments – liabilities
Time<br> deposits 280,010 279,607 - 279,607 -
Borrowed<br> funds 26,986 25,136 - 25,136 -
December 31, 2024
Financial<br> instruments – assets
Net<br> loans $ 649,852 $ 633,023 $ - $ - $ 633,023
Financial<br> instruments – liabilities
Time<br> deposits 268,739 268,509 - 268,509 -
Borrowed<br> 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 June 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 June 30, 2025 was 6.75 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 June 30, 2025 was 3.37%.

For the three and

six months ended June 30, 2025 and 2024, operating lease expenses were $145,000 and $288,000; and $145,000 and $289,000, respectively.

The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. As of June 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 $ 287
2026 575
2027 596
2028 586
2029 492
Thereafter 1,243
Total<br> lease payments 3,779
Less:<br> imputed interest (545)
Total $ 3,234

NOTE

13 BORROWED FUNDS

Borrowed

funds totaled $26,986 and $24,986 as of June 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.

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 six months ended June 30, 2025 and 2024:

Schedule of revenue from contracts with customers
For<br> the three months ended For<br> the six months ended
June<br> 30, June<br> 30,
(Dollars in thousands) 2025 2024 2025
Service<br> charges and fees $ 899 $ 967 $ 1,776 1,882
Card<br> processing and interchange income 988 971 1,853 1,866
Financial<br> services fees 356 372 674 694
Other<br> noninterest income 193 222 546 411
Total<br> noninterest income $ 2,436 $ 2,532 $ 4,849 4,853

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>June 30, For the six months ended <br>June 30,
(Dollars in thousands) 2025 2024 2025 2024
Other operating expenses $ 934 $ 864 $ 1,813 $ 1,759
ATM network expense 417 377 845 753
Legal, accounting, and professional
fees 234 216 471 450
Loan related expenses 175 101 254 195
FDIC insurance premiums 99 97 197 189
Advertising 89 77 156 130
Consulting fees 41 40 83 80
Printing and supplies 36 26 61 55
Other real estate owned expenses, net (3 ) (32 ) (2 ) (28 )
Total other operating expenses $ 2,022 $ 1,766 $ 3,878 $ 3,583

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.

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;

  • our ability to successfully manage cybersecurity, including generative artificial intelligence risks;

  • 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 June 30, 2025 was $2.5 million, or $0.11 per share, an<br> increase of $848,000, or 50.36%, from the $1.7 million or $0.07 per share reported for the<br> same period in 2024.
· Returns<br> on average assets and equity of 1.15% and 13.91% for the second quarter of 2025, compared<br> to 0.79% and 10.56% for the second quarter of 2024, respectively;
--- ---
· Net<br> interest margin was 3.86% for the second quarter of 2025 compared to 3.41% for the second<br> quarter of 2024;
--- ---
· Net<br> interest income was $8.2 million for the second quarter of 2025, an increase of $1.2 million<br> or 17.85%, compared to the second quarter of 2024;
--- ---
· Noninterest<br> income was $2.4 million, a decrease of $96,000, or 3.79%, during the second quarter of 2025<br> compared to the second quarter of 2024; and
--- ---
· Noninterest<br> expense was $7.2 million, an increase of $375,000, or 5.48%, for the second quarter of 2025<br> compared to the second quarter of 2024.
--- ---

Comparison ofthe Three Months ended June 30, 2025 and 2024

Net interest income for the quarter ended June 30, 2025 was $8.2 million, an increase of $1.2 million, or 17.85%, when compared to the quarter ended June 30, 2024. During the second quarter of 2025, interest income increased $947,000 to $12.0 million due to the combination of an increase of 23 basis points (“bps”) in the yield on earning assets to 5.61% and a $31.7 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 31 bps to 6.20%, while the average balance increased $41.9 million compared to the quarter ended June 30, 2024. Investment securities contributed $125,000 as the average balance, excluding the unrealized loss, increased $4.2 million and the yield rose 37 bps, as we reinvest cash flows and grow the portfolio in a higher interest rate environment. Combined with the increased interest income, interest expense decreased $297,000 to $3.7 million during the second quarter of 2025 as compared to $4.0 million reported for the same period in 2024. The reduced interest expense is principally attributed to the cost of borrowed funds, which decreased 55 bps to 5.28%, as the related interest expense decreased $239,000. The decline was due to the decreased 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. These principal payments reduced the average balance of borrowed funds by $14.1 million or 39.09% for the comparative quarters ended June 30, 2025 and 2024. 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 28 bps to 2.66% during the second quarter of 2025 as compared to the second quarter of 2024. The net interest margin increased 45 bps to 3.86% for the quarter ending June 30, 2025, as compared to 3.41% for the same period in 2024 due to the increase in the yield on earning assets outpacing the cost of funds.

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

24

Net Interest Margin

Analysis

Average Balances,

Income and Expense, and Yields and Rates

Three Months Ended

June 30,

2025 2024
Average Income/ Yields/ Average Income/ Yields/
(Dollars are in thousands) Balance Expense Rates Balance Expense Rates
ASSETS
Loans<br> ^(1) (2)^ $ 681,828 $ 10,540 6.20% $ 639,918 $ 9,374 5.89%
Federal<br> funds sold 276 3 4.43% 110 2 5.44%
Interest<br> bearing deposits in other banks 60,976 663 4.36% 75,549 1,009 5.37%
Investment<br> securities ^(2)^ 111,272 752 2.71% 107,082 626 2.34%
Total<br> earning assets 854,352 11,958 5.61% 822,659 11,011 5.38%
Less:<br> Allowance for credit losses (7,956) (7,447)
Non-earning<br> assets 36,905 39,334
Total<br> assets $ 883,301 $ 854,546
LIABILITIES<br> AND SHAREHOLDERS’ EQUITY
Interest-bearing<br> demand deposits $ 72,194 $ 128 0.71% $ 74,082 $ 160 0.87%
Savings<br> and money market deposits 194,919 832 1.71% 169,190 676 1.61%
Time<br> deposits 275,114 2,490 3.63% 271,587 2,672 3.96%
Total<br> interest-bearing deposits 542,227 3,450 2.55% 514,859 3,508 2.74%
Other<br> borrowings 10,055 89 3.51% 20,000 209 4.13%
Trust<br> preferred securities 11,986 205 6.76% 16,186 324 7.93%
Total<br> borrowed funds 22,041 294 5.28% 36,186 533 5.83%
Total<br> interest-bearing liabilities 564,268 3,744 2.66% 551,045 4,041 2.94%
Non-interest-bearing<br> deposits 236,284 229,837
Other<br> liabilities 9,680 9,524
Total<br> liabilities 810,232 790,406
Shareholders’<br> equity 73,069 64,140
Total<br> liabilities and shareholders’ equity $ 883,301 854,546
Net<br> interest income $ 8,214 $ 6,970
Net<br> interest margin 3.86% 3.41%
Net<br> interest spread 2.95% 2.44%
^(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 June 30, 2025, as compared to the three months ended June 30, 2024.

25

Volume and Rate Analysis

Increase (decrease)

Three Months Ended June 30, 2025 Versus 2024

(Dollars in thousands) Volume<br> Effect Rate<br> Effect Rate<br> and Volume Effect Change<br> in Interest Income/ Expense
Interest<br> income:
Loans $ 616 $ 492 $ 58 $ 1,166
Federal<br> funds sold 3 (1) (1) 1
Interest<br> bearing deposits in other banks (195) (190) 39 (346)
Investment<br> securities 24 99 3 126
Total<br> earning assets 448 400 99 947
Interest<br> expense:
Interest-bearing<br> demand deposits (4) (29) 1 (32)
Savings<br> and money market deposits 103 44 9 156
Time<br> deposits 35 (221) 4 (182)
Other<br> borrowings (104) (31) 15 (120)
Trust<br> preferred securities (84) (48) 13 (119)
Total<br> interest-bearing liabilities (54) (285) 42 (297)
Change<br> in net interest income $ 502 $ 685 $ 57 $ 1,244

The provision for credit losses charged to the income statement for the quarter ended June 30, 2025 was $154,000 compared to $472,000 for the three months ended June 30, 2024. The second quarter 2025 provision reflects the impact of the loan growth while the provision recorded in 2024 was due to an increase in past due and nonperforming loans during the second quarter of 2024. The provision for credit losses on unfunded commitments was $0 for the second quarter of 2025 due to a reduction in the growth rate in commitments for construction loans which are expected to be drawn over the next 12-18 months. 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 $2.4 million for the quarter ended June 30, 2025 decreased $96,000 compared to the quarter ended June 30, 2024. Modest decreases in earnings from service charges and financial services revenue totaling $68,000 and $16,000, respectively, and a gain on disposal of premises and equipment of $53,000 in 2024 that was not repeated in 2025 were partially offset by a $17,000 increase in card processing fees.

Noninterest expense was $7.2 million for the quarter ended June 30, 2025 compared to $6.8 million for the quarter ended June 30, 2024. The $375,000 dollar increase resulted from increases in salaries and benefits, occupancy, and data processing costs, which combined for an increase of $119,000, and increases in advertising, ATM network, loan processing, and other expenses which combined for an increase of $196,000. The increase in salaries and benefits is attributed to normal recurring salary adjustments and staffing costs for the recently opened loan production office. Occupancy costs were impacted by costs for the new loan production office. Advertising included costs for a program to refresh the bank branding, while loan costs were impacted by costs associated with a loan promotion.

As we progress with our planned core conversion, it is expected that additional costs related to overtime, meals and other expenses related to the installation, testing and training on the new system will be incurred during the remainder of 2025.

The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 67.70% during the second quarter of 2025 from 71.96% for the second quarter of 2024. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.

Income tax expense for the second quarter of 2025 totaled $751,000, an increase of $243,000, or 47.83%, from $508,000 recorded during the same period in 2024. This increase was in line with the increase in pre-tax income which increased $1.1 million or 49.77% for the comparative three months ended June 30, 2025 and 2024. The effective tax rate for the three months ended June 30, 2025, was 22.88%, compared to 23.18% for the same period in 2024.

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.

26

Comparison ofthe Six Months ended June 30, 2025 and 2024

Year-to-date highlights include:

· Net<br> income for the six months ended June 30, 2025 was $4.4 million, or $0.19 per share, an increase<br> of $970,000, or 27.95%, from the $3.5 million or $0.15 per share reported for the same period<br> in 2024.
· Returns<br> on average assets and equity of 1.02% and 12.37% for the first half of 2025, compared to<br> 0.83% and 10.83% for the first six months of 2024, respectively;
--- ---

For the six months ended June 30, 2025, net interest income totaled $15.8 million, an increase of $1.9 million, or 13.84%, as compared to the six months ended June 30, 2024. The net interest margin increased 34 bps to 3.78% as compared to 3.44% for the same period in 2024. Net interest income improved due to increased average earning assets, which increased $32.2 million, or 3.97%, to $844.7 million. In addition, the yield on earning assets improved 21 bps to 5.56% during the comparative six-month periods. Interest expense for the six months ended June 30, 2025, totaled $7.5 million, a decrease of $239,000, or 3.09%, from the same period in 2024. The decrease in interest expense is due primarily to borrowed funds as discussed above.

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

Six Months Ended

June 30,

2025 2024
Average Income/ Yields/ Average Income/ Yields/
(Dollars are in thousands) Balance Expense Rates Balance Expense Rates
ASSETS
Loans<br> ^(1) (2)^ $ 670,488 $ 20,452 6.15% $ 637,744 $ 18,587 5.86%
Federal<br> funds sold 208 5 4.42% 116 3 5.38%
Interest<br> bearing deposits in other banks 62,681 1,355 4.36% 68,744 1,835 5.37%
Investment<br> securities ^(2)^ 111,290 1,497 2.71% 105,824 1,199 2.27%
Total<br> earning assets 844,667 23,309 5.56% 812,428 21,624 5.35%
Less:<br> Allowance for credit losses (7,873) (7,436)
Non-earning<br> assets 37,157 39,062
Total<br> assets $ 873,951 $ 844,054
LIABILITIES<br> AND SHAREHOLDERS’ EQUITY
Interest-bearing<br> demand deposits $ 72,293 $ 265 0.74% $ 73,113 $ 297 0.82%
Savings<br> and money market deposits 190,952 1,610 1.70% 165,011 1,218 1.48%
Time<br> deposits 274,841 5,024 3.69% 267,779 5,143 3.86%
Total<br> interest-bearing deposits 538,086 6,899 2.59% 505,903 6,658 2.65%
Other<br> borrowings 10,028 177 3.51% 20,000 418 4.13%
Trust<br> preferred securities 12,085 409 6.73% 16,186 648 7.92%
Total<br> borrowed funds 22,113 586 5.27% 36,186 1,066 5.83%
Total<br> interest-bearing liabilities 560,199 7,485 2.69% 542,089 7,724 2.86%
Non-interest-bearing<br> deposits 231,690 228,042
Other<br> liabilities 9,631 9,521
Total<br> liabilities 801,520 779,652
Shareholders’<br> equity 72,431 64,402
Total<br> liabilities and shareholders’ equity $ 873,951 844,054
Net<br> interest income $ 15,824 $ 13,900
Net<br> interest margin 3.78% 3.44%
Net<br> interest spread 2.87% 2.49%
^(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. 
27

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 six months ended June 30, 2025, as compared to the six months ended June 30, 2024.

Volume and Rate Analysis

Increase (decrease)

Six Months Ended June 30, 2025 Versus 2024

(Dollars in thousands) Volume<br> Effect Rate<br> Effect Rate<br> and Volume Effect Change<br> in Interest Income/ Expense
Interest<br> income:
Loans $ 952 $ 918 $ (5) $ 1,865
Federal<br> funds sold 2 - - 2
Interest<br> bearing deposits in other banks (161) (344) 25 (480)
Investment<br> securities 61 229 8 298
Total<br> earning assets 854 803 28 1,685
Interest<br> expense:
Interest-bearing<br> demand deposits (3) (28) (1) (32)
Savings<br> and money market deposits 191 177 24 392
Time<br> deposits 135 (234) (20) (119)
Other<br> borrowings (207) (63) 29 (241)
Trust<br> preferred securities (163) (97) 21 (239)
Total<br> interest-bearing liabilities (47) (245) 53 (239)
Change<br> in net interest income $ 901 $ 1,048 $ (25) $ 1,924

For the six months ended June 30, 2025, the provision for credit losses totaled $413,000 as compared to $429,000 recorded for the same period in 2024.

For the six months ended June 30, 2025 noninterest income decreased $4,000 to $4.8 compared to the same period in 2024, as combined decreases in service charges, card processing fees and financial services revenue totaling $139,000 were offset by a branded card incentive payment of $141,000.

For the six months ended June 30, 2025, noninterest expense totaled $14.5 million compared to $13.8 million for the same period in 2024, an increase of $670,000 or 4.85%. 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 for snow and ice removal to keep our branch locations open and safe during the winter storms incurred during the first quarter of 2025.

Balance Sheet

Total assets as of June 30, 2025 were $892.9 million, an increase of $38.0 million, or 8.96% annualized, from $854.9 million as of December 31, 2024. Gross loans of $695.8 million as of June 30, 2025 reflected an increase of $38.3 million from $657.5 million as of December 31, 2024. Liquid assets in the form of cash and cash equivalents increased $4.5 million, or 13.38% annualized, during the first six months of 2025. Investment securities increased $765,000 during the first six months of 2025 due to purchases of $4.8 million and a decrease in the unrealized loss on available-for-sale securities of $2.1 million which more than offset maturities, payments and amortization of $6.1 million.

Gross loans receivable increased $38.3 million, or 11.74% annualized to $695.8 million as of June 30, 2025 from $657.5 million as of December 31, 2024. Commercial and residential real estate loans increased $7.3 million and $14.4 million, respectively, from December 31, 2024 to June 30, 2025. Consumer loans increased $3.0 million, which included the purchase of $2.8 million of individual loans during the six months ended June 30, 2025. Farmland and Agriculture loans increased $3.8 million and $1.2 million, respectively, during the first six months of 2025.

Deposits totaled $781.9 million as of June 30, 2025 compared to $750.0 million as of December 31, 2024. The increase of $31.9 million, or 8.58% 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 $11.2 million, money market accounts increased $14.7 million, and noninterest bearing deposits increased $8.6 million during the first six months of 2025. The increase in time and money market deposits contributed to the decrease in our cost of interest-bearing deposits, which decreased 6 bps to 2.59% for the six months ended June 30, 2025, as compared to the same period in 2024, due to the relatively lower cost of money market deposit rates compared to time deposits, and the downward repricing of a portion of the time deposit portfolio as maturing deposits renew. During the second quarter of 2025, $15.0 million of brokered time deposits were added with maturities ranging from two months to two years. These deposits supplemented liquidity and supported loan closings and advances, and to bolster on balance sheet liquidity.

28

As of June 30, 2025, borrowed funds totaled $27.0 million, an increase of $2.0 million from December 31, 2024. 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 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.

During the six months ended June 30, 2025, total shareholders’ equity increased $4.1 million to $74.8 million, due to net income of $4.4 million and a decrease in the net unrealized loss on available-for-sale securities of $1.7 million. These increases to capital were offset by dividends paid to shareholders of $1.9 million, and the repurchase of common stock totaling $106,000. Consequently, book value per share increased to $3.17 as of June 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 six months of 2025, the Company repurchased 35,846 shares at an average price of $2.98 per share. Since the commencement of the repurchase plan in 2022, 321,208 shares have been repurchased at an average price of $2.48 per share.

Asset Quality

The allowance for credit losses was $7.9 million, or 1.14% as a percentage of total loans, as of June 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 June 30, 2025, as compared to $404,000 at 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 0.02% during the first six months of 2025 compared to (0.01)% during the same period of 2024 and 0.01% during the first quarter of 2025.

Nonperforming assets, which include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned, totaled $3.6 million as of June 30, 2025, an increase of $202,000, or 6.01%, since year-end 2024. Nonaccrual loans increased $215,000 during the first six months of 2025 due principally to a single loan relationship totaling $802,000 being placed in nonaccrual status. Nonperforming assets as a percentage of total assets were 0.40% as of June 30, 2025, and 0.39% as of December 31, 2024.

Other real estate owned decreased $30,000 to $57,000 as of June 30, 2025, compared to December 31, 2024, due to the sale of a property during the first quarter of 2025. Expenses associated with other real estate owned, including gains and losses on sales, were net recoveries of $3,000 for the three months ended June 30, 2025, compared to net recoveries of $32,000 during the three months ended June 30, 2024, due to gains on sales of foreclosed properties recorded of $6,000 and $34,000, during the respective three month periods in 2025 and 2024.

For detailed information on nonaccrual loans and other real estate owned as of June 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 $5.7 million as of June 30, 2025, an increase of $1.7 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 six 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 $4.4 million as of June 30, 2025 from $6.2 million as of December 31, 2024.

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.

29

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 six 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. 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 $413,000, of which $321,000 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 June 30, 2025 and December 31, 2024:

Selected Credit Ratios
June 30, December 31,
(Dollars in thousands) 2025 2024
Allowance<br> for credit losses - loans $ 7,948 $ 7,684
Total<br> loans 695,815 657,536
Allowance<br> for credit losses to total loans 1.14% 1.17%
Nonaccrual<br> loans $ 3,488 $ 3,273
Nonaccrual<br> loans to total loans 0.50% 0.50%
Ratio<br> of allowance for credit losses loans to nonaccrual loans 2.28X 2.35X
Charge-offs<br> net of recoveries $ 58 $ 78
Average<br> loans $ 670,488 $ 641,022
Net<br> charge-offs to average loans^1^ 0.02% 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 June 30, 2025 and December 31, 2024, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $2.7 million and $3.2 million, as of June 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 June 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 $3.17 and $2.99 as of June 30, 2025 and December 31, 2024, respectively. The increase in book value was due largely to a decrease in the unrealized loss on available for sale investment securities earnings for the year of $1.7 million combined with net earnings for the year of $4.4 million, which more than offset the dividend payment of $0.08 per share and the repurchase of common shares of $106,000 during the first half of 2025.

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Other key performance indicators are as follows:

Three months ended <br>June 30, Six months ended <br>June 30,
2025 2024 2025 2024
Return on average assets^1^ 1.15 % 0.79 % 1.02 % 0.83 %
Return on average shareholders’ equity^1^ 13.91 % 10.56 % 12.37 % 10.83 %
Average equity to average assets 8.27 % 7.51 % 8.29 % 7.63 %

^^

^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 June 30, 2025, the Company has repurchased 321,208 shares at an average price of $2.48 per share since inception of the plan. During the quarter ended June 30, 2025, the Company repurchased 13,069 shares at an average price of $2.95 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 $133.4 million as of June 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 and the short-term FHLB advance taken during June 2025. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs

As of June 30, 2025, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $61.3 million, which is net of the $35.5 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 $765,000, or 1.61%, annualized during the first half of 2025 from $96.0 million as of December 31, 2024 to $96.7 million as of June 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 88.99% and 87.67% as of June 30, 2025 and December 31, 2024, respectively.

Available third-party sources of liquidity as of June 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 $191.3 million was available as of June 30, 2025 on the $220.3 million line of credit. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.

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As of June 30, 2025 we held brokered time deposits of $18.0 million, an increase of $15.0 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 $7.6 million and $7.0 million as of June 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 June 30, 2025 approximately $17.9 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 $28.2 million were pledged as of June 30, 2025.

Time deposits of $250,000 or more were approximately 5.52% of total deposits at June 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 six months ended June 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.

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 June 30, 2025, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

32

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 June 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 June 30, 2025, as detailed below. Under the terms of the stock repurchase program, the Company has the remaining authority to repurchase up to 178,792 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
April<br> 30, 2025 3,117 $ 2.86 3,117 188,744
May<br> 31, 2025 5,484 $ 2.95 5,484 183,260
June<br> 30, 2025 4,468 $ 3.00 4,468 178,792
Total 13,069 $ 2.95 13,069
Item 3. Defaults<br> Upon Senior Securities
--- ---

None.

Item 4. Mine<br> Safety Disclosures

Not Applicable.

33
Item 5. Other<br> Information

Trading Arrangements – During the three months ended June 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 June<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

34

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: August 14, 2025
By: /s/ CHRISTOPHER G. SPEAKS
Christopher G. Speaks
Executive Vice President and Chief Financial Officer
Date: August 14, 2025 
35

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is made and entered into as of June 25, 2025 (the "Effective Date"), by and among New Peoples Bankshares, Inc., a Virginia bank holding corporation (the "Company"), New Peoples Bank, Inc., a Virginia bank (the "Bank" and, together with the Company, "New Peoples"), and James W. Kiser ("Executive").

WHEREAS, the Company and Executive wish to formalize and update the terms and conditions of their employment relationship pursuant to this Agreement.

NOW,THEREFORE, in consideration of the foregoing, the mutual promises herein contained, and other good and valuable consideration, including the continued employment of Executive by New Peoples and the compensation received by Executive from New Peoples from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as:

l. Employment.

a.                   Employment. Subject to the terms set forth herein, the Company and the Bank agree to employ Executive as President and Chief Executive Officer of the Company and President and Chief Executive Officer of the Bank, respectively, and Executive hereby accepts such employment. As President and Chief Executive Officer of the Company and the Bank, Executive shall have such authority, perform such duties, and fulfill such responsibilities commonly incident to such positions, as well as those that are delegated to Executive by the Board of Directors of the Company (the "Board") or the Board of Directors of the Bank (the "Bank Board"). While employed, Executive shall report to the Board with respect to his duties for the Company and shall report to the Bank Board with respect to his duties for the Bank. Executive shall devote his full business time and attention to the business and affairs of the Company and the Bank and shall use his best efforts to advance the interests of the Company and the Bank: provided that Executive may engage in outside activities in accordance with Section 5.

2. Employment<br> Period.

a.                   Duration. Executive's period of employment with New Peoples under this Agreement shall begin on the Effective Date and shall continue for a term of three (3) years and thereafter shall automatically renew for successive two (2) year terms unless at least six (6) months prior to the end of the then existing term either Executive or the Company gives the other party notice of its election not to renew the term of this Agreement at the end of its then existing term (or, if a Change in Control (as defined below) occurs prior to such anniversary, the second anniversary of the date of the Change in Control, if later), unless terminated prior thereto by either New Peoples or Executive in accordance with Section 6 hereof (such period of employment being the "Employment Period").

b.                   Employment Following Termination of Employment Period. Nothing in this Agreement shall mandate or prohibit a continuation of Executive's employment following the expiration of the Employment Period upon such terms and conditions as the Company, the Bank, and Executive may agree.

3. Compensation.

a.                   Base Salary. In consideration for the services performed by Executive during the Employment Period, New Peoples shall pay to Executive an annual salary ("Base Salary") of

$320,000.00. The Base Salary shall be paid in approximately equal installments in accordance with New Peoples' customary payroll practices. Executive's Base Salary shall be reviewed at least annually during the Employment Period for possible upward adjustment beginning for the second year of the initial three year term of this Agreement. Executive's Base Salary shall not be reduced without Executive's consent. The term Base Salary, as utilized in this Agreement, shall refer to Base Salary as it may be increased from time to time.

b.                   Annual Bonus. During the Employment Period, in January of each year, Executive shall be considered by New Peoples Board (or a committee thereof) for a bonus based on the Board (or committee's) determination of whether the Executive's performance during the prior year was exceptional which determination shall be in the sole discretion and judgment of the Board (or committee). The actual amount of Executive's annual bonus shall be determined by the Board (or committee) in its sole discretion and judgment based on such factors as the Board (or committee) deems relevant in respect to evaluating the Executive's overall performance. Any bonus payments shall be made at the sole discretion of the Board (or committee) and are subject to the Executive's continued employment through the payment date, unless otherwise specified in this Agreement.

c.                   Long-Term Compensation. During the Employment Period, Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by the Company from time to time for senior executive officers on a basis consistent with Executive's status as President and Chief Executive Officer of the Company and the Bank.

d. Employee<br> Benefit Plans; Paid Time Off.

i.                    Benefit Plans. During the Employment Period, Executive shall be an employee of the Company and the Bank, and shall be entitled to participate, on terms and conditions not less favorable to Executive than other similarly situated senior executives of New Peoples generally, in New Peoples's (A) tax-qualified defined contribution retirement plans (currently, New Peoples's 401(k)); (B) group life, health and disability insurance plans, supplemental life insurance and supplemental long-term disability; (C) such other executive benefits as may be approved from time to time adopted by the Board; and (D) other employee benefit plans and programs and perquisites in accordance with New Peoples's customary practices with respect to other similarly situated senior executives of New Peoples generally; provided that Executive's participation shall be subject to the terms of such plans and programs (including being a member of the class of employees eligible to commence participation in the plan or program); and provided, further, that nothing herein shall limit New Peoples's right to amend or terminate any such plans or programs.

ii.                  Paid Time Off. Executive shall be entitled to five (5) weeks of paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with New Peoples's usual practices), as well as sick leave, holidays and other paid absences in accordance with New Peoples's policies and procedures for senior executives.

Executive shall be compensated for any unused paid time off to the extent provided for under New Peoples's policies and procedures as applicable to other similarly situated senior executives of New Peoples generally.

e.                   Expenses. New Peoples shall reimburse Executive for Executive's ordinary and necessary business expenses and travel and entertainment expenses incurred in connection with the performance of Executive's duties under this Agreement upon presentation to the Bank of an itemized account of such expenses in such form as New Peoples may reasonably require.

4. Principal<br> Place of Employment.

Executive's principal place of employment during the Employment Period shall be at the Company's principal executive offices or at such other location upon which the Company and Executive may mutually agree, and subject to travel to such other locations as shall be necessary to fulfill the employment duties.

5.                 Outside Activities and Board Memberships*.* During the Employment Period, Executive shall not provide services on behalf of any financial institution or other entity or business that competes with the Company, the Bank or any of their affiliates (each, a "competitive business"), or any subsidiary or affiliate of any such competitive business, as an employee, consultant, independent contractor, agent, sole proprietor, partner, joint venturer, corporate officer or director; nor shall Executive acquire, by reason of purchase during the Employment Period, the ownership of more than five percent (5%) of the outstanding equity interest in any such competitive business. In addition, during the Employment Period, Executive shall not, directly or indirectly, acquire a beneficial interest, or engage in any joint venture with New Peoples. Subject to the foregoing, Executive may serve on boards of directors of unaffiliated corporations, subject to approval by the Board, which shall not be unreasonably withheld, and boards of directors of

not-for-profit organizations and trade associations, subject to approval by the Board in accordance with New Peoples's policies and procedures. Except as specifically set forth herein, Executive may engage in personal business and investment activities, including real estate investments and personal investments in the stocks, securities and obligations of other financial institutions (or their holding companies).

Notwithstanding the foregoing, in no event shall Executive's outside activities, services, personal business and investments materially interfere with the performance of Executive's duties under this Agreement.

Nothing in this Section 5 shall limit any of Executive's obligations under Section 9 hereof.

6. Termination<br> of Employment.
a. Termination<br> by New Peoples Without Cause.

New Peoples shall have the right to terminate Executive's employment at any time during the Employment Period without Cause by giving notice to Executive as described in Section 6(f). For sake of clarity, neither termination of Executive's employment pursuant to Section 6(e) nor upon or after expiration of the Employment Period shall constitute a termination without Cause for purposes of this Section 6. Termination by the Company shall automatically constitute termination by the Bank and vice versa unless the Company and Bank agree otherwise.

i. In<br> the event that New Peoples terminates Executive's employment during the Employment Period<br> without Cause:
1. New<br> Peoples shall pay or provide to Executive any Accrued Obligations;
--- ---

2.                   Subject to Section 6(g), New Peoples shall pay to Executive within sixty (60) days following the date of termination a lump sum cash payment (the "Severance Payment") equal to the product of (i) two (2) and (ii) the sum of Executive's Base Salary immediately prior to termination of employment and the amount of Executive's bonus, if any, for the fiscal year during which Executive's termination of employment occurs. Notwithstanding the foregoing, a multiplier of three (3) (instead of two (2)) shall be used in the preceding clause 6.a.i.2(i) if Executive's termination of employment occurs upon or within twenty-four (24) months following a Change in Contro1 except in the case of the Sale of the Company in which case a multiplier of one (1) shall be used in the preceding clause 6.a.i.2(i) if the total consideration received by the Company's shareholders in such transaction ("Shareholder Consideration") is less than the book value of the Company as reflected in the Company's then most recent audited financial statements ("Book Value") or a multiplier of two (2) shall be used in the preceding clause 6.a.i.2(i) if the Shareholder Consideration is equal to or up to 1.5 times the Book Value of the Company; or a multiplier of three (3) shall be used in the preceding clause 6.a.i.2(i) if the Shareholder Consideration is greater than 1.5 times the Book Value of the Company;

3.                   Subject to Section 6(g), New Peoples shall pay to Executive on a monthly basis commencing with the first month following Executive's termination of employment and continuing until the eighteenth (18th) month following Executive's termination of employment a cash payment (subject to reduction for applicable withholding taxes) equal to the monthly COBRA premium in effect as of the date of Executive's termination of employment for the level of coverage in effect for Executive under New Peoples's group health plan (the "COBRA Premium Payments");

ii.                  If such termination occurs upon or within twenty-four (24) months after a Change in Control, then, subject to Section 6(g) and except to the extent otherwise provided in the applicable award agreements or terms of the applicable plan(s), all of Executive's then outstanding stock options and other equity-based awards, if any, shall become fully vested (to the extent not previously vested) on the sixtieth (60th) day after such termination of employment, except that in the case of any stock options or other equity based awards the scheduled vesting of which is, in whole or in part, contingent upon the achievement of one or more performance goals, such performance goals shall be deemed to be fully achieved (at "target," to the extent applicable) as of the date of Executive's termination of employment and such option or other equity-based award shall vest on a pro rata basis on the sixtieth (60th) day after termination of employment based on the number of days during the scheduled vesting period during which Executive was employed relative to the total number of days during the scheduled vesting period. It is understood and agreed that if Executive's termination of employment occurs prior to a Change in Control or more than twenty-four (24) months after a Change in Control, Executive's then outstanding stock options and other equity compensation awards, if any, covering the Company's common stock shall vest if and to the extent provided in the applicable award agreements and terms of the applicable plan(s). Any accelerated vesting that occurs pursuant to the terms of this section (ii) is herein referred to as the "Accelerated Equity Vesting."

b.                   Termination by the Company for Cause. New Peoples shall have the right to terminate Executive's employment at any time during the Employment Period for Cause by giving notice to Executive as provided in Section 6(f) hereof. In the event Executive's employment is terminated for Cause, New Peoples's sole obligation shall be to pay or provide to Executive any Accrued Obligations. Termination by the Company shall automatically constitute termination by the Bank and vice versa unless the Company and Bank agree otherwise.

c.                   Resignation by Executive without Good Reason. Executive may resign from employment during the Employment Period without Good Reason (which shall include but not be limited to the Executive's election pursuant to Section 2(a) not to renew the then existing term of this Agreement) at any time by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment without Good Reason, New Peoples's sole obligation shall be to pay or provide to Executive any Accrued Obligations. Resignation by Executive of employment with either the Company or the Bank shall automatically constitute resignation of employment with the other.

d.                   Resignation by Executive for Good Reason. Executive may resign from employment under this Agreement for Good Reason by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment for Good Reason, (i) New Peoples Bank shall pay or provide to Executive any Accrued Obligations and (ii) Executive shall, subject to Section 6(g), be entitled to the Severance Payment, the COBRA Premium Payment and Accelerated Equity Vesting, if applicable (together, the "Severance Benefits") to the same extent as if Executive's employment was terminated by New Peoples without Cause pursuant to Section 6(a) as of the date of Executive's termination of employment for Good Reason. Resignation by Executive of employment with either the Company or the Bank shall automatically constitute resignation of employment with the other.

e. Termination<br> by Reason of Death or Disability of Executive.

i.                    In the event of Executive's death during the Employment Period, New Peoples's sole obligation shall be to pay to Executive's legal representatives any Accrued Obligations.

ii.                  New Peoples shall be entitled to terminate Executive's employment due to Executive's Disability. If Executive's employment hereunder is terminated due to Executive's Disability, New Peoples's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

f.                    Notice; Effective Date of Termination. Notice of termination of employment under this Agreement shall be communicated by or to Executive (on one hand) or New Peoples (on the other hand) in writing in accordance with Section 14. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:

i.                    immediately after New Peoples gives notice to Executive of Executive's termination without Cause or Executive gives notice to the Company of Executive's resignation without Good Reason unless the parties agree to a later date, in which case, termination shall be effective as of such later date;

ii.                  immediately upon approval by the Board or Bank Board of termination of Executive's employment for Cause;

iii. immediately<br> upon Executive's death;

iv.                 in the case of termination by reason of Executive's Disability, the date on which Executive is determined to be permanently disabled for purposes of New Peoples's long- term disability plan or policy that covers Executive; or

v.                   thirty (30) days after Executive gives written notice to New Peoples of Executive's resignation from employment under this Agreement for Good Reason, provided that New Peoples may set an earlier termination date at any time prior to the date of termination of employment, in which case Executive's resignation shall be effective as of such other date.

g.                   General Release of Claims. Executive shall not be entitled to any of the Severance Benefits pursuant to Sections 6(a) or 6(d) unless (i) Executive has executed and delivered to New Peoples a general release of claims (in the form attached hereto as Exhibit A) (the "Release") and (ii) such Release has become irrevocable under the Age Discrimination in Employment Act not later than fifty-six (56) days after the date of Executive's termination of employment hereunder. Executive's entitlement to the Severance Benefits is further conditioned upon Executive returning to New Peoples all property of New Peoples within seven (7) days following the date of Executive's termination of employment with New Peoples and complying with the terms of Sections 8, 9(a) and 9(b) hereof, subject to written notice by New Peoples and a reasonable opportunity for Executive to cure, if subject to cure. New Peoples shall deliver to Executive a copy of the Release not later than three (3) days after Executive's termination of employment hereunder pursuant to Section 6(a) or 6(d) hereof. In the event that the fifty-six (56) day period referenced above begins and ends in different taxable years of Executive, any payments or benefits under this Agreement that constitute nonqualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the payment or settlement of which is conditioned on the effectiveness of the Release shall be paid in the later taxable year.

h.                   No Other Severance Benefits. Executive acknowledges and agrees the Severance Benefits are in lieu of, and not in addition to, any payments and/or benefits to which Executive may otherwise be entitled under any severance plan, policy or program of New Peoples.

i.                    Payment of Obligations. Notwithstanding anything to the contrary herein, any payment obligation of New Peoples under this Agreement may be satisfied in whole or in part by payment by the Company, the Bank or any affiliate, and any such payment shall, for purposes of this Agreement, be treated as if made by New Peoples.

j.                    Resignation from Positions. Upon termination of Executive's employment for any reason, Executive shall promptly (i) resign from all positions (including, without limitation, any management, officer, or director position) with New Peoples and its affiliates and (ii) relinquish any power of attorney, signing authority, trust authorization, or bank account signatory authorization that Executive may hold on behalf of New Peoples and its affiliates. Executive's execution of this Agreement shall be deemed the grant by Executive to the officers of the Company and the Bank of a limited power of attorney to sign in Executive's name and on Executive's behalf such documentation as may be necessary or appropriate for the limited purposes of effectuating such resignations and relinquishments.

k.                   Golden Parachute Limit. Notwithstanding any other provision of this Agreement, in the event that any portion of the Severance Benefits or any other payment or benefit received or to be received by Executive in connection with a "change in ownership or control" (within the meaning of Section 280G of the Code) of the Company occurring following the Effective Date (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (collectively, the "Total Benefits") would be subject to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), the Total Benefits shall be reduced to the extent necessary so that no portion of the Total Benefits is subject to the Excise Tax; provided, however, that no such reduction in the Total Benefits shall be made if by not making such reduction, Executive's Retained Amount (as hereinafter defined) would be greater than Executive's Retained Amount if the Total Benefits are so reduced. All determinations required to be made under this Section 6(k) shall be made by tax counsel or a nationally recognized certified public accounting firm or other professional organization that is a certified public accounting firm recognized as an expert in determinations and calculations for purposes of Section 280G of the Code selected by the Company prior to a Change in Control and reasonably acceptable to Executive ("Tax Counsel"), which determinations shall be conclusive and binding on Executive and the Company absent manifest error. All fees and expenses of Tax Counsel shall be borne solely by the Company. Prior to any reduction in Executive's Total Benefits pursuant to this Section 6(k), Tax Counsel shall provide Executive and the Company with a report setting forth its calculations and containing related supporting information. In the event any such reduction is required, the Total Benefits shall be reduced in the following order: (i) the COBRA Premium Payments, (ii) the Severance Payment, (iii) any other portion of the Total Benefits that are not subject to Section 409A of the Code (other than Total Benefits resulting from any accelerated vesting of equity awards), (iv) Total Benefits that are subject to Section 409A of the Code in reverse order of payment, and (v) Total Benefits that are not subject to Section 409A and arise from any accelerated vesting of equity awards. The parties hereto hereby elect to use the applicable federal rate that is in effect on the date this Agreement is entered into for purposes of determining the present value of any payments provided for hereunder for purposes of Section 280G of the Code. "Retained Amount" shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of the Total Benefits net of all federal, state and local taxes imposed on Executive with respect thereto. In connection with making determinations under this Section 6(k), the Tax Counsel shall take into account the value of any reasonable compensation for services to be rendered by Executive before or after the Change in Control, including any noncompetition provisions that may apply to Executive, and New Peoples shall cooperate in the valuation of any such services, including any noncompetition provisions.

7. Certain<br> Definitions.

a.                   "Accrued Obligations" means (i) any accrued and unpaid Base Salary of Executive through the date of termination of employment, payable pursuant to New Peoples' standard payroll policies, (ii) with respect to any termination without Cause and any resignation for Good Reason, any earned and unpaid bonus of Executive for any completed fiscal year prior to the date of termination of employment, (iii) any compensation and benefits to the extent payable to Executive based on Executive's participation in any compensation or benefit plan, program or arrangement of New Peoples through the date of termination of employment, payable in accordance with the terms of such plan, program or arrangement, and (iv) any expense reimbursement to which Executive is entitled under New Peoples's standard expense reimbursement policy (as applicable) and Sections 3(e) and 10 hereof.

b.                   "Cause" means Executive's failure or refusal to substantially perform Executive's duties hereunder, personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, breach of New Peoples' s Code of Ethics, material violation of the Sarbanes-

Oxley requirements for officers of public companies that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the reputation of the Company or the Bank, willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order or regulatory action removing the Executive or substantially affecting Executive's ability to carry out his obligations hereunder, or material breach of any provision of this Agreement. The cessation of employment of Executive shall not be deemed to be for Cause unless and until (i) notice to the Executive specifying each basis for Cause and providing thirty (30) days to cure such basis (if such basis is curable as determined in the exercise of reasonable discretion by the Board); (ii) if there is any curable basis specified in the notice, thirty (30) days shall have passed without each curable basis for Cause specified in the notice to Executive having been fully cured; and (iii) there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three- quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose, finding that, in the good faith opinion of the Board, the basis for Cause specified in the notice to the Executive exists and either that there are no curable bases or that each of the curable bases specified in such notice have not been fully cured within the required thirty (30) day cure period. For purposes hereof, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable good faith belief that Executive's action or omission was in the best interests of the Company and the Bank. Any act, or failure to act, based upon the direction of the Board or the Bank Board based upon the advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company or the Bank.

c.                   "Change in Control" means the occurrence of any of the following with respect to the Company occurring after the Effective Date:

i.                    any "person" (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than any employee benefit plan of New Peoples or any affiliate or a person currently as of the Effective Date serving on the Company's Board of Directors, is or becomes the "beneficial owner" (as defined in Rule 13d- 3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of Company's outstanding securities; or

ii.                  individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board; or

iii.                the Company consummates a merger, consolidation, share exchange, division or other reorganization or transaction of the Company (a "Fundamental Transaction") with any other corporation, other than a Fundamental Transaction that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power immediately after such Fundamental Transaction of (A) the Company's outstanding securities, (B) the surviving entity's outstanding securities, or (C) in the case of a division, the outstanding securities of each entity resulting from the division ("Sale of the Company"); or

iv.                 the shareholders of the Company approve a plan of complete liquidation or winding up of the Company; or

v.                   the consummation of an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of the Company's or the Bank's assets.

d.                   "Disability" means that Executive is deemed disabled for purposes of New Peoples's long-term disability plan or policy that covers Executive.

e.                   "Good Reason" means the occurrence of any of the following events (without Executive's consent):

i.                    a material reduction of any element of the compensation and benefits required to be provided to Executive in accordance with any of the provisions of Section 3;

ii.                  a material adverse change in Executive's functions, duties or responsibilities with the Company and the Bank, which change would cause Executive's position to become one of materially lesser responsibility, importance or scope;

iii.                New Peoples requiring Executive to be based at any office or location other than as provided in Section 4 resulting in an increase in Executive's commute of thirty (30) miles or more; or

iv.                 a material breach of this Agreement by the Company or the Bank. Notwithstanding the foregoing, no such event shall constitute "Good Reason” unless (A) Executive shall have given written notice of such event to the Company within thirty (30) days after the initial occurrence thereof, (B) the Company and the Bank shall have failed to cure the situation within thirty (30) days following the delivery of such notice (or such longer cure period as may be agreed upon by the parties), and (C) Executive terminates employment within thirty

(30) days after expiration of such cure period.

8.                   Confidentiality. In the course of Executive's employment with and involvement with New Peoples and its affiliates, Executive has obtained, and will obtain, secret or confidential information, knowledge or data concerning New Peoples's and its affiliates' businesses, strategies, operations, clients, customers, prospects, financial affairs, organizational and personnel matters, policies, procedures and other nonpublic matters, or concerning those of third parties. Executive shall hold in a fiduciary capacity for the benefit of New Peoples and its affiliates, all secret or confidential information, knowledge or data relating to New Peoples or any of its affiliated companies, and their respective businesses, which shall have been obtained by Executive during Executive's employment by New Peoples or any of its affiliates and which shall not be or become public knowledge (other than by acts by Executive or representatives of Executive in violation of this Agreement). All records, files, memoranda, reports, customer lists, documents and the like (whether in paper or electronic format) that Executive has used or prepared during Executive's employment shall remain the sole property of New Peoples and shall be promptly returned to New Peoples's premises upon any termination of employment. After termination of Executive's services with New Peoples, Executive shall not, without the prior written consent of New Peoples or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than New Peoples and those designated by it. The confidentiality provision contained herein is in addition to and not in limitation of Executive's duties as an officer and director under applicable law. For purposes of this Section 8 and Section 9, references to the Company, the Bank, New Peoples and their affiliates shall include their predecessor and any successor entities.

9. Nonsolicitation;<br> Noncompetition; Post-Termination Cooperation; Non-Disparagement.
a. Executive<br> hereby covenants and agrees that, while employed and for a period of twelve

(12) months following his termination of employment with New Peoples for any reason (excluding non- renewal of the Agreement by Company or Executive), Executive shall not, without the prior written consent of New Peoples, either directly or indirectly, (i) induce or attempt to induce any employee or independent contractor of the Company, the Bank or any of their respective affiliates to leave the Company, the Bank or any such affiliate, (ii) hire any person who was an employee or independent contractor of the Company, the Bank or any of their respective affiliates until six (6) months after such individual's relationship with the Company, the Bank or such affiliate has been terminated, (iii) induce or attempt to induce any client, customer, Active Prospect (as defined below) or other business relationship (whether (A) current, (B) former, within the six (6) months after such relationship has been terminated or

(C) prospective, provided that there are demonstrable efforts or plans to establish such relationship) of the Company, the Bank or any of their respective affiliates to cease doing business, to reduce the amount of business which any client, customer or other business relation has customarily done or contemplates doing with the Company, the Bank or any such affiliate, or to use a Competing Business, as defined below, for products or services offered by or competitive with those offered by the Company, the Bank or an affiliate; whether or not the relationship between the Company, the Bank or any such affiliate and such client, customer, Active Prospect or other business relation was originally established, in whole or in part, through Executive's efforts, or in any way interfere with the relationship between any such client, customer, Active Prospect or business relation, on the one hand, and the Company, the Bank or any such affiliate, on the other hand. As used in this section, and Active Prospect shall be those persons or entities to whom the Company, the Bank or their respective affiliate have made a written proposal for services in the three (3) months prior to Executive’s termination of employment for any reason or from whom Executive has personally solicited business on behalf of the Bank or its affiliates within such three (3) month period.

b.                   Executive acknowledges that, in the course of Executive's employment with the Company, the Bank and their respective affiliates (including their predecessor and any successor entities), Executive has become familiar, or will become familiar, with the Company's, the Bank's and their respective affiliates' trade secrets and with other confidential information, knowledge or data concerning the Company, the Bank, their respective affiliates and their respective predecessors, and that Executive's services have been and will be of special, unique and extraordinary value to the Company, the Bank and their respective affiliates. Therefore, Executive agrees that, while employed and for a period of twelve (12) months following his termination of employment with New Peoples for any reason, excluding non- renewal of the Agreement by the Company or Executive, (the "Noncompetition Period"), Executive shall not, directly or indirectly, own, manage, operate, control, be employed in a role that would provide Competitive Services (whether as an employee, director consultant, independent contractor or otherwise, and whether or not for compensation) by or render Competitive Services in any capacity to a Competing Business (as defined below), within twenty five (25) miles of any branch or office in which the Company, the Bank or any of their respective affiliates conducts business; provided, however, that the restriction set forth in this Section 9(b) shall not apply if Executive's employment is terminated following a Change in Control. For purposes of this Agreement, a "Competing Business" shall mean any person, firm, corporation or other entity, in whatever form, engaged in the business in which the Company, the Bank, their respective affiliates engage, including the sale or servicing of banking and financial products and services, including business and consumer lending, asset-based financing, residential mortgage warehouse funding, factoring/accounts receivable management services, equipment financing, commercial and residential mortgage lending and brokerage, deposit services (including municipal deposit services) and trade financing, sale of annuities, life and health insurance products, title insurance services, real estate investment trusts and investment advisory services. Nothing herein shall prohibit Executive from being a passive owner of not more than five percent (5%) of the outstanding equity interest in any entity which is publicly traded, so long as Executive has no active participation in the business of such entity. For purposes of this Agreement, providing “Competitive Services” shall be defined as serving as an officer or director of such entity, employment in the role of President, CEO or Chief Lending Officer, or in any other managerial or sales role in which Executive would have contact with customers and/or prospective customers and/or be involved in the sales of products or services offered by a Competing Business, or be involved in loan underwriting, origination or account management.

c.                   Executive hereby agrees that prior to accepting employment with any other person or Competing Business during the Noncompetition Period, Executive shall: (i) provide such prospective employer with written notice of his obligations under this Section 9; (ii) deliver a copy of such notice to the Company; and (iii) provide the Company at least fifteen (15) days advanced written notice of the date on which Executive intends to commence such employment and the position in which Executive will be employed.

d.                   In the event the Agreement is not renewed by the Company or the Executive, the Noncompetition restrictions will not be activated.

e.                   During the Employment Period and following the cessation of Executive's employment for any reason, Executive shall, upon reasonable notice, (i) furnish such information and assistance to the Company, the Bank and/or their respective affiliates, as may reasonably be requested by the Company, the Bank or such affiliates, with respect to any matter, project, initiative or effort for which Executive is or was responsible or has relevant knowledge or had substantial involvement in while employed by the Company or the Bank under this Agreement, and (ii) cooperate with the Company, the Bank and their respective affiliates during the course of all third-party proceedings arising out of the Company, the Bank and their respective affiliates' business about which Executive has knowledge or information; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and the Company, the Bank or any of their subsidiaries or affiliates.

f.                    Executive acknowledges and agrees that: (i) the purposes of the foregoing covenants, including without limitation the noncompetition covenant of Section 9(b), are to protect the goodwill and trade secrets and confidential information of the Company, the Bank, New Peoples and their respective affiliates; and (ii) because of the nature of the business in which the Company, the Bank and their respective affiliates are engaged, and because of the nature of the trade secrets and confidential information to which Executive has access, it would be impractical and excessively difficult to determine the actual damages of the Company and its affiliates in the event Executive breached any of the covenants of Section 8 or this Section 9. Executive understands that the covenants may limit Executive's ability to earn a livelihood in a Competing Business. Executive acknowledges that the Company would be irreparably injured by a violation of Section 8 or this Section 9, and that it is impossible to measure in money the damages that will accrue to the Company by reason of a failure by Executive to perform any of Executive's obligations under Section 8 or this Section 9. Accordingly, if the Company or its affiliates institutes any action or proceeding to enforce any of the provisions of Section 8 or this Section 9, to the extent permitted by applicable law, Executive hereby waives the claim or defense that the Company or its affiliates have an adequate remedy at law, and Executive shall not urge in any such action or proceeding the defense that any such remedy exists at law. Furthermore, in addition to other remedies that may be available (including, without limitation, termination of the obligation for the Company and the Bank to pay compensation or benefits hereunder due to Executive's failure to comply in all material respects with the restrictive covenants in Section 8, 9(a) or 9(b), subject to written notice by the Bank and a reasonable opportunity for Executive to cure, if subject to cure), the Company and its affiliates shall be entitled to specific performance and other injunctive relief, without the requirement to post a bond. If any of the covenants set forth in Section 8 or this Section 9 is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining covenants shall not be affected thereby. Any termination of Executive's services or of this Agreement shall have no effect on the continuing operation of Section 8 and this Section 9, which shall survive in accordance with their terms.

g.                   Subsequent to the termination of Executive's employment hereunder: (i) Executive shall not provide information, issue statements or make any communication, whether written, oral or electronic, and whether direct or indirect, having the effect of disparaging or causing harm to the reputation, business relationships or goodwill of the Company, Bank, affiliates or their representatives, directors, officers, employees, products, services or business practices; (ii) New Peoples shall not provide information, issue statements or make any communication having the effect of disparaging or causing harm to the Executive; provided that nothing in this Section shall prohibit (yy) either party from providing communications when required by law or to the regulators of financial institutions or (zz) which, in the case of New Peoples are necessary or appropriate in the opinion of its counsel, for communications with investors or in filings with the U.S. Securities and Exchange Commission or set out the basis under this Agreement for the termination of Executive's employment.

10. Section<br> 409A of the Code.

This Agreement is intended to comply with the requirements of Section 409A of the Code (including the exceptions thereto), to the extent applicable, and the Company shall administer and interpret this Agreement in accordance with such requirements. If any provision contained in the Agreement conflicts with the requirements of Section 409A of the Code (or the exemptions intended to apply under thisAgreement), this Agreement shall be deemed to be reformed to comply with the requirements of Section 409A of the Code (or the applicable exemptions thereto). Notwithstanding anything to the contrary herein, for purposes of determining Executive's entitlement to payment or receipt of amounts or benefits that constitute nonqualified deferred compensation within the meaning of Section 409A of the Code, Executive's employment shall not be deemed to have terminated unless and until Executive incurs a "separation from service" as defined in Section 409A of the Code. Reimbursement of any expenses provided for in this Agreement shall be made promptly upon presentation of documentation in accordance with New Peoples's policies with respect thereto as in effect from time to time (but in no event later than the end of calendar year following the year such expenses were incurred); provided, however, that in no event shall the amount of expenses eligible for reimbursement hereunder during a calendar year affect the expenses eligible for reimbursement in any other taxable year. Notwithstanding anything to the contrary herein, if a payment or benefit under this Agreement that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code is payable or provided due to a "separation from service" for purposes of the rules under Treas. Reg. § 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and Executive is determined to be a "specified employee" (as determined under Treas. Reg. § l.409A-l(i) and related Company procedures), such payment shall, to the extent necessary to comply with the requirements of Section 409A of the Code, be made on the date that is six (6) months after the date of Executive's separation from service (or, if earlier, the date of Executive's death). Any installment payments that are delayed pursuant to this Section 10 shall be accumulated and paid in a lump sum on the first day of the seventh month following the date of Executive's separation from service (or, if earlier, upon Executive's death) and the remaining installment payments shall begin on such date in accordance with the schedule provided in this Agreement. The Severance Benefits are intended not to constitute deferred compensation subject to Section 409A of the Code to the extent such Severance Benefits are covered by (a) the "short-term deferral exception" set forth in Treas. Reg. § l.409A- l(b)(4),

(b) the "two times severance exception" set forth in Treas. Reg.§ l.409A-l(b)(9)(iii), or (c) the "limited payments exception" set forth in Treas. Reg. § l.409A-l(b)(9)(v)(D). The short- term deferral exception, the two times severance exception and the limited payments exception shall be applied to the Severance Benefits in order of payment in such manner as results in the maximum exclusion of such Severance Payments from treatment as deferred compensation under Section 409A of the Code. Each installment of the Severance Benefits and any other payment or benefits that constitute nonqualified deferred compensation within the meaning of Section 409A of the Code shall be deemed to be a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.

11. Additional<br> Termination and Suspension Provisions.

a.                   If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(l) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(3) and (g)(l)), all obligations of the Company and the Bank under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company and the Bank may in their discretion (but subject in all events to the requirements of Code Section 409A), (i) pay Executive all of the compensation withheld while the Company's and the Bank's obligations under this Agreement were suspended and (ii) reinstate (in whole) any of the Company's and the Bank's obligations which were suspended, and in exercising such discretion, the Company and the Bank shall consider the facts and make a decision promptly following such dismissal of charges and act in good faith in deciding whether to pay any withheld compensation to Executive and to reinstate any suspended obligations of the Company and the Bank.

b.                   If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818 (e)(4) or (g)(l)), all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.

c.                   If the Bank is in default, as defined in Section 3(x)(l) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1813 (x)(l)), all obligations of the Company and the Bank under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the parties.

d.                   All obligations under this Agreement shall be terminated, except to the extent it is determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the Bureau of Financial Institutions or other applicable banking regulator (the "Regulator"), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, as amended; or (ii) by the Regulator, at the time the Regulator approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

e.                   If any regulation applicable to the Company or the Bank shall hereafter be adopted, amended or modified or if any new regulation applicable to the Company or the Bank and effective after the date of this Agreement:

i.                    shall require the inclusion in this Agreement of a provision not presently included in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent necessary to give effect in this Agreement to any such amended, modified or new regulation; and

ii.                  shall permit the exclusion of a limitation in this Agreement on the payment to Executive of an amount or benefit provided for presently in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent permissible to exclude from this Agreement any such limitation previously required to be included in this Agreement by a regulation prior to its amendment, modification or repeal.

12.               Arbitration. Any dispute or controversy arising out of, under, in connection with, or relating to this Agreement or any amendment hereof shall be submitted to binding arbitration before one arbitrator in the counties of Russell, Tazewell and Washington or the City of Bristol, Virginia as shall be selected by the party initiating arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association for expedited arbitration, and any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be an attorney selected by Executive and New Peoples who shall have experience in representing financial institutions and their executives in respect to employment matters. In the event the parties cannot agree on a single arbitrator then each shall designate an arbitrator qualified as herein before provided and each arbitrator so selected shall select a third arbitrator qualified as hereinbefore provided. The arbitrator(s) shall award reasonable attorneys’ fees and costs of the arbitration to the party substantially prevailing in the arbitration.

13. Indemnification<br> and Insurance.

a.                   New Peoples provides its senior executive officers with coverage under a directors' and officers' liability insurance policy, and New Peoples shall provide such coverage to Executive on substantially the same basis. New Peoples shall indemnify Executive (and Executive's heirs, executors and administrators) to the fullest extent provided under such coverage, so long as permitted under applicable law and applicable regulatory requirements, against all expenses and liabilities reasonably incurred by Executive in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of Executive's having been an officer of the Company or the Bank (whether or not Executive continues to be an officer at the time of incurring such expenses or liabilities and for a period of six years following Executive's termination of employment with New Peoples), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements (such settlements must be approved by the Board and not violate any regulatory requirements or restrictions), but such indemnity shall exclude any actions taken in bad faith, or that constitute a knowingly unlawful act or gross negligence. Any such indemnification shall be made consistent with Regulations and Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. § 1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.

b.                   Notwithstanding the foregoing, no indemnification shall be made by New Peoples unless New Peoples gives the Regulator, to the extent required by law, at least sixty (60) days' notice of its intention to make such indemnification. Such notice shall state the facts on which the action arose, the terms of any settlement, and any disposition of the action by a court. Such notice, a copy thereof, and a certified copy of the resolution containing the required determination by the Board shall be sent to the Regulator, to the extent required. The notice period for any such notice shall run from the date of such receipt. No such indemnification shall be made prior to this process being followed or if the Regulator advises New Peoples in writing within such notice period, of its objection thereto.

14.               Notices. The persons or addresses to which mailings or deliveries shall be made may change from time to time by notice given pursuant to the provisions of this Section. Any notice or other communication given pursuant to the provisions of this Section shall be deemed to have been given (a) if sent by messenger, upon personal delivery to the party to whom the notice is directed; (b) if sent by reputable overnight courier, one business day after delivery to such courier; (c) if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine; and (d) if sent by mail, three business days following deposit in the United States mail, properly addressed, postage prepaid, certified or registered mail with return receipt requested. All notices required or permitted to be given hereunder shall be addressed as follows:

If to Executive: James W. Kiser

17310 Cleveland Road

Abingdon, VA 24211

If to Company or the Bank: New Peoples Bankshares, Inc. or

New Peoples Bank, Inc. as applicable

53 Commerce Drive

Honaker, Virginia 24260

Attention: Chair of the Board of Directors

With a copy to: James K. Cowan, Jr., Esquire CowanPerry, PC

1328 3rd Street, SW Roanoke, VA 24016

15.               Amendment. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

16. Miscellaneous.

a.                   Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon Executive, his legal representatives and estate and intestate distributees, and the Company and the Bank, their successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company or the Bank, as applicable, may be sold or otherwise transferred. Any such successor of the Company or the Bank shall be deemed to have assumed this Agreement and to have become obligated hereunder to the same extent as the Company or the Bank, as applicable, and Executive's obligations hereunder shall continue in favor of such successor.

b.                   Severability. A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

c.                   Waiver. Failure to insist upon strict compliance with any terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

d.                   Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

e.                   Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia, without reference to conflicts of law principles, except to the extent governed by federal law in which case federal law shall govern. Any payments made to Executive pursuant to this Agreement or otherwise are subject to all applicable banking laws and regulations, including, without limitation, 12 U.S.C. § l 828(k) and any regulations promulgated thereunder.

f.                    Withholding. The Company and the Bank may withhold from any amounts payable to Executive hereunder all federal, state, city or other taxes that the Company or the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood, that Executive shall be responsible for payment of all taxes in respect of the payments and benefits provided herein).

g.                   Headings and Construction. The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any Section. Any reference to a Section number shall refer to a Section of this Agreement, unless otherwise specified.

INWITNESS WHEREOF, the Company and the Bank have caused this Agreement to be executed and Executive has hereunto set his hand, all as of the Effective Date specified above.

NEW PEOPLES BANKSHARES, INC.

By: /s/ Lynn Keene

Name: H. Lynn Keene

Title: Chairman of the Board

NEW PEOPLES BANK, INC.

By: /s/ Lynn Keene

Name: H. Lynn Keene

Title: Chairman of the Board

JAMES W. KISER

/s/ J.W. Kiser

EXHIBIT A RELEASE AGREEMENT

THIS RELEASE AGREEMENT (hereinafter "Agreement") is made and entered into on the _______ day of _____________ by and among New Peoples Bankshares, Inc., a Virginia bank holding corporation (the "Company"), New Peoples Bank, Inc., a Virginia bank (the "Bank" and, together with the Company, "New Peoples"), and James W. Kiser ("Executive").

WHEREAS, New Peoples and Executive are parties to an Employment Agreement, dated as of June 25, 2025 (the "Employment Agreement"), pursuant to which Executive is eligible, subject to the terms and conditions set forth in the Employment Agreement, to receive certain compensation and benefits in connection with certain terminations of Executive's services to New Peoples.

NOW, THEREFORE, in consideration of New Peoples agreeing to provide the compensation and benefits under Section 6 of the Employment Agreement to Executive and of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged by the parties, it is agreed as follows:

1.                   In exchange for the consideration referenced above, Executive hereby completely, irrevocably, and unconditionally releases and forever discharges New Peoples, and any of their predecessor or affiliated companies, and each and all of their officers, agents, directors, supervisors, employees, representatives, and their successors and assigns, and all persons acting by, through, under, for, or in concert with them, or any of them, in any and all of their capacities (hereinafter individually or collectively, the "Released Parties"), from any and all charges, complaints, claims, and liabilities of any kind or nature whatsoever, known or unknown, suspected or unsuspected, asserted or unasserted and whether in law or equity (hereinafter referred to as a "claim" or "claims") which Executive at any time heretofore had or claimed to have or which Executive may have or claim to have regarding events that have occurred as of the Effective Date of this Agreement, including, without limitation, those based on: any employee welfare benefit or pension plan governed by the Employee Retirement Income Security Act of 1974, as amended (hereinafter "ERISA") (provided that this release does not extend to any vested benefits of Executive under New Peoples's pension and welfare benefit plans as of the date of Executive's termination of services); the Civil Rights Act of 1964, as amended (race, color, religion, sex and national origin discrimination and harassment); the Civil Rights Act of 1966 (42 U.S.C. § 1981) (discrimination); the Age Discrimination in Employment Act of 1967, as amended (hereinafter "ADEA"); the Older Workers Benefit Protection Act, as amended; the Americans With Disabilities Act, as amended (hereinafter "ADA"); § 503 of the Rehabilitation Act of 1973; the Fair Labor Standards Act, as amended (wage and hour matters); the Family and Medical Leave Act, as amended (family leave matters); any other federal, state, or local laws or regulations regarding employment discrimination or harassment, wages, insurance, leave, privacy or any other matter; any negligent or intentional tort; any contract, policy or practice (implied, oral, or written); or any other theory of recovery under federal, state, or local law, and whether for compensatory or punitive damages, or other equitable relief, including, but not limited to, any and all claims which Executive may now have or may have had, arising from or in any way whatsoever connected with Executive's employment, service, or contacts, with New Peoples or any other of the Released Parties. Notwithstanding the foregoing, the released claims do not include, and this Agreement does not release, any: (a) rights to compensation and benefits provided under Section 6 of the Employment Agreement; (b) rights to indemnification Executive may have under applicable law, the bylaws or certificate of incorporation of New Peoples, any applicable director and officer liability policy or under the Employment Agreement, as a result of having served as an officer or director of New Peoples or any of its affiliates; and (c) any claims that Executive may not by law release through a settlement agreement such as this.

2.                   To the extent permitted by law, Executive agrees that Executive will not cause or encourage any future legal proceedings to be maintained or instituted against any of the Released Parties. To the extent permitted by law, Executive agrees that Executive will not accept any remedy or recovery arising from any charge filed or proceedings or investigation conducted by the EEOC or by any state or local human rights or employment rights enforcement agency relating to any of the matters released in this Agreement.

3. Older<br> Workers Benefit Protection Act /ADEA Waiver:

a.                   Executive acknowledges that New Peoples has advised Executive in writing to consult with an attorney of Executive's choice before signing this Agreement, and Executive has been given the opportunity to consult with an attorney of Executive's choice before signing this Agreement.

b.                   Executive acknowledges that Executive has been given the opportunity to review and consider this Agreement for a full twenty-one (21) days before signing it, and that, if Executive has signed this Agreement in less than that time, Executive has done so voluntarily in order to obtain sooner the benefits of this Agreement.

c. Executive<br> further acknowledges that Executive may revoke this Agreement within seven

(7) days after signing it, provided that this Agreement will not become effective until such seven (7) day period has expired. To be effective, any such revocation must be in writing and delivered to Company's principal place of business by the close of business on the seventh (7th) day after signing the Agreement and must expressly state Executive's intention to revoke this Agreement. Provided that Executive does not timely revoke this Agreement, the eighth (8th) day following Executive's execution hereof shall be deemed the "Effective Date" of this Agreement.

d.                   The Parties also agree that the release provided by Executive in this Agreement does not include a release for claims under the ADEA arising after the date Executive signs this Agreement.

4.                   Executive shall promptly turn over to the Company any and all documents, files, computer records, or other materials, including all copies thereof (whether in electronic or hard copy form) belonging to, or containing confidential or proprietary information obtained from New Peoples that are in Executive's possession, custody, or control, including any such materials that may be at Executive's home. Executive shall certify in writing within five (5) business days of the Effective Date that all such materials have been returned and no copies have been retained.

5.                   This Agreement shall not in any way be construed as an admission by New Peoples of any acts of unlawful conduct, wrongdoing or discrimination against Executive, and New Peoples specifically disclaims any liability to Executive on the part of itself, its employees, and its agents.

6.                   This Agreement cannot be amended, modified, or supplemented in any respect except by written agreement entered into and signed by the parties hereto.

7.                   The Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to the principles of conflict of laws. The parties hereby consent to the exclusive venue for the resolution of any disputes arising under or relating to this Agreement to be in the United States Federal Court for the Western District of Virginia, Abingdon Division, or the state courts located in Washington County, Virginia.

8.                   Executive hereby acknowledges that Executive has read, fully understands, and voluntarily agrees to all terms of this Agreement and that Executive signs it voluntarily and without coercion. Executive further acknowledges that Executive was given an opportunity to consider and review this Agreement and the waivers contained in this Agreement, that Executive has done so and that the waivers made herein are knowing, conscious and with full appreciation that Executive is forever foreclosed from pursing any of the rights so waived.

9.                   The Agreement may be signed in counterparts, and each counterpart shall be considered an original for all purposes.

PLEASE READ THIS AGREEMENT CAREFULLY; IT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

IN WITNESS WHEREOF, the Company and Bank have caused this Agreement to be executed by their duly authorized officers, and Executive has executed this Agreement, as of the date first written above.

NEW PEOPLES BANKSHARES, INC.

By: ______________

Name: H. Lynn Keene

Title: Chairman of the Board

NEW PEOPLES BANK, INC.

By: ______________

Name: H. Lynn Keene

Title: Chairman of the Board

JAMES W. KISER

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

Exhibit32

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

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