[10-Q] National Bankshares Inc/VA Quarterly Earnings Report
National Bankshares, Inc. (NKSH) reported improved profitability in the quarter and year-to-date periods while showing mixed funding and investment portfolio dynamics. For the three months ended June 30, 2025, the Company earned $2.289 million versus a loss of $0.307 million a year earlier, delivering basic and diluted EPS of $0.36. Net interest income rose to $10.991 million from $8.677 million, driven by higher interest and fees on loans. Loans totaled $1.011 billion, up from $988.6 million, and the allowance for credit losses was $10.422 million.
The securities available-for-sale portfolio had a fair value of $590.021 million with aggregate unrealized losses, but other comprehensive income improved materially, adding $11.353 million year-to-date. Total deposits were $1.627675 billion and cash and cash equivalents ended at $92.849 million. The Company paid regular dividends of $0.73 per share and is carrying goodwill of $10.718 million from its 2024 Frontier Community Bank acquisition, which expanded its market footprint into Waynesboro, Staunton and Lynchburg, Virginia.
National Bankshares, Inc. (NKSH) ha registrato un miglioramento della redditività nel trimestre e nel periodo da inizio anno, pur mostrando dinamiche miste nei finanziamenti e nel portafoglio investimenti. Per i tre mesi terminati il 30 giugno 2025, la Società ha realizzato un utile di $2.289 million rispetto a una perdita di $0.307 million nello stesso periodo dell'anno precedente, con un utile base e diluito per azione di $0.36. Il reddito da interessi netto è salito a $10.991 million da $8.677 million, trainato da maggiori interessi e commissioni sui prestiti. I prestiti ammontavano a $1.011 billion, in aumento rispetto a $988.6 million, e la copertura per perdite su crediti era pari a $10.422 million.
Il portafoglio titoli disponibili per la vendita presentava un valore equo di $590.021 million con perdite non realizzate aggregate, ma gli altri proventi complessivi sono migliorati sensibilmente, aggiungendo $11.353 million da inizio anno. I depositi totali erano di $1.627675 billion e le disponibilità liquide e mezzi equivalenti si attestavano a $92.849 million. La Società ha distribuito dividendi regolari di $0.73 per share e riporta un avviamento di $10.718 million derivante dall'acquisizione nel 2024 di Frontier Community Bank, che ha ampliato la sua presenza di mercato a Waynesboro, Staunton e Lynchburg, in Virginia.
National Bankshares, Inc. (NKSH) reportó una rentabilidad mejorada en el trimestre y en el acumulado del año, aunque mostró dinámicas mixtas en la financiación y en la cartera de inversiones. Para los tres meses terminados el 30 de junio de 2025, la Compañía obtuvo $2.289 million frente a una pérdida de $0.307 million un año antes, registrando un BPA básico y diluido de $0.36. Los ingresos netos por intereses aumentaron a $10.991 million desde $8.677 million, impulsados por mayores intereses y comisiones sobre préstamos. Los préstamos sumaron $1.011 billion, respecto a $988.6 million, y la provisión para pérdidas crediticias fue de $10.422 million.
La cartera de valores disponibles para la venta tenía un valor razonable de $590.021 million con pérdidas no realizadas agregadas, pero el otro resultado integral mejoró significativamente, agregando $11.353 million en el año hasta la fecha. Los depósitos totales fueron $1.627675 billion y el efectivo y equivalentes cerraron en $92.849 million. La Compañía pagó dividendos regulares de $0.73 per share y mantiene plusvalía (goodwill) por $10.718 million procedente de la adquisición en 2024 de Frontier Community Bank, que amplió su presencia en Waynesboro, Staunton y Lynchburg, Virginia.
National Bankshares, Inc. (NKSH)는 분기 및 연초 누계 기간에 수익성이 개선되었으나 자금조달 및 투자 포트폴리오에서는 혼재된 흐름을 보였습니다. 2025년 6월 30일로 종료된 3개월 동안 회사는 $2.289 million의 이익을 기록했으며, 이는 전년 동기 $0.307 million의 손실에서의 개선으로 기본 및 희석 주당순이익은 $0.36였습니다. 순이자수익은 대출에 대한 이자 및 수수료 증가로 $8.677 million에서 $10.991 million으로 상승했습니다. 대출 잔액은 $1.011 billion으로 $988.6 million에서 증가했으며, 대손충당금은 $10.422 million입니다.
매도가능증권 포트폴리오의 공정가치는 $590.021 million였으며 미실현손실이 집계되어 있으나, 기타포괄손익은 연초 이후 $11.353 million 증가하며 크게 개선되었습니다. 총 예금은 $1.627675 billion, 현금 및 현금성자산은 $92.849 million로 종료되었습니다. 회사는 주당 $0.73 per share의 정기 배당을 지급했으며, 2024년 Frontier Community Bank 인수로 인한 영업권(goodwill) $10.718 million을 보유하고 있는데, 이 인수로 버지니아주 Waynesboro, Staunton 및 Lynchburg 지역으로 시장 범위를 확대했습니다.
National Bankshares, Inc. (NKSH) a affiché une amélioration de sa rentabilité sur le trimestre et depuis le début de l'année, tout en présentant des dynamiques mitigées en matière de financement et de portefeuille d'investissement. Pour les trois mois clos le 30 juin 2025, la Société a réalisé un bénéfice de $2.289 million contre une perte de $0.307 million un an plus tôt, avec un BPA de base et dilué de $0.36. Le produit net d'intérêts est passé à $10.991 million contre $8.677 million, soutenu par des intérêts et frais sur prêts plus élevés. Les prêts s'élevaient à $1.011 billion contre $988.6 million, et la provision pour pertes sur créances était de $10.422 million.
Le portefeuille de titres disponibles à la vente présentait une juste valeur de $590.021 million avec des pertes non réalisées agrégées, mais les autres éléments du résultat global se sont améliorés sensiblement, ajoutant $11.353 million depuis le début de l'année. Les dépôts totaux s'élevaient à $1.627675 billion et les liquidités et équivalents de trésorerie se sont établis à $92.849 million. La Société a versé des dividendes réguliers de $0.73 per share et porte un goodwill de $10.718 million issu de l'acquisition en 2024 de Frontier Community Bank, qui a étendu sa présence sur les marchés de Waynesboro, Staunton et Lynchburg (Virginie).
National Bankshares, Inc. (NKSH) verzeichnete im Quartal und im laufenden Jahr eine verbesserte Profitabilität, zeigte jedoch gemischte Entwicklungen bei Finanzierung und Anlageportfolio. Für die drei Monate zum 30. Juni 2025 erzielte das Unternehmen $2.289 million im Vergleich zu einem Verlust von $0.307 million im Vorjahreszeitraum und wies ein einfaches sowie verwässertes Ergebnis je Aktie von $0.36 aus. Das Nettozinsergebnis stieg auf $10.991 million gegenüber $8.677 million, angetrieben durch höhere Zinsen und Gebühren aus Krediten. Kredite beliefen sich auf $1.011 billion gegenüber $988.6 million, und die Kreditverlustvorsorge betrug $10.422 million.
Das zur Veräußerung verfügbare Wertpapierportfolio hatte einen beizulegenden Zeitwert von $590.021 million mit aggregierten unrealisierten Verlusten, dennoch verbesserte sich das sonstige Ergebnis (Other Comprehensive Income) deutlich und erhöhte sich im Jahresverlauf um $11.353 million. Die Gesamteinlagen betrugen $1.627675 billion und liquide Mittel sowie Zahlungsmitteläquivalente beliefen sich auf $92.849 million. Das Unternehmen zahlte reguläre Dividenden von $0.73 per share und führt immateriellen Geschäfts- oder Firmenwert (Goodwill) in Höhe von $10.718 million aus der Übernahme der Frontier Community Bank im Jahr 2024, die die Marktpräsenz in Waynesboro, Staunton und Lynchburg (Virginia) ausgeweitet hat.
- Returned to profitability for the quarter with net income of $2.289 million versus a loss a year earlier
- Net interest income increased to $10.991 million for the quarter and $21.241 million year-to-date, driven by higher loan interest
- Loans grew to $1.011 billion, up from $988.6 million, supporting interest income expansion
- Other comprehensive income improved by $11.353 million year-to-date due to unrealized gains in the securities portfolio
- Dividend maintained at $0.73 per share, indicating stable shareholder distributions
- Cash and cash equivalents declined to $92.849 million from $108.117 million, reducing liquidity
- Net cash used in financing activities was $21.823 million, driven by a $18.345 million decrease in time deposits
- Significant unrealized losses in securities: amortized cost $654.249 million vs fair value $590.021 million (aggregate unrealized losses)
- Conversion and other noninterest expenses remain elevated (conversion expense $1.977 million for the quarter), pressuring operating costs
Insights
TL;DR: Profitability rebound driven by higher loan yields and NII, with improved comprehensive income from securities.
Net interest income increased significantly year-over-year to $10.991 million for the quarter and $21.241 million for six months, reflecting stronger loan interest and fees ($13.495 million quarterly). The Company moved from a quarterly loss to a quarterly profit, producing $2.289 million in net income and basic EPS of $0.36. Year-to-date net income of $5.525 million versus $1.867 million in 2024 is a notable improvement. Noninterest income was stable and dividends were maintained at $0.73 per share, supporting shareholder return continuity. The Frontier Community Bank acquisition remains reflected in goodwill and expanded presence.
TL;DR: Credit metrics are stable but liquidity and unrealized securities losses warrant monitoring.
The allowance for credit losses stands at $10.422 million, only modestly higher than year-end, and provision expense for the quarter was minimal ($36 thousand), indicating no acute credit deterioration reported. However, cash and cash equivalents declined to $92.849 million from $108.117 million at year-end and net cash used in financing activities was $21.823 million, driven in part by a $18.345 million reduction in time deposits. The securities portfolio shows significant unrealized losses at amortized cost $654.249 million and fair value $590.021 million, although management recorded no credit impairments and OCI improved year-to-date. These mixed liquidity and market-risk signals are material for deposit and interest-rate sensitivity assessment.
National Bankshares, Inc. (NKSH) ha registrato un miglioramento della redditività nel trimestre e nel periodo da inizio anno, pur mostrando dinamiche miste nei finanziamenti e nel portafoglio investimenti. Per i tre mesi terminati il 30 giugno 2025, la Società ha realizzato un utile di $2.289 million rispetto a una perdita di $0.307 million nello stesso periodo dell'anno precedente, con un utile base e diluito per azione di $0.36. Il reddito da interessi netto è salito a $10.991 million da $8.677 million, trainato da maggiori interessi e commissioni sui prestiti. I prestiti ammontavano a $1.011 billion, in aumento rispetto a $988.6 million, e la copertura per perdite su crediti era pari a $10.422 million.
Il portafoglio titoli disponibili per la vendita presentava un valore equo di $590.021 million con perdite non realizzate aggregate, ma gli altri proventi complessivi sono migliorati sensibilmente, aggiungendo $11.353 million da inizio anno. I depositi totali erano di $1.627675 billion e le disponibilità liquide e mezzi equivalenti si attestavano a $92.849 million. La Società ha distribuito dividendi regolari di $0.73 per share e riporta un avviamento di $10.718 million derivante dall'acquisizione nel 2024 di Frontier Community Bank, che ha ampliato la sua presenza di mercato a Waynesboro, Staunton e Lynchburg, in Virginia.
National Bankshares, Inc. (NKSH) reportó una rentabilidad mejorada en el trimestre y en el acumulado del año, aunque mostró dinámicas mixtas en la financiación y en la cartera de inversiones. Para los tres meses terminados el 30 de junio de 2025, la Compañía obtuvo $2.289 million frente a una pérdida de $0.307 million un año antes, registrando un BPA básico y diluido de $0.36. Los ingresos netos por intereses aumentaron a $10.991 million desde $8.677 million, impulsados por mayores intereses y comisiones sobre préstamos. Los préstamos sumaron $1.011 billion, respecto a $988.6 million, y la provisión para pérdidas crediticias fue de $10.422 million.
La cartera de valores disponibles para la venta tenía un valor razonable de $590.021 million con pérdidas no realizadas agregadas, pero el otro resultado integral mejoró significativamente, agregando $11.353 million en el año hasta la fecha. Los depósitos totales fueron $1.627675 billion y el efectivo y equivalentes cerraron en $92.849 million. La Compañía pagó dividendos regulares de $0.73 per share y mantiene plusvalía (goodwill) por $10.718 million procedente de la adquisición en 2024 de Frontier Community Bank, que amplió su presencia en Waynesboro, Staunton y Lynchburg, Virginia.
National Bankshares, Inc. (NKSH)는 분기 및 연초 누계 기간에 수익성이 개선되었으나 자금조달 및 투자 포트폴리오에서는 혼재된 흐름을 보였습니다. 2025년 6월 30일로 종료된 3개월 동안 회사는 $2.289 million의 이익을 기록했으며, 이는 전년 동기 $0.307 million의 손실에서의 개선으로 기본 및 희석 주당순이익은 $0.36였습니다. 순이자수익은 대출에 대한 이자 및 수수료 증가로 $8.677 million에서 $10.991 million으로 상승했습니다. 대출 잔액은 $1.011 billion으로 $988.6 million에서 증가했으며, 대손충당금은 $10.422 million입니다.
매도가능증권 포트폴리오의 공정가치는 $590.021 million였으며 미실현손실이 집계되어 있으나, 기타포괄손익은 연초 이후 $11.353 million 증가하며 크게 개선되었습니다. 총 예금은 $1.627675 billion, 현금 및 현금성자산은 $92.849 million로 종료되었습니다. 회사는 주당 $0.73 per share의 정기 배당을 지급했으며, 2024년 Frontier Community Bank 인수로 인한 영업권(goodwill) $10.718 million을 보유하고 있는데, 이 인수로 버지니아주 Waynesboro, Staunton 및 Lynchburg 지역으로 시장 범위를 확대했습니다.
National Bankshares, Inc. (NKSH) a affiché une amélioration de sa rentabilité sur le trimestre et depuis le début de l'année, tout en présentant des dynamiques mitigées en matière de financement et de portefeuille d'investissement. Pour les trois mois clos le 30 juin 2025, la Société a réalisé un bénéfice de $2.289 million contre une perte de $0.307 million un an plus tôt, avec un BPA de base et dilué de $0.36. Le produit net d'intérêts est passé à $10.991 million contre $8.677 million, soutenu par des intérêts et frais sur prêts plus élevés. Les prêts s'élevaient à $1.011 billion contre $988.6 million, et la provision pour pertes sur créances était de $10.422 million.
Le portefeuille de titres disponibles à la vente présentait une juste valeur de $590.021 million avec des pertes non réalisées agrégées, mais les autres éléments du résultat global se sont améliorés sensiblement, ajoutant $11.353 million depuis le début de l'année. Les dépôts totaux s'élevaient à $1.627675 billion et les liquidités et équivalents de trésorerie se sont établis à $92.849 million. La Société a versé des dividendes réguliers de $0.73 per share et porte un goodwill de $10.718 million issu de l'acquisition en 2024 de Frontier Community Bank, qui a étendu sa présence sur les marchés de Waynesboro, Staunton et Lynchburg (Virginie).
National Bankshares, Inc. (NKSH) verzeichnete im Quartal und im laufenden Jahr eine verbesserte Profitabilität, zeigte jedoch gemischte Entwicklungen bei Finanzierung und Anlageportfolio. Für die drei Monate zum 30. Juni 2025 erzielte das Unternehmen $2.289 million im Vergleich zu einem Verlust von $0.307 million im Vorjahreszeitraum und wies ein einfaches sowie verwässertes Ergebnis je Aktie von $0.36 aus. Das Nettozinsergebnis stieg auf $10.991 million gegenüber $8.677 million, angetrieben durch höhere Zinsen und Gebühren aus Krediten. Kredite beliefen sich auf $1.011 billion gegenüber $988.6 million, und die Kreditverlustvorsorge betrug $10.422 million.
Das zur Veräußerung verfügbare Wertpapierportfolio hatte einen beizulegenden Zeitwert von $590.021 million mit aggregierten unrealisierten Verlusten, dennoch verbesserte sich das sonstige Ergebnis (Other Comprehensive Income) deutlich und erhöhte sich im Jahresverlauf um $11.353 million. Die Gesamteinlagen betrugen $1.627675 billion und liquide Mittel sowie Zahlungsmitteläquivalente beliefen sich auf $92.849 million. Das Unternehmen zahlte reguläre Dividenden von $0.73 per share und führt immateriellen Geschäfts- oder Firmenwert (Goodwill) in Höhe von $10.718 million aus der Übernahme der Frontier Community Bank im Jahr 2024, die die Marktpräsenz in Waynesboro, Staunton und Lynchburg (Virginia) ausgeweitet hat.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended |
For the transition period from ________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
(Not applicable)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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. ☒
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). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Outstanding shares of common stock at August 13, 2025 |
Table of Contents
NATIONAL BANKSHARES, INC.
Form 10-Q
Index
Part I – Financial Information |
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Item 1 |
Financial Statements |
3 |
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Consolidated Balance Sheets, June 30, 2025 (Unaudited) and December 31, 2024 |
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Consolidated Statements of Income (Loss) for the Three Months Ended June 30, 2025 and 2024 (Unaudited) |
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Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended June 30, 2025 and 2024 (Unaudited) |
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Consolidated Statements of Income for the Six Months Ended June 30, 2025 and 2024 (Unaudited) |
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Consolidated Statements of Comprehensive Income (Loss) for the Six Months Ended June 30, 2025 and 2024 (Unaudited) |
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Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2025 and 2024 (Unaudited) |
8 |
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Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2025 and 2024 (Unaudited) |
8 |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (Unaudited) |
9 |
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Notes to Consolidated Financial Statements (Unaudited) |
11 |
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Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
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Item 3 |
Quantitative and Qualitative Disclosures About Market Risk |
44 |
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Item 4 |
Controls and Procedures |
44 |
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Part II – Other Information |
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Item 1 |
Legal Proceedings |
44 |
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Item 1A |
Risk Factors |
44 |
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Item 2 |
Unregistered Sales of Equity Securities and Use of Proceeds |
44 |
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Item 3 |
Defaults Upon Senior Securities |
44 |
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Item 4 |
Mine Safety Disclosures |
44 |
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Item 5 |
Other Information |
45 |
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Item 6 |
Exhibits |
45 |
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Signatures |
46 |
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2
Table of Contents
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
National Bankshares, Inc.
Consolidated Balance Sheets
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(in thousands, except share and per share data) |
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June 30, 2025 |
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December 31, 2024 |
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Assets |
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Cash and due from banks |
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Interest-bearing deposits |
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Federal funds sold |
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Total cash and cash equivalents |
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Securities available for sale, at fair value |
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Mortgage loans held for sale |
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Loans: |
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Real estate construction loans |
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Consumer real estate loans |
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Commercial real estate loans |
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Commercial non real estate loans |
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Public sector and IDA loans |
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Consumer non real estate loans |
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Total loans |
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Less: deferred fees and costs |
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Loans, net of deferred fees and costs |
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Less: allowance for credit losses |
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Loans, net |
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Premises and equipment, net |
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Accrued interest receivable |
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Goodwill |
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Core deposit intangible, net |
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Bank-owned life insurance ("BOLI") |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Noninterest-bearing demand deposits |
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$ |
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Interest-bearing demand deposits |
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Savings deposits |
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Time deposits |
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Total deposits |
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Accrued interest payable |
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Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Commitments and contingencies |
|
|
|
|
|
|
||
Stockholders' Equity |
|
|
|
|
|
|
||
Preferred stock, |
|
$ |
- |
|
|
$ |
- |
|
Common stock of $ |
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
||
Accumulated other comprehensive loss, net |
|
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to consolidated financial statements.
3
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Income (Loss)
(Unaudited)
|
|
Three Months Ended June 30, |
|
|||||
(in thousands, except share and per share data) |
|
2025 |
|
|
2024 |
|
||
Interest Income |
|
|
|
|
|
|
||
Interest and fees on loans |
|
$ |
|
|
$ |
|
||
Interest on federal funds sold |
|
|
|
|
|
|
||
Interest on interest-bearing deposits |
|
|
|
|
|
|
||
Interest on securities – taxable |
|
|
|
|
|
|
||
Interest on securities – nontaxable |
|
|
|
|
|
|
||
Total interest income |
|
|
|
|
|
|
||
Interest Expense |
|
|
|
|
|
|
||
Interest on time deposits |
|
|
|
|
|
|
||
Interest on other deposits |
|
|
|
|
|
|
||
Interest on borrowings |
|
|
- |
|
|
|
|
|
Total interest expense |
|
|
|
|
|
|
||
Net interest income |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Net interest income after provision for credit losses |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Noninterest Income |
|
|
|
|
|
|
||
Service charges on deposit accounts |
|
|
|
|
|
|
||
Other service charges and fees |
|
|
|
|
|
|
||
Credit and debit card fees, net |
|
|
|
|
|
|
||
Trust income |
|
|
|
|
|
|
||
BOLI income |
|
|
|
|
|
|
||
Gain on sale of mortgage loans held for sale |
|
|
|
|
|
|
||
Other income |
|
|
|
|
|
|
||
Total noninterest income |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Noninterest Expense |
|
|
|
|
|
|
||
Salaries and employee benefits |
|
|
|
|
|
|
||
Occupancy, furniture and fixtures |
|
|
|
|
|
|
||
Data processing and ATM |
|
|
|
|
|
|
||
FDIC assessment |
|
|
|
|
|
|
||
Intangible asset amortization |
|
|
|
|
|
|
||
Franchise taxes |
|
|
|
|
|
|
||
Professional services |
|
|
|
|
|
|
||
Merger-related expense |
|
|
- |
|
|
|
|
|
Conversion expense |
|
|
|
|
|
|
||
Other operating expenses |
|
|
|
|
|
|
||
Total noninterest expense |
|
|
|
|
|
|
||
Income (loss) before income tax |
|
|
|
|
|
( |
) |
|
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
Net Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
Basic net income (loss) per common share |
|
$ |
|
|
$ |
( |
) |
|
Diluted net income (loss) per common share |
|
$ |
|
|
$ |
( |
) |
|
Weighted average number of common shares outstanding, basic |
|
|
|
|
|
|
||
Weighted average number of common shares outstanding, diluted |
|
|
|
|
|
|
||
Dividends declared per common share |
|
$ |
|
|
$ |
|
||
4
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2025 and 2024
(Unaudited)
|
|
Three months ended June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
||
Other Comprehensive Income (Loss), Net of Tax |
|
|
|
|
|
|
||
Unrealized holding gain (loss) on available for sale securities net of tax of $ |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
Total Comprehensive Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
5
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Income
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
(in thousands, except share and per share data) |
|
2025 |
|
|
2024 |
|
||
Interest Income |
|
|
|
|
|
|
||
Interest and fees on loans |
|
$ |
|
|
$ |
|
||
Interest on federal funds sold |
|
|
|
|
|
|
||
Interest on interest-bearing deposits |
|
|
|
|
|
|
||
Interest on securities – taxable |
|
|
|
|
|
|
||
Interest on securities – nontaxable |
|
|
|
|
|
|
||
Total interest income |
|
|
|
|
|
|
||
Interest Expense |
|
|
|
|
|
|
||
Interest on time deposits |
|
|
|
|
|
|
||
Interest on other deposits |
|
|
|
|
|
|
||
Interest on borrowings |
|
|
- |
|
|
|
|
|
Total interest expense |
|
|
|
|
|
|
||
Net interest income |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Net interest income after provision for credit losses |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Noninterest Income |
|
|
|
|
|
|
||
Service charges on deposit accounts |
|
|
|
|
|
|
||
Other service charges and fees |
|
|
|
|
|
|
||
Credit and debit card fees, net |
|
|
|
|
|
|
||
Trust income |
|
|
|
|
|
|
||
BOLI income |
|
|
|
|
|
|
||
Gain on sale of mortgage loans held for sale |
|
|
|
|
|
|
||
Other income |
|
|
|
|
|
|
||
Total noninterest income |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Noninterest Expense |
|
|
|
|
|
|
||
Salaries and employee benefits |
|
|
|
|
|
|
||
Occupancy, furniture and fixtures |
|
|
|
|
|
|
||
Data processing and ATM |
|
|
|
|
|
|
||
FDIC assessment |
|
|
|
|
|
|
||
Intangible asset amortization |
|
|
|
|
|
|
||
Franchise taxes |
|
|
|
|
|
|
||
Professional services |
|
|
|
|
|
|
||
Merger-related expense |
|
|
- |
|
|
|
|
|
Conversion expense |
|
|
|
|
|
|
||
Other operating expenses |
|
|
|
|
|
|
||
Total noninterest expense |
|
|
|
|
|
|
||
Income before income tax expense |
|
|
|
|
|
|
||
Income tax expense |
|
|
|
|
|
|
||
Net Income |
|
$ |
|
|
$ |
|
||
Basic net income per common share |
|
$ |
|
|
$ |
|
||
Diluted net income per common share |
|
$ |
|
|
$ |
|
||
Weighted average number of common shares outstanding, basic |
|
|
|
|
|
|
||
Weighted average number of common shares outstanding, diluted |
|
|
|
|
|
|
||
Dividends declared per common share |
|
$ |
|
|
$ |
|
||
6
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2025 and 2024
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net Income |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Other Comprehensive Income (Loss), Net of Tax |
|
|
|
|
|
|
||
Unrealized holding gain (loss) on available for sale securities net of tax of $ |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
Total Comprehensive Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
See accompanying notes to consolidated financial statements.
7
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
Three Months Ended June 30, 2025 and 2024
(Unaudited)
(in thousands except share data) |
|
Common Stock and Additional Paid-in Capital |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Loss |
|
|
Total |
|
||||
Balances at March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net loss |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Acquisition of Frontier Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends of $ |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive loss, net of tax of ($ |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends of $ |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive income, net of tax of $ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Six Months Ended June 30, 2025 and 2024
(Unaudited)
(in thousands except per share data) |
|
Common Stock and Additional Paid-in Capital |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
||||
Balances at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition of Frontier Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends of $ |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive loss, net of tax of ($ |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends of $ |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive income, net of tax of $ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
See accompanying notes to consolidated financial statements.
8
Table of Contents
National Bankshares, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2025 and 2024
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Depreciation of premises and equipment |
|
|
|
|
|
|
||
Amortization of premiums and accretion of discounts on securities, net |
|
|
|
|
|
|
||
Amortization of core deposit intangible |
|
|
|
|
|
|
||
Accretion of fair value of acquired loans |
|
|
( |
) |
|
|
( |
) |
Amortization of fair value of acquired time deposits and leases |
|
|
|
|
|
|
||
Origination of mortgage loans held for sale |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of mortgage loans held for sale |
|
|
|
|
|
|
||
Gain on sale of mortgage loans held for sale |
|
|
( |
) |
|
|
( |
) |
Increase in cash value of bank-owned life insurance |
|
|
( |
) |
|
|
( |
) |
Equity based compensation expense |
|
|
|
|
|
|
||
Net change in: |
|
|
|
|
|
|
||
Accrued interest receivable |
|
|
|
|
|
|
||
Other assets |
|
|
( |
) |
|
|
( |
) |
Accrued interest payable |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Proceeds from repayments of mortgage-backed securities |
|
|
|
|
|
|
||
Proceeds from calls, sales and maturities of securities available for sale |
|
|
|
|
|
|
||
Net change in restricted stock |
|
|
|
|
|
|
||
Purchase of loan participations |
|
|
( |
) |
|
|
( |
) |
Collection of loan participations |
|
|
|
|
|
|
||
Loan originations and principal collections, net |
|
|
( |
) |
|
|
( |
) |
Recoveries on loans charged off |
|
|
|
|
|
|
||
Purchases of premises and equipment |
|
|
( |
) |
|
|
( |
) |
Cash acquired in the acquisition, net of cash paid |
|
|
|
|
|
|
||
Net cash provided by investing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Net change in time deposits |
|
|
( |
) |
|
|
|
|
Net change in other deposits |
|
|
|
|
|
( |
) |
|
Cash dividends paid |
|
|
( |
) |
|
|
( |
) |
Repayment of borrowings |
|
|
- |
|
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
9
Table of Contents
|
|
For the Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Supplemental Disclosures of Cash Flow Information |
|
|
|
|
|
|
||
Cash payments for: |
|
|
|
|
|
|
||
Interest on deposits and borrowings |
|
$ |
|
|
$ |
|
||
Income taxes |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Supplemental Disclosure of Noncash Activities |
|
|
|
|
|
|
||
Loans charged against the allowance for credit losses |
|
$ |
|
|
$ |
|
||
Unrealized holding gain on securities available for sale |
|
|
|
|
|
( |
) |
|
Lease liabilities arising from obtaining right-of-use assets during the period |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
See accompanying notes to consolidated financial statements.
10
Table of Contents
National Bankshares, Inc.
Notes to Consolidated Financial Statements
June 30, 2025
(Unaudited)
$ in thousands, except per share data
Note 1: General and Summary of Significant Accounting Policies
The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (the “Bank” or “NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. All intercompany accounts and transactions between the Company and its subsidiaries have been eliminated. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of the Company’s management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included.
Application of the principles of GAAP and practices within the banking industry require management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statement; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on loans and acquisition accounting.
The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of results of operations for the full year or any other interim period. The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). The Company’s significant accounting policies followed in preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the Company's 2024 Form 10-K. All amounts and disclosures included in this quarterly report as of December 31, 2024, were derived from the Company’s audited consolidated financial statements. Certain items in the prior period financial statements have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or stockholders’ equity. The Company posts all reports required to be filed under the Securities Exchange Act of 1934 on its web site at www.nationalbankshares.com.
Risks and Uncertainties
The Company is closely monitoring risks that may impact its business, including inflation, along with U.S. monetary policy maneuvers to manage inflation. Inflation and U.S. monetary policy maneuvers to reduce it may impact the Company’s customers’ demand for banking services and ability to qualify for and/or repay loans. These risks could adversely affect the Company’s business, financial condition, results of operations, cash flows, credit risk, asset valuations and capital position.
Recently Adopted Accounting Developments
ASU 2023-09
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“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 and applies to annual periods beginning after December 15, 2024. Adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
ASU 2024-03
In November 2024, the 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
11
Table of Contents
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.
Note 2: Business Combination
On June 1, 2024 (the “Acquisition Date”), the Company completed its acquisition of Frontier Community Bank ("FCB"), a Virginia chartered commercial bank headquartered in Waynesboro, Virginia, in accordance with the definitive merger agreement entered on January 23, 2024, by and among the Company, the Bank and FCB. Upon completion of the merger, FCB merged with and into the Bank. Each share of FCB common stock was converted into either $
The acquisition of FCB was accounted for as a business combination using the acquisition method of accounting. Assets acquired, liabilities assumed, and consideration paid were recorded at estimated fair value on the Acquisition Date. The excess of the purchase price over the fair value of the net assets was recorded as provisional goodwill and represents the benefit from the transaction that is not otherwise quantifiable, including expected management and operational synergies and intangible assets that do not qualify for separate recognition. The Company does not expect that any portion of goodwill will be deductible. Please refer to the Company’s 2024 Form 10-K, Note 22: Business Combination for additional information of the acquisition of FCB.
12
Table of Contents
The following table presents the calculation of the purchase price and the fair value of the identifiable assets and liabilities as of the Acquisition Date.
June 1, 2024 |
|
As Recorded by FCB |
|
|
Estimated Fair Value Adjustments |
|
|
Estimated Fair Values as Recorded by NBI |
|
|||
Purchase Price Consideration: |
|
|
|
|
|
|
|
|
|
|||
Stock consideration(1) |
|
|
|
|
|
|
|
$ |
|
|||
Cash consideration (2) |
|
|
|
|
|
|
|
|
|
|||
Total purchase price consideration |
|
|
|
|
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Identifiable assets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Securities |
|
|
|
|
|
( |
) |
|
|
|
||
Loans, gross, purchased performing |
|
|
|
|
|
( |
) |
|
|
|
||
Loans, gross, purchased credit deteriorated |
|
|
|
|
|
( |
) |
|
|
|
||
Loans in process |
|
|
|
|
|
|
|
|
|
|||
Deferred fees and costs on loans |
|
|
|
|
|
( |
) |
|
|
|
||
Allowance for credit losses on loans |
|
|
( |
) |
|
|
|
|
|
|
||
Premises and equipment |
|
|
|
|
|
|
|
|
|
|||
Core deposit intangible |
|
|
|
|
|
|
|
|
|
|||
Other assets |
|
|
|
|
|
|
|
|
|
|||
Total identifiable assets acquired |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Identifiable Liabilities |
|
|
|
|
|
|
|
|
|
|||
Deposits |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Borrowings |
|
|
|
|
|
( |
) |
|
|
|
||
Other liabilities |
|
|
|
|
|
|
|
|
|
|||
Total identifiable liabilities assumed |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Fair value of net assets acquired |
|
|
|
|
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Goodwill(3) |
|
|
|
|
|
|
|
$ |
|
|||
13
Table of Contents
Note 3: Loans and Allowance for Credit Losses
Loans
Loans include acquired loans and originated loans. Acquired loans are presented at their outstanding principal balance, net of the remaining purchase discount of $
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Real estate construction |
|
$ |
|
|
$ |
|
||
Consumer real estate |
|
|
|
|
|
|
||
Commercial real estate |
|
|
|
|
|
|
||
Commercial non real estate |
|
|
|
|
|
|
||
Public sector and IDA |
|
|
|
|
|
|
||
Consumer non real estate |
|
|
|
|
|
|
||
Gross loans |
|
$ |
|
|
$ |
|
||
Less deferred fees and costs |
|
|
( |
) |
|
|
( |
) |
Loans, net of deferred fees and costs |
|
$ |
|
|
$ |
|
||
Allowance for credit losses on loans |
|
|
( |
) |
|
|
( |
) |
Total loans, net |
|
$ |
|
|
$ |
|
||
Accrued interest receivable of $
Past Due and Nonaccrual Loans
The following tables present the aging of past due loans, by loan pool, as of the dates indicated.
June 30, 2025 |
|
Accruing |
|
|
Accruing |
|
|
Accruing |
|
|
Nonaccrual |
|
|
Total |
|
|
Accruing |
|
||||||
Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction, 1-4 family residential |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Construction, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consumer Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity line |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential closed-end first liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential closed-end junior liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investor-owned residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Multifamily residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial real estate, owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial real estate, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Non Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Public Sector and IDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consumer Non Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
14
Table of Contents
December 31, 2024 |
|
Accruing |
|
|
Accruing |
|
|
Accruing |
|
|
Nonaccrual |
|
|
Total |
|
|
Accruing |
|
||||||
Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction, 1-4 family residential |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Construction, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consumer Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity line |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential closed-end first liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential closed-end junior liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investor-owned residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Multifamily residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial real estate, owner-occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial real estate, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Non Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Public Sector and IDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consumer Non Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following table presents nonaccrual loans, by loan class, as of the dates indicated:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
With No |
|
|
With an |
|
|
Total |
|
|
With No |
|
|
With an |
|
|
Total |
|
||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial real estate owner-occupied |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
No accrued interest receivable was reversed against interest income during the three and six months ended June 30, 2025 or June 30, 2024.
Allowance for Credit Losses on Loans (“ACLL”)
The following tables present the activity in the ACLL by portfolio segment for the periods indicated:
|
|
Activity in the ACLL for the Six Months Ended June 30, 2025 |
|
|||||||||||||||||||||||||||||
|
|
Real Estate |
|
|
Consumer |
|
|
Commercial |
|
|
Commercial |
|
|
Public |
|
|
Consumer |
|
|
Unallocated |
|
|
Total |
|
||||||||
Balance, December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Charge-offs |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Provision for (recovery of) credit losses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Balance, June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
15
Table of Contents
|
|
Activity in the ACLL for the Six Months Ended June 30, 2024 |
|
|||||||||||||||||||||||||||||
|
|
Real Estate |
|
|
Consumer |
|
|
Commercial |
|
|
Commercial |
|
|
Public |
|
|
Consumer |
|
|
Unallocated |
|
|
Total |
|
||||||||
Balance, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Charge-offs |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Provision for (recovery of) credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||||
Merger adjustment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, June 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
Activity in the ACLL for the Year Ended December 31, 2024 |
|
|||||||||||||||||||||||||||||
|
|
Real Estate |
|
|
Consumer |
|
|
Commercial |
|
|
Commercial |
|
|
Public |
|
|
Consumer |
|
|
Unallocated |
|
|
Total |
|
||||||||
Balance, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Charge-offs |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Provision for (recovery of) credit losses |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Merger adjustment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
(1)
The following tables present information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.
|
|
ACLL by Segment and Evaluation Method |
|
|||||||||||||||||||||||||||||
June 30, 2025 |
|
Real Estate Construction |
|
|
Consumer Real Estate |
|
|
Commercial Real Estate |
|
|
Commercial Non Real Estate |
|
|
Public Sector and IDA |
|
|
Consumer Non Real Estate |
|
|
Unallocated |
|
|
Total |
|
||||||||
Individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
ACLL by Segment and Evaluation Method |
|
|||||||||||||||||||||||||||||
December 31, 2024 |
|
Real Estate |
|
|
Consumer Real Estate |
|
|
Commercial Real Estate |
|
|
Commercial Non Real Estate |
|
|
Public |
|
|
Consumer Non Real Estate |
|
|
Unallocated |
|
|
Total |
|
||||||||
Individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The following tables present information about individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.
|
|
Loans by Segment and Evaluation Method |
|
|||||||||||||||||||||||||
June 30, 2025 |
|
Real Estate Construction |
|
|
Consumer Real Estate |
|
|
Commercial Real Estate |
|
|
Commercial Non Real Estate |
|
|
Public Sector and IDA |
|
|
Consumer Non Real Estate |
|
|
Total |
|
|||||||
Individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Loans by Segment and Evaluation Method |
|
|||||||||||||||||||||||||
December 31, 2024 |
|
Real Estate |
|
|
Consumer |
|
|
Commercial |
|
|
Commercial |
|
|
Public |
|
|
Consumer |
|
|
Total |
|
|||||||
Individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Collectively evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
16
Table of Contents
Collateral Dependent Loans
Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACLL on collateral dependent loans based upon the fair value of the collateral. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACLL is required.
As of June 30, 2025 and December 31, 2024, three of the Company’s individually evaluated loans were collateral dependent and secured by real estate. The following table provides detail on collateral dependent loans as of the dates indicated:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Balance |
|
|
Related |
|
|
Balance |
|
|
Related |
|
||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial real estate, owner occupied |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial real estate, other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Credit Quality
The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, payment history, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows:
The following tables present the amortized cost basis of the loan portfolio by year of origination, loan class and credit quality as of June 30, 2025 and December 31, 2024, and gross charge-offs by year of origination for the six months ended June 30, 2025 and the year ended December 31, 2024.
17
Table of Contents
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|
|
Revolving |
|
|
|
|||||||||||||||||||
June 30, 2025 |
|
Prior |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
Revolving |
|
to Term |
|
Total |
|
|||||||||
Construction, residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Construction, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Equity lines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Residential closed-end first liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Residential closed-end junior liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Investor-owned residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Multifamily residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial real estate, owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial real estate, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Public sector and IDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
|
|
Gross Charge Offs by Origination Year for the Six Months Ended June 30, 2025 |
|
Revolving |
|
|
|
|||||||||||||||||||||
|
|
Prior |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
Revolving |
|
to Term |
|
Total |
|
|||||||||
Residential closed-end first liens |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total Gross Charge-Offs |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
18
Table of Contents
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|
|
Revolving |
|
|
|
|||||||||||||||||||
December 31, 2024 |
|
Prior |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
Revolving |
|
to Term |
|
Total |
|
|||||||||
Construction, residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Construction, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Equity lines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Residential closed-end first |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Residential closed-end junior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Investor-owned residential real |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Multifamily residential real |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial real estate, owner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial real estate, other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Commercial and industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Public sector and IDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Other Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
19
Table of Contents
|
|
Gross Charge Offs by Origination Year for the Twelve Monts Ended December 31, 2024 |
|
Revolving |
|
|
|
|||||||||||||||||||||
|
|
Prior |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
|
2024 |
|
Revolving |
|
to Term |
|
Total |
|
|||||||||
Commercial and industrial |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Other Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total YTD gross charge-offs |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Loan Modifications to Borrowers Experiencing Financial Difficulty
On the date a loan is modified, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan is risk rated special mention or classified, as determined appropriate. If the loan exceeds $
During the three and six months ended June 30, 2025, no loans were modified for borrowers experiencing financial difficulty. Two loans were modified for borrowers experiencing financial difficulty during the first three months of 2024. One of these loans was modified a second time during the three month period ended June 30, 2024.
The following table presents information as of June 30, 2024 about loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2024.
June 30, 2024 |
|
Amortized |
|
|
% of |
|
|
Type of |
|
Financial Effect |
||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
||
Commercial real estate owner-occupied |
|
$ |
|
|
|
% |
|
Interest only |
|
|||
Commercial Non real estate |
|
|
|
|
|
|
|
|
|
|
||
Commercial and industrial |
|
$ |
|
|
|
% |
|
Term extension |
|
Renewal of single-payment note for an additional |
||
The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty. As of June 30, 2024, the loans were in current status and individually evaluated. There were no modified loans to borrowers experiencing financial difficulty that had a payment default during the three or six months ended June 30, 2025 and 2024 and that were modified in the twelve months prior. Default occurs when a payment is 90 days past due, the loan is fully or partially charged off or the Company forecloses on the collateral.
Consumer Real Estate Loans In Process of Foreclosure
As of June 30, 2025, the Company had
ACL for Unfunded Commitments
The following tables present the balance and activity in the ACL for unfunded commitments for the six months ended June 30, 2025 and 2024:
Allowance for Credit Losses on Unfunded Commitments |
|
|||
Balance, December 31, 2024 |
|
$ |
|
|
Recovery of credit losses |
|
|
( |
) |
Balance, June 30, 2025 |
|
$ |
|
|
|
|
|
|
|
Balance, December 31, 2023 |
|
$ |
|
|
Recovery of credit losses |
|
|
( |
) |
FCB acquisition |
|
|
|
|
Balance, June 30, 2024 |
|
$ |
|
|
|
|
|
|
|
20
Table of Contents
Note 4: Securities
The amortized cost and estimated fair value of securities available for sale along with gross unrealized gains and losses as of the dates indicated are summarized as follows:
June 30, 2025 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following tables present information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous loss position, as of the dates indicated.
|
|
Less Than 12 Months |
|
|
12 Months or More |
|
||||||||||
June 30, 2025 |
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total temporarily impaired securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Less Than 12 Months |
|
|
12 Months or More |
|
||||||||||
December 31, 2024 |
|
Fair |
|
|
Gross |
|
|
Fair |
|
|
Gross |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
State and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total temporarily impaired securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company evaluates securities available for sale that are in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
At June 30, 2025, the Company had
21
Table of Contents
than not that the Company will not have to sell any such securities before a recovery of cost. The contractual terms of the investments do not permit the issuers to settle the securities at a price less than the cost basis of the investments. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.
The amortized cost and fair value of securities available for sale at June 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities included in these totals are categorized by final maturity.
June 30, 2025 |
|
Amortized Cost |
|
|
Fair Value |
|
||
Available for Sale: |
|
|
|
|
|
|
||
Due in one year or less |
|
$ |
|
|
$ |
|
||
Due after one year through five years |
|
|
|
|
|
|
||
Due after five years through ten years |
|
|
|
|
|
|
||
Due after ten years |
|
|
|
|
|
|
||
Total securities available for sale |
|
$ |
|
|
$ |
|
||
Accrued interest receivable on securities, included in accrued interest receivable on the Consolidated Balance Sheets, totaled $
The deferred tax asset for the net unrealized loss on securities available for sale was $
Realized Securities Gains and Losses
There were no sales of securities during the six months ended June 30, 2025 and 2024.
Restricted Stock.
The Company held restricted stock of $
Redemption of FHLB stock is subject to certain limitations and conditions. At its discretion, the FHLB may declare dividends on the stock. In addition to dividends, NBB also benefits from its membership with FHLB through eligibility to borrow from the FHLB, using as collateral NBB’s capital stock investment in the FHLB and qualifying NBB real estate mortgage loans totaling $
Note 5: Defined Benefit Plan
The following table presents components of net periodic benefit cost (income) for the periods indicated:
|
|
Net Periodic Benefit Income |
|
|||||
|
|
Three Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Service cost |
|
$ |
|
|
$ |
|
||
Interest cost |
|
|
|
|
|
|
||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
Recognized net actuarial loss |
|
|
|
|
|
|
||
Net periodic benefit income |
|
$ |
( |
) |
|
$ |
( |
) |
22
Table of Contents
|
|
Net Periodic Benefit Income |
|
|||||
|
|
Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Service cost |
|
$ |
|
|
$ |
|
||
Interest cost |
|
|
|
|
|
|
||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
Recognized net actuarial loss |
|
|
|
|
|
|
||
Net periodic benefit income |
|
$ |
( |
) |
|
$ |
( |
) |
The service cost component of net periodic benefit cost is included in salaries and employee benefits expense in the Consolidated Statements of Income. All other components are included in other operating expense in the Consolidated Statements of Income.
Note 6: Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of the observable inputs and minimize the use of the unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:
|
Level 1 – |
|
Valuation is based on quoted prices in active markets for identical assets and liabilities. |
|
Level 2 – |
|
Valuation is based on observable inputs including: • quoted prices in active markets for similar assets and liabilities, • quoted prices for identical or similar assets and liabilities in less active markets, • inputs other than quoted prices that are observable, and • model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. |
|
Level 3 – |
|
Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. |
Fair value is best determined by quoted market prices. However, 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, fair value estimates may not be realized in an immediate settlement of the instrument. Accounting guidance for fair value excludes certain financial instruments and all nonfinancial instruments from disclosure requirements. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the consolidated financial statements.
Financial Instruments Measured at Fair Value on a Recurring Basis
Securities Available for Sale
Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). The following tables present the balances of financial assets measured at fair value on a recurring basis as of the dates indicated.
|
|
|
|
|
Fair Value Measurement Using |
|
||||||||||
June 30, 2025 |
|
Balance |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
23
Table of Contents
|
|
|
|
|
Fair Value Measurement Using |
|
||||||||||
December 31, 2024 |
|
Balance |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
U.S. government agencies and corporations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
States and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s securities portfolio is valued using Level 2 inputs. The Company relies on an independent third party vendor to provide market valuations. The inputs used to determine value include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. The third party vendor also monitors market indicators, industry activity and economic events as part of the valuation process. Central to the final valuation is the assumption that the indicators used are representative of the fair value of securities held within the Company’s portfolio. Level 2 inputs are subject to a certain degree of uncertainty and changes in these assumptions or methodologies in the future, if any, may impact securities fair value, deferred tax assets or liabilities, or expense.
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
Certain financial instruments are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the consolidated financial statements.
Loans Held for Sale
Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis.
Collateral Dependent Loans
Collateral dependent loans are measured on a non-recurring basis for the ACLL. If the fair value of the collateral is lower than the loan’s amortized cost basis, the shortfall is recognized in the ACLL. When repayment is expected from the operation of the collateral, fair value is estimated as the present value of expected cash flows from the operation of the collateral. When repayment is expected from the sale of the collateral, fair value is estimated using measurement techniques discussed below and discounted by the estimated cost to sell. The ACLL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.
For loans secured by real estate, fair value of collateral is determined by the “as-is” value of appraisals or third party evaluations that are less than 24 months of age. Appraisals are prepared by independent, licensed appraisers. Appraisals are based upon observable market data analyzed through an income or sales valuation approach. Valuation falls within Level 2 categorization. The Company may further discount appraisals for marketing strategies, which results in Level 3 categorization.
The value of business equipment is based upon an outside appraisal (Level 2) if deemed significant, or the net book value on the applicable business’ financial statements (Level 3) if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3).
As of June 30, 2025, three commercial real estate loans totaling $
Fair Value Summary
The following presents the recorded amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of the dates indicated. Fair values are estimated using the exit price notion.
24
Table of Contents
|
|
|
|
|
Estimated Fair Value |
|
||||||||||
June 30, 2025 |
|
Carrying Amount |
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Level 1 |
|
|
Level 2 |
|
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Level 3 |
|
||||
Financial assets: |
|
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|
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|
|
|
|
|
|
|
||||
Cash and due from banks |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest-bearing deposits |
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||||
Securities available for sale |
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||||
Restricted stock, at cost |
|
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|
||||
Mortgage loans held for sale |
|
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||||
Loans, net |
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|
||||
Accrued interest receivable |
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|
||||
Bank-owned life insurance |
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|
||||
Financial liabilities: |
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|
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|
|
|
||||
Deposits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accrued interest payable |
|
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|
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|
|
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|
|
|
|
||||
|
|
|
|
|
Estimated Fair Value |
|
||||||||||
December 31, 2024 |
|
Carrying Amount |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and due from banks |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest-bearing deposits |
|
|
|
|
|
|
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|
|
|
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|
||||
Federal funds sold |
|
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|
||||
Securities available for sale |
|
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|
|
|
|
|
|
|
||||
Restricted stock, at cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued interest receivable |
|
|
|
|
|
|
|
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|
|
|
|
||||
Bank-owned life insurance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accrued interest payable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 7: Components of Accumulated Other Comprehensive Loss
The following tables provide information about components of accumulated other comprehensive loss as of the dates indicated:
|
|
Net Unrealized Loss on Securities |
|
|
Adjustments Related to Pension Benefits |
|
|
Accumulated Other Comprehensive Loss |
|
|||
Balance at March 31, 2024 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized holding loss on available for sale securities, net of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at June 30, 2024 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Balance at March 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Unrealized holding gain on available for sale securities, net of |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
25
Table of Contents
|
|
Net |
|
|
Adjustments |
|
|
Accumulated |
|
|||
Balance at December 31, 2023 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized holding loss on available for sale securities, net of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at June 30, 2024 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Balance at December 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Unrealized holding gain on available for sale securities, net of |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Note 8: Revenue Recognition
Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams such as service charges on deposit accounts, other service charges and fees, credit and debit card fees, trust income, and annuity and insurance commissions are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as financial guarantees, derivatives, and certain credit card fees are outside the scope of the guidance. Noninterest revenue streams within the scope of Topic 606 are discussed below.
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of monthly service fees, overdraft and nonsufficient funds fees, ATM fees, wire transfer fees, and other deposit account related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. ATM fees are generated when a Company cardholder uses a non-Company ATM. Wire transfer fees, overdraft and nonsufficient funds fees and other deposit account related fees are transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.
Other Service Charges and Fees
Other service charges include safe deposit box rental fees, check ordering charges, ATM fees to holders of cards issued by other banks and other service charges. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Check ordering charges, ATM fees to holders of cards issued by other banks and other service charges are transaction based and therefore, the Company’s performance obligation is satisfied and related revenue recognized at a point in time.
Credit and Debit Card Fees
Credit and debit card fees are primarily comprised of interchange fee income and merchant services income. Interchange fees are earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa and MasterCard. Merchant services income mainly represents commission fees based upon merchant processing volume. The Company’s performance obligation for interchange fee income and merchant services income are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. In compliance with Topic 606, credit and debit card fee income is presented net of associated expense.
Trust Income
Trust income is primarily comprised of fees earned from the management and administration of trusts and estates and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Estate
26
Table of Contents
management fees are based upon the size of the estate. A partial fee is recognized half-way through the estate administration and the remainder of the fee is recognized when remaining assets are distributed and the estate is closed.
Insurance and Investment
Insurance income primarily consists of commissions received on insurance product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the insurance policy. Shortly after the insurance policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue.
Investment income consists of recurring revenue streams such as commissions from sales of mutual funds, annuities and other investments. Commissions from the sale of mutual funds, annuities and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined.
The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods indicated.
|
|
Three Months Ended June 30, |
|
|||||
Noninterest Income |
|
2025 |
|
|
2024 |
|
||
In-scope of Topic 606: |
|
|
|
|
|
|
||
Service charges on deposit accounts |
|
$ |
|
|
$ |
|
||
Other service charges and fees |
|
|
|
|
|
|
||
Credit and debit card fees, net |
|
|
|
|
|
|
||
Trust income |
|
|
|
|
|
|
||
Insurance and Investment (1) |
|
|
|
|
|
|
||
Noninterest Income (in-scope of Topic 606) |
|
$ |
|
|
$ |
|
||
Noninterest Income (out-of-scope of Topic 606) |
|
|
|
|
|
|
||
Total noninterest income |
|
$ |
|
|
$ |
|
||
|
|
Six Months Ended June 30, |
|
|||||
Noninterest Income |
|
2025 |
|
|
2024 |
|
||
In-scope of Topic 606: |
|
|
|
|
|
|
||
Service charges on deposit accounts |
|
$ |
|
|
$ |
|
||
Other service charges and fees |
|
|
|
|
|
|
||
Credit and debit card fees, net |
|
|
|
|
|
|
||
Trust income |
|
|
|
|
|
|
||
Insurance and Investment (1) |
|
|
|
|
|
|
||
Noninterest Income (in-scope of Topic 606) |
|
$ |
|
|
$ |
|
||
Noninterest Income (out-of-scope of Topic 606) |
|
|
|
|
|
|
||
Total noninterest income |
|
$ |
|
|
$ |
|
||
(1)
27
Table of Contents
Note 9: Leases
The Company’s leases are recorded under ASC Topic 842, “Leases”. The Company categorizes leases as short-term, operating or finance leases. Leases with terms of 12 months or less are designated as short-term and are not capitalized. Operating and finance leases are capitalized as right-of-use assets and lease liabilities. Right-of-use assets, included in other assets, represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor. Lease liabilities, included in other liabilities, represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. The Company does not separate non-lease components from lease components within a single contract. Counterparties for the Company’s lease contracts are external to the Company and not related parties.
On June 1, 2024, the Company’s acquisition of FCB added two long-term branch leases. At the Acquisition Date, the leases were remeasured using the Company’s incremental borrowing rate and remaining lease terms, resulting in an increase of $
Lease payments
Short-term lease payments are recognized as lease expense on a straight-line basis over the lease term, or for variable lease payments, in the period in which the obligation was incurred. Operating and finance lease payments may be fixed for the term of the lease or variable. If the escalation factor for a variable lease payment is known, such as a specified percentage increase per year or a stated increase at a specified time, the variable payment is included in the cash flows used to determine the lease liability. If the variable payment is based upon an unknown escalator, such as the consumer price index at a future date, the increase is not included in the cash flows used to determine the lease liability.
Options to Extend, Residual Value Guarantees, Restrictions and Covenants
Certain of the Company’s operating leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
The following tables present information about leases as of the dates and for the periods indicated:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Lease liability |
|
$ |
|
|
$ |
|
||
Right-of-use asset |
|
$ |
|
|
$ |
|
||
Weighted average remaining lease term (in years) |
|
|
|
|
|
|
||
Weighted average discount rate |
|
|
% |
|
|
% |
||
|
|
For the Three Months Ended June 30, |
|
|||||
Lease Expense |
|
2025 |
|
|
2024 |
|
||
Operating lease expense |
|
$ |
|
|
$ |
|
||
Short-term lease expense |
|
|
|
|
|
|
||
Total lease expense |
|
$ |
|
|
$ |
|
||
Cash paid for amounts included in lease liabilities |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease liabilities commencing |
|
$ |
|
|
$ |
|
||
|
|
For the Six Months Ended June 30, |
|
|||||
Lease Expense |
|
2025 |
|
|
2024 |
|
||
Operating lease expense |
|
$ |
|
|
$ |
|
||
Short-term lease expense |
|
|
|
|
|
|
||
Total lease expense |
|
$ |
|
|
$ |
|
||
Cash paid for amounts included in lease liabilities |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease |
|
$ |
|
|
$ |
|
||
28
Table of Contents
The following table presents a maturity schedule of undiscounted cash flows that contribute to the lease liability:
Undiscounted Cash Flow for the Period |
|
As of |
|
|
Twelve months ending June 30, 2026 |
|
$ |
|
|
Twelve months ending June 30, 2027 |
|
|
|
|
Twelve months ending June 30, 2028 |
|
|
|
|
Twelve months ending June 30, 2029 |
|
|
|
|
Twelve months ending June 30, 2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted cash flows |
|
$ |
|
|
Less: discount |
|
|
( |
) |
Lease liability |
|
$ |
|
|
Note 10: Stock Based Compensation
The Company’s 2023 Stock Incentive Plan (“the Plan”) provides for the grant of various forms of stock-based compensation awards that may be settled in, or based upon the value of, the Company’s common stock. The maximum number of shares available for issuance under the Plan is
Restricted Stock Awards
Under the Plan, restricted stock awards (“RSAs”) were granted to non-employee directors as part of the semi-annual retainer and restricted stock units ("RSUs") were granted to certain executives. The RSAs and RSUs were valued at the closing stock price on the grant date and expensed over a
|
|
Shares |
|
|
Weighted-Average |
|
||
Nonvested at January 1, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and released |
|
|
( |
) |
|
|
|
|
Nonvested at June 30, 2025 |
|
|
|
|
$ |
|
||
Note 11: Net Income (Loss) Per Common Share
The factors used in the computation of net income (loss) per common share for the periods indicated are presented below:
|
|
For the Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Net Income |
|
|
Common Shares Weighted Average Outstanding (Denominator) |
|
|
Per Share |
|
|
Net Loss |
|
|
Common Shares Weighted Average Outstanding (Denominator) |
|
|
Per Share |
|
||||||
Basic net income (loss) per common share |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||||
Dilutive shares(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Diluted net income (loss) per common share |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||||
29
Table of Contents
|
|
For the Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Net Income |
|
|
Common Shares Weighted Average Outstanding (Denominator) |
|
|
Per |
|
|
Net Income |
|
|
Common Shares Weighted Average Outstanding (Denominator) |
|
|
Per |
|
||||||
Basic net income per common share |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Dilutive shares(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted net income per common share |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
(1)
Note 12 – Goodwill and Other Intangibles
Core deposit intangible amortization expense was $
|
|
Beginning Balance |
|
|
Additions |
|
|
Measurement Period Adjustment |
|
|
Accumulated Amortization |
|
|
Ending Balance |
|
|||||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||||
Core deposit intangible |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|||
As of June 30, 2025, estimated future remaining amortization of the core deposit intangible within the years ending December 31, is as follows:
|
|
Amortization Expense |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total amortizing core deposit intangible |
|
$ |
|
|
30
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
$ in thousands, except per share data
The purpose of this discussion and analysis is to provide information about the financial condition and results of operations of the Company. Please refer to the financial statements and other information included in this report as well as the Company’s 2024 Form 10-K for an understanding of the following discussion and analysis. References in the following discussion and analysis to “we” or “us” refer to the Company unless the context indicates that the reference is to the Bank.
Cautionary Statement Regarding Forward-Looking Statements
We make forward-looking statements in this Form 10-Q that are subject to significant risks and uncertainties. These forward-looking statements include statements regarding our profitability, liquidity, allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals, and are based upon management’s views and assumptions as of the date of this report. 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.
These forward-looking statements are based upon or are affected by factors that could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, effects of or changes in:
These risks and uncertainties should be considered in evaluating the forward-looking statements contained in this report. We caution readers not to place undue reliance on those statements, which speak only as of the date of this report. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A of the Company's 2024 Form 10-K.
31
Table of Contents
Overview
NBI is a financial holding company that was organized in 1986 under the laws of Virginia and is registered under the Bank Holding Company Act of 1956. NBI common stock is listed on the Nasdaq Capital Market and is traded under the symbol “NKSH.”
NBI has two wholly-owned subsidiaries; the National Bank of Blacksburg ("NBB") and National Bankshares Financial Services, Inc. ("NBFS"). NBB is a community bank and does business as National Bank from 28 office locations and one loan production office. NBB is the source of nearly all of the Company’s revenue. NBFS does business as National Bankshares Investment Services and National Bankshares Insurance Services. Income from NBFS is not significant at this time, nor is it expected to be so in the near future.
Critical Accounting Policies
The Company’s consolidated financial statements are prepared in accordance with GAAP. The financial information contained within our statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. Although the economics of the Company’s transactions may not change, the timing of events that would impact the transactions could change.
Critical accounting policies are most important to the portrayal of the Company’s financial condition or results of operations and require management’s most difficult, subjective, and complex judgments about matters that are inherently uncertain. If conditions occur that differ from our assumptions, depending upon the severity of such differences, the Company’s financial condition or results of operations may be materially impacted. The Company has designated the following policies as critical: those governing the allowance for credit losses, goodwill, the pension plan, core deposit intangibles and loans acquired in a business combination. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. For information on the Company's critical accounting policies, please refer to the Company’s 2024 Form 10-K, Note 1: Summary of Significant Accounting Policies.
Acquisition of Frontier Community Bank
On June 1, 2024, the Company and the Bank acquired FCB, a Virginia chartered commercial bank headquartered in Waynesboro, Virginia. FCB’s balances and results of operations are included in the Company’s consolidated results beginning on June 1, 2024.
Non-GAAP Financial Measures
This report refers to certain financial measures that are computed under a basis other than GAAP (“non-GAAP”). The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP. Details on non-GAAP measures follow.
Net Interest Margin
The Company uses the net interest margin (non-GAAP) to measure profitability of interest generating activities, as a percentage of total interest-earning assets. The Company’s net interest margin is calculated on a fully taxable equivalent (“FTE”) basis. The portion of interest income that is nontaxable is grossed up to the tax equivalent by adding the tax benefit based on a tax rate of 21%. Annualized FTE net interest income is divided by total average earning assets to calculate the net interest margin. The following tables present the reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, for the periods indicated.
|
|
Three Months Ended June 30, |
|
|||||
Net Interest Margin, FTE |
|
2025 |
|
|
2024 |
|
||
Interest income (GAAP) |
|
$ |
18,537 |
|
|
$ |
17,095 |
|
Add: FTE adjustment |
|
|
244 |
|
|
|
243 |
|
Interest income, FTE (non-GAAP) |
|
|
18,781 |
|
|
|
17,338 |
|
Interest expense (GAAP) |
|
|
7,546 |
|
|
|
8,418 |
|
Net interest income, FTE (non-GAAP) |
|
$ |
11,235 |
|
|
$ |
8,920 |
|
Average balance of interest-earning assets |
|
$ |
1,758,449 |
|
|
$ |
1,687,407 |
|
Net interest margin |
|
|
2.56 |
% |
|
|
2.13 |
% |
32
Table of Contents
|
|
Six Months Ended June 30, |
|
|||||
Net Interest Margin, FTE |
|
2025 |
|
|
2024 |
|
||
Interest income (GAAP) |
|
$ |
36,734 |
|
|
$ |
33,101 |
|
Add: FTE adjustment |
|
|
482 |
|
|
|
488 |
|
Interest income, FTE (non-GAAP) |
|
|
37,216 |
|
|
|
33,589 |
|
Interest expense (GAAP) |
|
|
15,493 |
|
|
|
16,194 |
|
Net interest income, FTE (non-GAAP) |
|
$ |
21,723 |
|
|
$ |
17,395 |
|
Average balance of interest-earning assets |
|
$ |
1,762,525 |
|
|
$ |
1,662,424 |
|
Net interest margin (non-GAAP) |
|
|
2.49 |
% |
|
|
2.10 |
% |
Efficiency Ratio
The efficiency ratio is computed by dividing noninterest expense by the sum of FTE net interest income and noninterest income, excluding certain items the Company’s management deems unusual or non-recurring. This is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. The components of the efficiency ratio calculation for the periods indicated are summarized in the following table.
|
|
Three Months Ended June 30, |
|
|||||
Efficiency Ratio |
|
2025 |
|
|
2024 |
|
||
Noninterest expense (GAAP) |
|
$ |
10,583 |
|
|
$ |
10,127 |
|
Less: merger-related expense |
|
|
- |
|
|
|
(2,257 |
) |
Less: conversion expense (1) |
|
|
(1,977 |
) |
|
|
(173 |
) |
Adjusted noninterest expense (non-GAAP) |
|
$ |
8,606 |
|
|
$ |
7,697 |
|
Noninterest income (GAAP) |
|
$ |
2,279 |
|
|
$ |
2,267 |
|
Net interest income, FTE (non-GAAP) |
|
|
11,235 |
|
|
|
8,920 |
|
Total income for efficiency ratio (non-GAAP) |
|
$ |
13,514 |
|
|
$ |
11,187 |
|
Efficiency ratio |
|
|
63.68 |
% |
|
|
68.80 |
% |
|
|
Six Months Ended June 30, |
|
|||||
Efficiency Ratio |
|
2025 |
|
|
2024 |
|
||
Noninterest expense (GAAP) |
|
$ |
19,215 |
|
|
$ |
17,889 |
|
Less: merger-related expense |
|
|
- |
|
|
|
(2,741 |
) |
Less: conversion expense(1) |
|
|
(2,023 |
) |
|
|
(173 |
) |
Adjusted noninterest expense (non-GAAP) |
|
$ |
17,192 |
|
|
$ |
14,975 |
|
Noninterest income (GAAP) |
|
$ |
4,839 |
|
|
$ |
4,482 |
|
Net interest income, FTE (non-GAAP) |
|
|
21,723 |
|
|
|
17,395 |
|
Total income for efficiency ratio (non-GAAP) |
|
$ |
26,562 |
|
|
$ |
21,877 |
|
Efficiency ratio (non-GAAP) |
|
|
64.72 |
% |
|
|
68.45 |
% |
Adjusted Return on Average Assets and Adjusted Return on Average Equity
The adjusted return on average assets and adjusted return on average equity are measures of profitability, calculated by annualizing net income and dividing by average year-to-date assets or equity, respectively. Significant income or expenses that are unusual or not expected to recur during the year are not annualized, in order to reduce distortion within the ratios. The tables below present the reconciliation of adjusted annualized net income, which is not a measurement under GAAP, for the periods indicated.
33
Table of Contents
|
|
Three Months Ended June 30, |
|
|||||
Annualized Net Income (Loss) for Ratio Calculation |
|
2025 |
|
|
2024 |
|
||
Net income (loss) per GAAP |
|
$ |
2,289 |
|
|
$ |
(307 |
) |
Less: items not annualized: |
|
|
|
|
|
|
||
Partnership income net of tax of $8 for the peiod ended June 30, 2025 |
|
|
31 |
|
|
|
- |
|
ACL provision, net of tax of $271 for the period ended June 30, 2024 |
|
|
- |
|
|
|
1,019 |
|
Merger-related expense net of tax of $411 for the period ended June 30, 2024 |
|
|
- |
|
|
|
1,846 |
|
Conversion expense, net of tax of $415 and $36 for the periods ended June 30, 2025 and 2024, respectively |
|
|
1,562 |
|
|
|
137 |
|
Total non-annualized items |
|
|
1,593 |
|
|
|
3,002 |
|
Adjusted net income |
|
|
3,882 |
|
|
$ |
2,695 |
|
Adjusted net income, annualized |
|
$ |
15,571 |
|
|
$ |
10,839 |
|
Add: total non-annualized items |
|
|
(1,593 |
) |
|
|
(3,002 |
) |
Annualized net income for ratio calculation (non-GAAP) |
|
$ |
13,978 |
|
|
$ |
7,837 |
|
Average assets |
|
$ |
1,815,371 |
|
|
$ |
1,714,639 |
|
Return on average assets (GAAP) |
|
|
0.51 |
% |
|
|
(0.07 |
)% |
Adjusted return on average assets (non-GAAP) |
|
|
0.77 |
% |
|
|
0.46 |
% |
Average equity |
|
$ |
166,971 |
|
|
$ |
137,873 |
|
Return on average equity (GAAP) |
|
|
5.50 |
% |
|
|
(0.90 |
)% |
Adjusted return on average equity (non-GAAP) |
|
|
8.37 |
% |
|
|
5.68 |
% |
|
|
Six Months Ended June 30, |
|
|||||
Annualized Net Income for Ratio Calculation |
|
2025 |
|
|
2024 |
|
||
Net income per GAAP |
|
$ |
5,525 |
|
|
$ |
1,867 |
|
Less: items not annualized: |
|
|
|
|
|
|
||
Partnership income net of tax of ($44) and ($35) for the periods ended June 30, 2025 |
|
|
(166 |
) |
|
|
(134 |
) |
ACL provision, net of tax of $271 for the period ended June 30, 2024 |
|
|
- |
|
|
|
1,019 |
|
Merger-related expense net of tax of $411 for the period ended June 30, 2024 |
|
|
- |
|
|
|
2,330 |
|
Conversion expense, net of tax of $425 and $36 for the periods ended June 30, 2025 |
|
|
1,598 |
|
|
|
137 |
|
Total non-annualized items |
|
|
1,432 |
|
|
|
3,352 |
|
Adjusted net income |
|
$ |
6,957 |
|
|
$ |
5,219 |
|
Adjusted net income, annualized |
|
$ |
14,029 |
|
|
$ |
10,495 |
|
Add: total non-annualized items |
|
|
(1,432 |
) |
|
|
(3,352 |
) |
Annualized net income for ratio calculation (non-GAAP) |
|
$ |
12,597 |
|
|
$ |
7,143 |
|
Average assets |
|
$ |
1,817,524 |
|
|
$ |
1,687,446 |
|
Return on average assets (GAAP) |
|
|
0.61 |
% |
|
|
0.22 |
% |
Adjusted return on average assets (non-GAAP) |
|
|
0.69 |
% |
|
|
0.42 |
% |
Average equity |
|
$ |
163,857 |
|
|
$ |
136,956 |
|
Return on average equity (GAAP) |
|
|
6.80 |
% |
|
|
2.74 |
% |
Adjusted return on average equity (non-GAAP) |
|
|
7.69 |
% |
|
|
5.22 |
% |
34
Table of Contents
Performance Summary
Key to understanding the Company’s results of operations and financial position is the acquisition of FCB in 2024, the impact of the interest rate environment and the system conversion completed during the second quarter of 2025 that will enhance efficiency and product offerings.
The acquisition of FCB on June 1, 2024 expanded the Company's footprint into desirable markets and increased its growth potential. The acquisition added to the balance sheet $118,743 in loans, $129,717 in deposits and $14,299 in equity. The Company also recorded merger expenses detailed under Non-GAAP above.
The Federal Reserve's 100 basis point interest rate cut between September and December of 2024 eased deposit pricing pressure beginning in the fourth quarter of 2024 and continued to positively influence results in 2025. The interest rate environment continues at a level that allows adjustable rate loans to reprice higher than their previous rates.
The Company completed the system conversion of both the acquired bank and the legacy bank during the second quarter of 2025, with related expenses presented in Conversion Expense on the Consolidated Statements of Income. The system conversion positions the Company for further growth. The following table presents the Company’s key performance indicators for the periods indicated.
|
|
Three Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net Income (Loss) |
|
$ |
2,289 |
|
|
$ |
(307 |
) |
Return on average assets |
|
|
0.51 |
% |
|
|
(0.07 |
)% |
Adjusted return on average assets (1) |
|
|
0.77 |
% |
|
|
0.46 |
% |
Return on average equity |
|
|
5.50 |
% |
|
|
(0.90 |
)% |
Adjusted return on average equity (1) |
|
|
8.37 |
% |
|
|
5.68 |
% |
Basic net income (loss) per common share |
|
$ |
0.36 |
|
|
$ |
(0.05 |
) |
Diluted net income (loss) per common share |
|
$ |
0.36 |
|
|
$ |
(0.05 |
) |
Net interest margin (1) |
|
|
2.56 |
% |
|
|
2.13 |
% |
Efficiency ratio (1) |
|
|
63.68 |
% |
|
|
68.80 |
% |
|
|
Six Months Ended June 30, |
|
|||||
Summary Key Performance Indicators |
|
2025 |
|
|
2024 |
|
||
Net Income |
|
$ |
5,525 |
|
|
$ |
1,867 |
|
Return on average assets |
|
|
0.61 |
% |
|
|
0.22 |
% |
Adjusted return on average assets (1) |
|
|
0.69 |
% |
|
|
0.42 |
% |
Return on average equity |
|
|
6.80 |
% |
|
|
2.74 |
% |
Adjusted return on average equity (1) |
|
|
7.69 |
% |
|
|
5.22 |
% |
Basic net income per common share |
|
$ |
0.87 |
|
|
$ |
0.31 |
|
Diluted net income per common share |
|
$ |
0.87 |
|
|
$ |
0.31 |
|
Net interest margin (1) |
|
|
2.49 |
% |
|
|
2.10 |
% |
Efficiency ratio (1) |
|
|
64.72 |
% |
|
|
68.45 |
% |
Net income for the three and six months ended June 30, 2025 increased when compared with the comparable periods of 2024, due to net interest margin expansion and merger related expenses in 2024. The net interest margin as well as key noninterest income and expense items are discussed below.
Net Interest Income
The following tables present interest‑earning assets and interest‑bearing liabilities, the interest earned or paid, the average yield or rate on the daily average balance outstanding, net interest income and net interest margin for the periods indicated.
35
Table of Contents
|
|
Three Months Ended June 30, |
|
||||||||||||||||||||||
|
|
2025 |
|
|
|
2024 |
|
||||||||||||||||||
($ in thousands) |
|
Average |
|
|
Interest |
|
|
Average |
|
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1)(2)(3)(4)(5) |
|
$ |
1,008,401 |
|
|
$ |
13,619 |
|
|
|
5.42 |
% |
|
|
$ |
904,317 |
|
|
$ |
11,427 |
|
|
|
5.08 |
% |
Taxable securities (5) |
|
|
596,497 |
|
|
|
3,725 |
|
|
|
2.50 |
% |
|
|
|
628,333 |
|
|
|
4,213 |
|
|
|
2.70 |
% |
Nontaxable securities (1)(5) |
|
|
62,847 |
|
|
|
457 |
|
|
|
2.92 |
% |
|
|
|
63,819 |
|
|
|
459 |
|
|
|
2.89 |
% |
Federal funds sold |
|
|
197 |
|
|
|
2 |
|
|
|
4.07 |
% |
|
|
|
891 |
|
|
|
10 |
|
|
|
4.51 |
% |
Interest-bearing deposits |
|
|
90,507 |
|
|
|
978 |
|
|
|
4.33 |
% |
|
|
|
90,047 |
|
|
|
1,229 |
|
|
|
5.49 |
% |
Total interest-earning assets |
|
$ |
1,758,449 |
|
|
$ |
18,781 |
|
|
|
4.28 |
% |
|
|
$ |
1,687,407 |
|
|
$ |
17,338 |
|
|
|
4.13 |
% |
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing demand deposits |
|
$ |
853,516 |
|
|
$ |
4,440 |
|
|
|
2.09 |
% |
|
|
$ |
842,809 |
|
|
$ |
5,270 |
|
|
|
2.51 |
% |
Savings deposits |
|
|
143,470 |
|
|
|
48 |
|
|
|
0.13 |
% |
|
|
|
139,646 |
|
|
|
56 |
|
|
|
0.16 |
% |
Time deposits(6) |
|
|
330,906 |
|
|
|
3,058 |
|
|
|
3.71 |
% |
|
|
|
296,637 |
|
|
|
3,090 |
|
|
|
4.19 |
% |
Borrowings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
230 |
|
|
|
2 |
|
|
|
3.50 |
% |
Total interest-bearing liabilities |
|
$ |
1,327,892 |
|
|
$ |
7,546 |
|
|
|
2.28 |
% |
|
|
$ |
1,279,322 |
|
|
$ |
8,418 |
|
|
|
2.65 |
% |
Net interest income and interest rate spread |
|
|
|
|
$ |
11,235 |
|
|
|
2.00 |
% |
|
|
|
|
|
$ |
8,920 |
|
|
|
1.48 |
% |
||
Net interest margin |
|
|
|
|
|
|
|
|
2.56 |
% |
|
|
|
|
|
|
|
|
|
2.13 |
% |
||||
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||
|
|
2025 |
|
|
|
2024 |
|
||||||||||||||||||
($ in thousands) |
|
Average |
|
|
Interest |
|
|
Average |
|
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1)(2)(3)(4)(5) |
|
$ |
1,001,763 |
|
|
$ |
26,696 |
|
|
|
5.37 |
% |
|
|
$ |
881,304 |
|
|
$ |
21,834 |
|
|
|
4.98 |
% |
Taxable securities (5) |
|
|
605,170 |
|
|
|
7,585 |
|
|
|
2.53 |
% |
|
|
|
630,290 |
|
|
|
8,467 |
|
|
|
2.70 |
% |
Nontaxable securities (1)(5) |
|
|
62,905 |
|
|
|
913 |
|
|
|
2.93 |
% |
|
|
|
63,999 |
|
|
|
920 |
|
|
|
2.89 |
% |
Federal funds sold |
|
|
229 |
|
|
|
5 |
|
|
|
4.40 |
% |
|
|
|
446 |
|
|
|
10 |
|
|
|
4.51 |
% |
Interest-bearing deposits |
|
|
92,458 |
|
|
|
2,017 |
|
|
|
4.40 |
% |
|
|
|
86,385 |
|
|
|
2,358 |
|
|
|
5.49 |
% |
Total interest-earning assets |
|
$ |
1,762,525 |
|
|
$ |
37,216 |
|
|
|
4.26 |
% |
|
|
$ |
1,662,424 |
|
|
$ |
33,589 |
|
|
|
4.06 |
% |
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing demand deposits |
|
$ |
862,213 |
|
|
$ |
9,023 |
|
|
|
2.11 |
% |
|
|
$ |
832,682 |
|
|
$ |
10,259 |
|
|
|
2.48 |
% |
Savings deposits |
|
|
143,727 |
|
|
|
101 |
|
|
|
0.14 |
% |
|
|
|
139,966 |
|
|
|
111 |
|
|
|
0.16 |
% |
Time deposits(6) |
|
|
336,085 |
|
|
|
6,369 |
|
|
|
3.82 |
% |
|
|
|
283,485 |
|
|
|
5,822 |
|
|
|
4.13 |
% |
Borrowings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
115 |
|
|
|
2 |
|
|
|
3.50 |
% |
Total interest-bearing liabilities |
|
$ |
1,342,025 |
|
|
$ |
15,493 |
|
|
|
2.33 |
% |
|
|
$ |
1,256,248 |
|
|
$ |
16,194 |
|
|
|
2.59 |
% |
Net interest income and interest |
|
|
|
|
$ |
21,723 |
|
|
|
1.93 |
% |
|
|
|
|
|
$ |
17,395 |
|
|
|
1.47 |
% |
||
Net interest margin |
|
|
|
|
|
|
|
|
2.49 |
% |
|
|
|
|
|
|
|
|
|
2.10 |
% |
||||
36
Table of Contents
When the three and six month periods ended June 30, 2025 and 2024 are compared, the yield on earning assets increased and the cost of interest bearing liabilities decreased, improving the net interest margin. The Federal Reserve's interest rate cuts between September and December 2024 immediately reduced expense for deposits with pricing based on the prime interest rate. Current interest rates are still at a level that will allow improved interest income as loans continue to reach repricing dates.
Noninterest Income
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Service charges on deposits |
|
$ |
735 |
|
|
$ |
678 |
|
|
$ |
57 |
|
|
|
8.41 |
% |
Other service charges and fees |
|
|
72 |
|
|
|
87 |
|
|
|
(15 |
) |
|
|
(17.24 |
)% |
Credit and debit card fees, net |
|
|
366 |
|
|
|
423 |
|
|
|
(57 |
) |
|
|
(13.48 |
)% |
Trust income |
|
|
578 |
|
|
|
513 |
|
|
|
65 |
|
|
|
12.67 |
% |
BOLI income |
|
|
297 |
|
|
|
269 |
|
|
|
28 |
|
|
|
10.41 |
% |
Gain on sale of mortgage loans held for sale |
|
|
54 |
|
|
|
58 |
|
|
|
(4 |
) |
|
|
(6.90 |
)% |
Other income |
|
|
177 |
|
|
|
239 |
|
|
|
(62 |
) |
|
|
(25.94 |
)% |
Total noninterest income |
|
$ |
2,279 |
|
|
$ |
2,267 |
|
|
$ |
12 |
|
|
|
0.53 |
% |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Service charges on deposits |
|
$ |
1,433 |
|
|
$ |
1,311 |
|
|
$ |
122 |
|
|
|
9.31 |
% |
Other service charges and fees |
|
|
156 |
|
|
|
169 |
|
|
|
(13 |
) |
|
|
(7.69 |
)% |
Credit and debit card fees, net |
|
|
783 |
|
|
|
797 |
|
|
|
(14 |
) |
|
|
(1.76 |
)% |
Trust income |
|
|
1,157 |
|
|
|
1,016 |
|
|
|
141 |
|
|
|
13.88 |
% |
BOLI income |
|
|
589 |
|
|
|
527 |
|
|
|
62 |
|
|
|
11.76 |
% |
Gain on sale of mortgage loans held for sale |
|
|
79 |
|
|
|
82 |
|
|
|
(3 |
) |
|
|
(3.66 |
)% |
Other income |
|
|
642 |
|
|
|
580 |
|
|
|
62 |
|
|
|
10.69 |
% |
Total noninterest income |
|
$ |
4,839 |
|
|
$ |
4,482 |
|
|
$ |
357 |
|
|
|
7.97 |
% |
Service charges on deposit accounts increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024, due to higher levels of deposits.
Credit and debit card fees, net, decreased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024, due to higher processing fees.
Trust income increased due to higher assets under management, when the three and six months ended June 30, 2025 are compared with the comparable period of 2024.
BOLI income increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to income from policies acquired from FCB.
Other income includes revenue from investment and insurance sales, adjustments to partnership basis and other miscellaneous components. Insurance income and a vendor incentive payment account for the increase when the six months ended June 30, 2025 is compared with the comparable period of 2024.
37
Table of Contents
Noninterest Expense
|
|
Three Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Salaries and employee benefits |
|
$ |
5,203 |
|
|
$ |
4,687 |
|
|
$ |
516 |
|
|
|
11.01 |
% |
Occupancy, furniture and fixtures |
|
|
731 |
|
|
|
637 |
|
|
|
94 |
|
|
|
14.76 |
% |
Data processing and ATM |
|
|
701 |
|
|
|
800 |
|
|
|
(99 |
) |
|
|
(12.38 |
)% |
FDIC assessment |
|
|
210 |
|
|
|
192 |
|
|
|
18 |
|
|
|
9.38 |
% |
Intangible asset amortization |
|
|
95 |
|
|
|
35 |
|
|
|
60 |
|
|
|
171.43 |
% |
Franchise taxes |
|
|
358 |
|
|
|
358 |
|
|
|
- |
|
|
|
0.00 |
% |
Professional services |
|
|
509 |
|
|
|
272 |
|
|
|
237 |
|
|
|
87.13 |
% |
Merger-related expenses |
|
|
- |
|
|
|
2,257 |
|
|
|
(2,257 |
) |
|
NM |
|
|
Conversion expenses |
|
|
1,977 |
|
|
|
173 |
|
|
|
1,804 |
|
|
NM |
|
|
Other operating expenses |
|
|
799 |
|
|
|
716 |
|
|
|
83 |
|
|
|
11.59 |
% |
Total noninterest expense |
|
$ |
10,583 |
|
|
$ |
10,127 |
|
|
$ |
456 |
|
|
|
4.50 |
% |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Salaries and employee benefits |
|
$ |
10,391 |
|
|
$ |
9,153 |
|
|
$ |
1,238 |
|
|
|
13.53 |
% |
Occupancy, furniture and fixtures |
|
|
1,470 |
|
|
|
1,260 |
|
|
|
210 |
|
|
|
16.67 |
% |
Data processing and ATM |
|
|
1,684 |
|
|
|
1,566 |
|
|
|
118 |
|
|
|
7.54 |
% |
FDIC assessment |
|
|
417 |
|
|
|
379 |
|
|
|
38 |
|
|
|
10.03 |
% |
Intangible asset amortization |
|
|
192 |
|
|
|
35 |
|
|
|
157 |
|
|
|
448.57 |
% |
Franchise taxes |
|
|
731 |
|
|
|
708 |
|
|
|
23 |
|
|
|
3.25 |
% |
Professional services |
|
|
808 |
|
|
|
512 |
|
|
|
296 |
|
|
|
57.81 |
% |
Merger-related expenses |
|
|
- |
|
|
|
2,741 |
|
|
|
(2,741 |
) |
|
NM |
|
|
Conversion expenses |
|
|
2,023 |
|
|
|
173 |
|
|
|
1,850 |
|
|
NM |
|
|
Other operating expenses |
|
|
1,499 |
|
|
|
1,362 |
|
|
|
137 |
|
|
|
10.06 |
% |
Total noninterest expense |
|
$ |
19,215 |
|
|
$ |
17,889 |
|
|
$ |
1,326 |
|
|
|
7.41 |
% |
Noninterest expense increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024. Salaries and employee benefits, which include payroll taxes, health insurance, contributions to the employee stock ownership plan and employee 401(k), pension expense, incentives and salary continuation increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024, reflecting the addition of FCB employees.
Occupancy, furniture and fixtures expense increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to additional assets acquired from FCB and higher maintenance costs.
Data processing expense decreased when the three months ended June 30, 2025 are compared with the comparable period of 2024, reflecting savings from the system conversion. Data processing expense increased when the six months ended June 30, 2025 is compared with the comparable period of 2024 due to the expense of maintaining the legacy system for FCB until system conversion in May 2025.
FDIC assessment increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to a larger assessment base.
Professional services include legal, audit and consulting expenses, which increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to higher legal expense.
During 2024, the Company recorded expenses associated with its acquisition of FCB, including legal and consulting fees.
Conversion expense primarily includes payments made to the former core system vendor to exit the contracts as well as other expenses associated with the conversion.
Other operating expenses increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024. The category of other operating expenses includes expense for marketing and business development, supplies, non-service pension cost and charitable donations, among others. Included in various categories of noninterest expense are expenses to manage cybersecurity risk. The cost of these measures was $100 for the three months ended June 30, 2025 and $94 for the three months ended June 30, 2024. For the six months ended June 30, 2025, total cybersecurity expense was $141 compared to $184 for the six months ended June 30, 2024. The Company places high priority on cybersecurity. The decrease in expense reflects renegotiation of contracts and licensing.
38
Table of Contents
Income Tax
The Company’s income tax expense was $362 for the three months ended June 30, 2025 compared to an income tax benefit of $178 for the same period in 2024.The Company's income tax expense was $1,028 for the six months ended June 30, 2025 and effective tax rate was 15.69%. For the six months ended June 30, 2024, the Company’s income tax expense was $341 and effective tax rate was 15.44%. A large portion of merger related expense was not tax deductible, impacting the Company’s effective tax rate for 2024.
Asset Quality
Key indicators of the Company’s asset quality are presented in the following table.
|
|
June 30, |
|
|
December 31, |
|
||||||
|
|
2025 |
|
|
2024 |
|
|
2024 |
|
|||
Nonaccrual loans |
|
$ |
2,111 |
|
|
$ |
2,507 |
|
|
$ |
2,222 |
|
Loans past due 90 days or more, and still accruing |
|
|
21 |
|
|
|
234 |
|
|
|
548 |
|
ACLL to loans net of deferred fees and costs |
|
|
1.03 |
% |
|
|
1.06 |
% |
|
|
1.04 |
% |
Net charge-off ratio |
|
|
0.03 |
% |
|
|
0.02 |
% |
|
|
0.03 |
% |
Ratio of nonperforming loans to loans, net of |
|
|
0.21 |
% |
|
|
0.25 |
% |
|
|
0.22 |
% |
Ratio of ACLL to nonperforming loans |
|
|
493.70 |
% |
|
|
418.91 |
% |
|
|
461.84 |
% |
For information on the Company’s policies on the ACLL, please refer to the Company’s 2024 Form 10-K, Note 1: Summary of Significant Accounting Policies.
The Company’s risk analysis as of June 30, 2025 determined an ACLL of $10,422, or 1.03% of loans net of deferred fees and costs. This compares with an allowance of $10,262 as of December 31, 2024, or 1.04% of loans. To determine the appropriate level of the ACLL, the Company considers credit risk for individually evaluated loans and for groups of loans evaluated collectively.
Individually Evaluated Loans
As of June 30, 2025, individually evaluated loans were $10,849. Three individually evaluated loans were collateral dependent but were adequately collateralized and did not result in an individual allocation. The remaining individually evaluated loans were measured using the discounted cash flow method, resulting in an allocation of $141.
As of December 31, 2024, individually evaluated loans were $10,521. Three individually evaluated loans were collateral dependent but were adequately collateralized and did not result in an individual allocation. The remaining individually evaluated loans were measured using the discounted cash flow method, resulting in an allocation of $80.
Collectively Evaluated Loans
Collectively evaluated loans totaled $1,000,286, with an ACLL of $10,281 as of June 30, 2025. As of December 31, 2024, collectively evaluated loans totaled $978,092, with an allowance of $10,182.
Collectively evaluated loans are divided into classes based upon risk characteristics. Utilizing historical loss information and peer data, the Company calculates probability of default ("PD") and loss given default ("LGD") for each class, which is adjusted for a reasonable and supportable forecast. Cash flow projections based on each loan’s contractual terms are modified by the adjusted PD and LGD for its class. Loan classes are allocated additional loss estimates based upon the Company’s analysis of qualitative factors including economic measures, asset quality indicators, loan characteristics, and changes to internal Company policies and management.
Reasonable and Supportable Forecast
The Company applies national unemployment forecasts to project cash flows. The Company determined that 12 months represents a reasonable and supportable forecast period as of June 30, 2025, and set a period of 12 months to revert to historical losses on a straight-line basis. The forecast applied as of June 30, 2025 projects that unemployment will slightly increase over the next 12 months at a lower level than the forecast applied as of December 31, 2024. The lower unemployment forecast decreased the required level of the ACLL when June 30, 2025 is compared with December 31, 2024.
Qualitative Factors: Economic
The Company sources economic data pertinent to its market from the most recently available publications, including business and personal bankruptcy filings, the residential vacancy rate and the inventory of new and existing homes.
Higher bankruptcy filings indicate heightened credit risk and increase the ACLL, while lower bankruptcy filings have a beneficial impact on credit risk. Compared with data available as of December 31, 2024, business and personal bankruptcies filings decreased.
Residential vacancy rates and housing inventory impact the Company’s residential construction customers and the consumer real estate market. Higher levels increase credit risk. The residential vacancy rate available as of June 30, 2025 increased compared to the
39
Table of Contents
data incorporated into the December 31, 2024 calculation, resulting in a higher allocation. Housing inventory increased when June 30, 2025 is compared with December 31, 2024, resulting in a higher allocation.
Qualitative Factors: Asset Quality Indicators
Accruing past due loans are analyzed at the class level and compared with previous levels. Increases in past due loans indicate heightened credit risk. Accruing loans past due 30-89 days were 0.50% of total loans as of June 30, 2025, an increase from 0.30% as of December 31, 2024. The increase is primarily due to certain loans awaiting renewal. Management expects the renewals to be approved and removed them from the allocation population.
Qualitative Factors: Other Considerations
The Company considers other factors that impact credit risk, including the interest rate environment, the competitive, legal and regulatory environments, changes in lending policies and loan review, changes in lending management, and high risk loans.
The interest rate environment impacts variable rate loans. The Company allocates additional reserve each time the Federal Reserve increases rates, under the expectation that higher payments may increase credit risk. After the rate increase has been in effect for one year, the allocation may be removed if management deems that the impact of the change has become integrated to the portfolio. As of June 30, 2025, no allocation was included for interest rate changes, unchanged from December 31, 2024.
The competitive, legal and regulatory environments were evaluated for changes that would affect credit risk. Higher competition for loans increases credit risk, while lower competition decreases credit risk. Competition remained at similar levels to those at December 31, 2024. The legal and regulatory environments also remain in a similar posture to December 31, 2024.
Lending policies, loan review procedures and management’s experience influence credit risk. Policies and procedures remain similar to those at December 31, 2024. The Company maintained an allocation to account for integration of FCB lenders.
Levels of high risk loans are considered in the determination of the level of the ACLL. A decrease in the level of high risk loans within a class decreases the required allocation for the loan class, and an increase in the level of high risk loans within a class increases the required allocation for the loan class. Total high risk loans increased from the level at December 31, 2024.
Unallocated Surplus
The unallocated surplus as of June 30, 2025 was $10, or 0.10% in excess of the calculated requirement. The unallocated surplus at December 31, 2024 was $50, or 0.49% in excess of the calculated requirement. The surplus provides some mitigation of uncertainty about events that may exist at the reporting date but that are not known to the Company and may impact credit risk.
Conclusion
The calculation of the appropriate level for the ACLL incorporates analysis of multiple factors and requires management’s prudent and informed judgment. Based on analysis of historical indicators, asset quality and economic factors, management believes the level of the ACLL is reasonable for the credit risk in the loan portfolio as of June 30, 2025.
ACL on Unfunded Commitments
The ACL on unfunded commitments was $241, or 0.14 % of unfunded commitments as of June 30, 2025. The ACL on unfunded commitments was $251, or 0.14% as of December 31, 2024.
Provision for (Recovery of) Credit Losses
The provision for credit losses represents charges to earnings necessary to maintain an adequate allowance. The adequacy of the ACLL is reviewed quarterly and adjustments are made as determined necessary. The Company recorded a provision for credit losses on loans of $322 and a recovery of credit losses on unfunded commitments of $10 for the six months ended June 30, 2025, compared with a provision for credit losses on loans of $1,307 and a recovery of $15 for unfunded commitments for the six months ended June 30, 2024. For the three month period ended June 30, 2025, the Company recorded a provision for credit losses on loans of $45 and a recovery of credit losses on unfunded commitments of $9. For the three month period ended June 30, 2024, the Company recorded a provision for credit losses on loans of $1,302, which included $1,290 for loans acquired on June 1, 2024.
Loan Modifications
In the ordinary course of business the Company modifies loan terms on a case-by-case basis for a variety of reasons. Modifications may include rate reductions, payment extensions of varying lengths of time, a change in amortization term or method or other arrangements. Modifications to consumer loans generally involve short-term payment extensions to accommodate specific, temporary circumstances. Modifications to commercial loans may include, but are not limited to, changes in interest rate, maturity, amortization and financial covenants.
The Company reviews each modification to determine whether the borrower is experiencing financial difficulty, including indicators of default, bankruptcy, going concern, insufficient projected cash flows and inability to obtain financing from other sources.
40
Table of Contents
Please refer to Note 3: Loans and Allowance for Credit Losses in Part I, Item 1 of this report for more information on loans modified for borrowers experiencing financial difficulty.
During the three and six months ended June 30, 2025 and 2024, the Company modified loans in the normal course of business for borrowers who were not experiencing financial difficulty. During the three months ended June 30, 2025, the Company modified 173 loans totaling $17,750. During the six months ended June 30, 2025, the Company modified 368 loans totaling $41,855. During the three and six months ended June 30, 2024, the Company provided 216 modifications to loans totaling $21,704 and 432 modifications totaling $43,936.
Key Assets and Liabilities
NBI’s key assets and liabilities and their change from December 31, 2024 are shown in the following table.
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Interest-bearing deposits |
|
$ |
83,051 |
|
|
$ |
94,254 |
|
|
$ |
(11,203 |
) |
|
|
(11.89 |
)% |
Securities available for sale, at fair value |
|
|
590,021 |
|
|
|
601,898 |
|
|
|
(11,877 |
) |
|
|
(1.97 |
)% |
Loans, net |
|
|
1,000,275 |
|
|
|
977,688 |
|
|
|
22,587 |
|
|
|
2.31 |
% |
Total assets |
|
|
1,806,610 |
|
|
|
1,811,635 |
|
|
|
(5,025 |
) |
|
|
(0.28 |
)% |
Deposits |
|
|
1,627,675 |
|
|
|
1,644,752 |
|
|
|
(17,077 |
) |
|
|
(1.04 |
)% |
Average Balances
Year-to-date daily averages for the major balance sheet categories are as follows:
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
$ |
92,458 |
|
|
$ |
76,211 |
|
|
$ |
16,247 |
|
|
|
21.32 |
% |
Securities available for sale, at fair value |
|
|
596,989 |
|
|
|
610,298 |
|
|
|
(13,309 |
) |
|
|
(2.18 |
)% |
Loans, net |
|
|
991,099 |
|
|
|
928,293 |
|
|
|
62,806 |
|
|
|
6.77 |
% |
Total assets |
|
|
1,817,524 |
|
|
|
1,744,440 |
|
|
|
73,084 |
|
|
|
4.19 |
% |
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noninterest-bearing demand deposits |
|
$ |
299,820 |
|
|
$ |
290,038 |
|
|
$ |
9,782 |
|
|
|
3.37 |
% |
Interest-bearing demand deposits |
|
|
862,213 |
|
|
|
838,526 |
|
|
|
23,687 |
|
|
|
2.82 |
% |
Savings deposits |
|
|
143,727 |
|
|
|
141,148 |
|
|
|
2,579 |
|
|
|
1.83 |
% |
Time deposits |
|
|
336,085 |
|
|
|
313,401 |
|
|
|
22,684 |
|
|
|
7.24 |
% |
Stockholders’ equity |
|
|
163,857 |
|
|
|
147,474 |
|
|
|
16,383 |
|
|
|
11.11 |
% |
Higher customer deposits resulted in increased investment in interest bearing deposit assets. Changes in securities, loans, deposits and stockholders’ equity are discussed below.
41
Table of Contents
Securities
The Company's securities are designated as available for sale and as such, are reported at fair value. The following table presents information on securities available for sale as of the dates indicated:
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Amortized cost |
|
$ |
654,249 |
|
|
$ |
680,496 |
|
|
$ |
(26,247 |
) |
|
|
(3.86 |
)% |
Unrealized loss, net |
|
|
(64,228 |
) |
|
|
(78,598 |
) |
|
|
14,370 |
|
|
|
18.28 |
% |
Securities available for sale, at fair value |
|
$ |
590,021 |
|
|
$ |
601,898 |
|
|
$ |
(11,877 |
) |
|
|
(1.97 |
)% |
The unrealized loss in the Company’s investment portfolio is due to interest rate risk. The fair value of bonds moves inversely to interest rate changes and expectations of interest rate changes. Most of the Company’s securities were purchased during periods prior to the Federal Reserve’s interest rate increases that began in March of 2022. The Company’s analysis of the securities portfolio determined no identifiable credit risk as of June 30, 2025 and no ACL has been recorded. Please refer to Note 1: General and Summary of Significant Accounting Policies of the Company's 2024 Form 10-K and Note 4: Securities in Part I, Item 1 of this report for additional information on the securities portfolio.
Loans
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Real estate construction |
|
$ |
44,529 |
|
|
$ |
50,798 |
|
|
$ |
(6,269 |
) |
|
|
(12.34 |
)% |
Consumer real estate |
|
|
317,949 |
|
|
|
307,855 |
|
|
|
10,094 |
|
|
|
3.28 |
% |
Commercial real estate |
|
|
494,755 |
|
|
|
478,078 |
|
|
|
16,677 |
|
|
|
3.49 |
% |
Commercial non real estate |
|
|
51,383 |
|
|
|
51,844 |
|
|
|
(461 |
) |
|
|
(0.89 |
)% |
Public sector and IDA |
|
|
56,347 |
|
|
|
57,171 |
|
|
|
(824 |
) |
|
|
(1.44 |
)% |
Consumer non real estate |
|
|
46,172 |
|
|
|
42,867 |
|
|
|
3,305 |
|
|
|
7.71 |
% |
Less: deferred fees and costs |
|
|
(438 |
) |
|
|
(663 |
) |
|
|
225 |
|
|
|
(33.94 |
)% |
Loans, net of deferred fees and costs |
|
$ |
1,010,697 |
|
|
$ |
987,950 |
|
|
$ |
22,747 |
|
|
|
2.30 |
% |
The increase from December 31, 2024 is the result of organic growth. The Company is positioned to make every loan that meets its underwriting standards.
Deposits
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Noninterest-bearing demand deposits |
|
$ |
306,427 |
|
|
$ |
290,088 |
|
|
$ |
16,339 |
|
|
|
5.63 |
% |
Interest-bearing demand deposits |
|
|
852,405 |
|
|
|
864,753 |
|
|
|
(12,348 |
) |
|
|
(1.43 |
)% |
Savings deposits |
|
|
140,285 |
|
|
|
143,109 |
|
|
|
(2,824 |
) |
|
|
(1.97 |
)% |
Time deposits |
|
|
328,558 |
|
|
|
346,802 |
|
|
|
(18,244 |
) |
|
|
(5.26 |
)% |
Total deposits |
|
$ |
1,627,675 |
|
|
$ |
1,644,752 |
|
|
$ |
(17,077 |
) |
|
|
(1.04 |
)% |
The Company’s depositors within its market area are diverse, including individuals, businesses and municipalities. The Company does not have any brokered deposits. Depositors are insured up to the FDIC maximum of $250 thousand. Municipal deposits, which account for approximately 24% of the Company’s deposits, have additional security from bonds pledged as collateral, in accordance with state regulation. Of the Company’s non-municipal deposits, approximately 24% are uninsured.
Capital Resources
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
Dollars |
|
|
Percent |
|
||||
Common stock and additional paid in capital |
|
$ |
21,925 |
|
|
$ |
21,831 |
|
|
$ |
94 |
|
|
|
0.43 |
% |
Retained earnings |
|
|
197,223 |
|
|
|
196,343 |
|
|
|
880 |
|
|
|
0.45 |
% |
Accumulated other comprehensive loss |
|
|
(50,412 |
) |
|
|
(61,765 |
) |
|
|
11,353 |
|
|
|
18.38 |
% |
Total stockholders’ equity |
|
$ |
168,736 |
|
|
$ |
156,409 |
|
|
$ |
12,327 |
|
|
|
7.88 |
% |
42
Table of Contents
The increase in stockholders’ equity reflects an improvement in the unrealized losses on securities available for sale and net income during the period.
The Company qualifies as a small bank holding company under the Federal Reserve’s Small Bank Holding Company Policy Statement, which exempts bank holding companies with less than $3 billion in assets from reporting consolidated regulatory capital ratios and from minimum regulatory capital requirements. NBB is subject to various capital requirements administered by banking agencies, including an additional capital conservation buffer in order to make capital distributions or discretionary bonus payments. Risk-based capital ratios are calculated in compliance with OCC rules based on the Basel III Capital Rules. Capital ratios for NBB are shown in the following tables.
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
|
Regulatory |
|
|
Regulatory Capital |
|
||||
Common Equity Tier I Capital Ratio |
|
|
16.13 |
% |
|
|
15.28 |
% |
|
|
4.50 |
% |
|
|
7.00 |
% |
Tier I Capital Ratio |
|
|
16.13 |
% |
|
|
15.28 |
% |
|
|
6.00 |
% |
|
|
8.50 |
% |
Total Capital Ratio |
|
|
17.02 |
% |
|
|
16.14 |
% |
|
|
8.00 |
% |
|
|
10.50 |
% |
Leverage Ratio |
|
|
10.49 |
% |
|
|
10.25 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
Liquidity
Liquidity measures the Company’s ability to meet its financial commitments at a reasonable cost. Demands on the Company’s liquidity include funding additional loan demand and accepting withdrawals of existing deposits. The Company has diverse liquidity sources, including customer and purchased deposits, customer repayments of loan principal and interest, sales, calls and maturities of securities, Federal Reserve discount window borrowing, short-term borrowing, and FHLB advances.
As of June 30, 2025, the Company had $292,916 of borrowing capacity from the FHLB and the Company had $173,226 of available capacity at the Federal Reserve Bank discount window. As of June 30, 2025, the Company did not have purchased deposits, discount window borrowings or short-term borrowings.
The Company considers its security portfolio for typical liquidity needs, within accounting, legal and strategic parameters. Portions of the securities portfolio are pledged to meet state requirements for public funds deposits. Discount window borrowings also require pledged securities. Increased/decreased liquidity from public funds deposits or discount window borrowings results in increased/decreased liquidity from pledging requirements. The Company monitors public funds pledging requirements and unpledged available for sale securities accessible for liquidity needs.
Regulatory capital levels determine the Company’s ability to use purchased deposits and the Federal Reserve Bank discount window. As of June 30, 2025, the Company is considered well capitalized and does not have any restrictions on purchased deposits or borrowing ability at the Federal Reserve Bank discount window.
The Company monitors factors that may increase its liquidity needs. Some of these factors include deposit trends, large depositor activity, maturing deposit promotions, interest rate sensitivity, maturity and repricing timing gaps between assets and liabilities, the level of unfunded loan commitments and loan growth. As of June 30, 2025, the Company’s liquidity is sufficient to meet projected trends.
To monitor and estimate liquidity levels, the Company performs stress testing under varying assumptions on credit sensitive liabilities and the sources and amounts of balance sheet and external liquidity available to replace outflows. The Company’s Contingency Funding Plan sets forth avenues for rectifying liquidity shortfalls. As of June 30, 2025, the analysis indicated adequate liquidity under the tested scenarios.
The Company utilizes several other strategies to maintain sufficient liquidity. Loan and deposit growth are managed to keep the loan to deposit ratio within the Company’s internally-set target range. As of June 30, 2025, the loan to deposit ratio was 62.09%. The investment strategy takes into consideration the term of the investment, and securities in the available for sale portfolio are laddered based upon projected funding needs.
Off-Balance Sheet Arrangements
In the normal course of business, NBB extends lines of credit and letters of credit to its customers. Depending on their needs, customers may draw upon lines of credit at any time in any amount up to a pre-approved limit. Financial letters of credit guarantee payments to facilitate customer purchases. Performance letters of credit guarantee payment if the customer fails to complete a specific obligation.
43
Table of Contents
While it would be possible for customers to fully draw on approved lines of credit and for beneficiaries to call all letters of credit, historically this has not occurred. In the event of a sudden and substantial draw on these lines, the Company would be able to access multiple options, including its lines of credit with correspondents, raising additional deposits, or selling securities available for sale or loans. The Company estimates an ACL on unfunded loan commitments under the current expected credit losses model.
The Company sells mortgages on the secondary market. Our agreement with the purchaser provides for strict underwriting and documentation requirements. Violation of the representations and warranties of the agreement would entitle the purchaser to recourse provisions. The Company has determined that its risk in this area is not significant because of the low volume of secondary market mortgage loans and high underwriting standards. The Company estimates a potential loss reserve for recourse provisions that is not material as of June 30, 2025. To date, no recourse provisions have been invoked. If funds were needed, the Company would access the same sources as noted above for funding lines and letters of credit. There were no material changes in off-balance sheet arrangements during the three and six months ended June 30, 2025.
Contractual Obligations
The Company had no finance lease or purchase obligations and no long-term debt at June 30, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2025 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Because of the inherent limitations in all control systems, the Company believes that no system of controls, no matter how well designed and operated, can provide absolute assurance that all control issues have been detected.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending or threatened legal proceedings to which the Company or any of its subsidiaries is a party or to which the property of the Company or any of its subsidiaries is subject that, in the opinion of management, may materially impact the financial condition of the Company.
Item 1A. Risk Factors
Please refer to the “Risk Factors” previously disclosed in Item 1A of the Company's 2024 Form 10-K and the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” in Part I. Item 2 of this Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
44
Table of Contents
Item 5. Other Information
Item 6. Exhibits
Index of Exhibits
Exhibit No. |
Description |
|
|
2(i) |
Agreement and Plan of Merger, dated as of January 23, 2024, by and among National Bankshares, Inc., The National Bank of Blacksburg and Frontier Community Bank |
|
(incorporated herein by reference to Exhibit 2.1 of the Form 8-K filed on January 24, 2024) |
3(i) |
Amended and Restated Articles of Incorporation of National Bankshares, Inc. |
|
(incorporated herein by reference to Exhibit 3.1 of the Form 8-K filed on March 16, 2006) |
3(ii) |
Amended and Restated Bylaws of National Bankshares, Inc. |
|
(incorporated herein by reference to Exhibit 3.2 of the Form 8-K filed on July 10, 2024) |
4 |
Specimen copy of certificate for National Bankshares, Inc. common stock |
|
(incorporated herein by reference to Exhibit 4(a) of the Annual Report on Form 10-K for fiscal year ended December 31, 1993) |
+31(i) |
Section 302 Certification of Chief Executive Officer |
|
Filed herewith |
+31(ii) |
Section 302 Certification of Chief Financial Officer |
|
Filed herewith |
+32(i) |
18 U.S.C. Section 1350 Certification of Chief Executive Officer |
|
Filed herewith |
+32(ii) |
18 U.S.C. Section 1350 Certification of Chief Financial Officer |
|
Filed herewith |
+101 |
The following materials from National Bankshares, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2025 are formatted in iXBRL (Inline Extensible Business Reporting Language), furnished herewith: (i) Consolidated Balance Sheets at June 30, 2025 and December 31, 2024; (ii) Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2025 and 2024; (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2025 and 2024; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024; and (vi) Notes to Consolidated Financial Statements. |
|
Filed herewith |
104 |
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
|
Filed herewith |
45
Table of Contents
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.
|
NATIONAL BANKSHARES, INC. |
|
|
|
|
|
|
|
Date: August 13, 2025 |
|
/s/ Lara Ramsey |
|
|
By: Lara Ramsey |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
Date: August 13, 2025 |
|
/s/ Lora M. Jones |
|
|
By: Lora M. Jones |
|
|
Treasurer and |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
(Principal Accounting Officer) |
46
FAQ
What was NKSH's net income for Q2 2025 and how does it compare to Q2 2024?
How did NKSH's net interest income (NII) perform in Q2 2025?
What are NKSH's loans and allowance for credit losses as of June 30, 2025?
Did NKSH maintain its dividend in 2025?
What liquidity or deposit trends are evident in the filing?
What is the status of NKSH's securities portfolio and unrealized gains/losses?
