NATIONAL BANKSHARES INC
For the period ended Mar 31, 2025. Filed May 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
NKSH$39.19-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0000950170-24-126420
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0000950170-25-071488
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 153 previous paragraphs and 143 current paragraphs.
87 unchanged; 43 reworded; 12 added; 21 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 22 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
inflation and changes in interest rates that may reduce our margins or reduce the fair value of financial instruments,
Current report
Conversion expense stems from an upcoming system upgrade that will provide greater efficiency and product offerings.
Current report
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 upcoming system conversion that will enhance efficiency and product offerings.
Current report
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.
Current report
Average dilutive common shares were 1,982 and 1,964 for the three months ended March 31, 2025 and 2024, respectively. Dilutive common shares stem from unvested restricted stock.
Current report
Included in interest expense is amortization of premium on acquired time deposits of $58 for the three months ended March 31, 2025.
Current report
Noninterest expense increased when the three months ended March 31, 2025 are compared with the comparable period 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 months ended March 31, 2025 is compared with the comparable period of 2024, reflecting the addition of FCB employees.
Current report
Data processing and ATM and FDIC assessment expenses increased when the three months ended March 31, 2025 are compared with the comparable period of 2024 due to expenses associated with the branches acquired from FCB and a larger assessment base.
Current report
Professional services include legal, audit and consulting expenses, which increased when the three months ended March 31, 2025 are compared with the comparable period of 2024 due to higher fees for the expanded asset base and system considerations associated with the FCB acquisition.
Current report
Conversion expense includes payments made to vendors in advance of the system upgrade planned for the second quarter of 2025.
Current report
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:
Current report
The increase in stockholders’ equity reflects a decrease in the unrealized losses on securities available for sale and net income during the three months ended March 31, 2025
Removed paragraphs (21)
Previous report
interest rates,
Previous report
On June 1, 2024, the Company and the Bank acquired Frontier Community Bank (“FCB”). In addition to the factors described above, the Company’s operations, performance, business strategy and results may be affected by the following factors:
Previous report
the businesses of the Company and Frontier may not be integrated successfully after the merger or such integration may be more difficult, time-consuming or more costly than expected;
Previous report
the cost savings and synergies contemplated by the merger may not be fully realized or realized within the expected timeframe;
Previous report
revenues following the merger may be lower than expected;
Previous report
customer and employee relationships and business operations may be disrupted by the merger.
Previous report
The Company expects construction of a new branch in Roanoke, Virginia to be completed during the fourth quarter of 2024. The full service branch will expand our already successful loan production office and enhance our business opportunities in the Roanoke Valley.
Previous report
The acquisition was made pursuant to an Agreement and Plan of Merger, dated January 23, 2024, by and among the Company, the Bank and FCB under which FCB merged with and into the Bank (the “FCB Merger Agreement”). Pursuant to the terms of the FCB Merger Agreement, at the effective time of the acquisition, each share of FCB common stock was converted into either $14.48 in cash or 0.4250 shares of the Company’s common stock, with FCB shareholders having the ability to elect the merger consideration to be received, subject to the allocation and proration procedures set forth in the FCB Merger Agreement. The Company issued 464,855 shares of common stock and paid $2,050 to former FCB shareholders in the acquisition. As a result of the transaction, the Bank expanded its operations into the Waynesboro, Staunton and Lynchburg, Virginia markets. Please refer to Note 2: Business Combination in Part I, Item 1 of this report for additional information of the acquisition of FCB.
Previous report
Contract termination expense was recorded to reflect the Company’s notification to a vendor that it intends to end its relationship in 2025.
Previous report
Included in professional services in the Consolidated Statements of Income.
Previous report
Sale of VISA Class B shares.
Previous report
Upon acquisition of FCB, the Company recorded a provision for credit losses of $1,290 to establish an ACL for non-PCD loans. After the acquisition date, credit risk for FCB non-PCD loans is recognized according to the company's normal ACL and provision processes. As of the reporting dates, the Company did not expect to record a provision or recovery of similar magnitude for the remainder of 2024 or 2023.
Previous report
As of September 30, 2024, the Company had 4,379 unvested shares of restricted stock outstanding with a one year vesting period.
Previous report
The Company recorded a gain on the sale of an investment and a loss on the sale of securities during the second quarter of 2023. The sale of securities is discussed in more detail under the Securities section below.
Previous report
Noninterest expense increased when the three and nine months ended September 30, 2024 are compared with the comparable periods of 2023. Key noninterest expense changes include occupancy, furniture and fixtures, professional services, merger-related expenses, and contract termination expenses.
Previous report
Professional services include legal and other expenses for the Company’s response to a proxy contest from an activist shareholder during 2023, which amounted to $786 for the nine months ended September 30, 2023.
Previous report
During the second quarter of 2024, the Company recorded a contract termination expense when it gave formal notification to a vendor that it intends to end its relationship in 2025.
Previous report
The Company recorded a provision for credit losses on loans of $1,312 and a recovery of credit losses on unfunded commitments of $25 for the nine months ended September 30, 2024, compared with a recovery of credit losses on loans of $389 for the nine months ended September 30, 2023 and a provision of $21 for unfunded commitments. Upon acquisition of FCB in June 2024, the Company recorded a provision for credit losses of $1,290 to establish an allowance on non-PCD loans.
Previous report
Borrowings
Previous report
The Company acquired FHLB borrowings in the FCB merger, which were repaid upon completion of the merger.
Previous report
The increase in stockholders’ equity reflects the stock consideration issued to acquire FCB. The Company paid dividends to shareholders in June 2024.
Reworded paragraphs (43)
Previous wording
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 Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 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.
Current wording
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.
Previous wording
geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts,
Current wording
geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts,
Previous wording
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 2023 Form 10-K.
Current wording
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.
Previous wording
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 27 office locations and two loan production offices. 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.
Current wording
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.
Previous wording
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 allowance for credit losses, goodwill and the pension plan, please refer to the Company’s 2023 Form 10-K, Note 1: Summary of Significant Accounting Policies. For information on policies governing core deposit intangibles and loans acquired in a business combination, please refer to Note 1: General and Summary of Significant Accounting Policies of this Form 10-Q report.
Current wording
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.
Previous wording
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 the Acquisition Date.
Current wording
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.
Previous wording
The Company uses the net interest margin to measure profit on 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.
Current wording
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.
Previous wording
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. Larger nonrecurring income or expenses 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.
Current wording
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.
Previous wording
The following table presents the Company’s key performance indicators for the periods indicated.
Current wording
Between March 2022 and July 2023, the Federal Reserve increased interest rates 525 basis points. The rapidity and magnitude of the change was unprecedented and spurred intense competitive pressure for deposits, affected the fair value of the Company’s securities, and dampened loan demand. The effects of the interest rate environment continued into 2024, however, the Federal Reserve's 100 basis point interest rate cut between September and December eased deposit pricing pressure beginning in the fourth quarter of 2024 and continued to positively influence results in 2025. The following table presents the Company’s key performance indicators for the periods indicated.
Previous wording
Net income for the three and nine months ended September 30, 2024 decreased when compared with the comparable period of 2023, due to net interest margin compression, merger related expenses and contract termination expense. The net interest margin as well as key noninterest income and expense items are discussed below.
Current wording
Net income for the three months ended March 31, 2025 increased when compared with the comparable period 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.
Previous wording
Included in interest income are loan fees of $44 and $56 for the three months ended September 30, 2024 and 2023, respectively.
Current wording
Included in interest income are loan fees of $68 and $48 for the three months ended March 31, 2025 and 2024, respectively. Also included in interest income is accretion of discounts on acquired loans of $251 for the three months ended March 31, 2025.
Previous wording
In September, 2024, the Federal Reserve cut its target interest rate by 50 basis points. This cut had an immediate impact on deposits with pricing based on the prime interest rate. Competitive pressure for deposits began in 2023 and continues to contribute to higher cost of funds and compressed net interest margin when results for the three and nine months ended September 30, 2024 are compared with the same periods of 2023. However, the Company expects the interest rate cut to benefit deposit costs during the fourth quarter of 2024. While the interest rate cut is expected to reduce deposit costs, current interest rates are still at a level that will allow interest income and the yield on earning assets to grow as adjustable loans reach repricing dates.
Current wording
When the three month periods ended March 31, 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.
Previous wording
Service charges on deposit accounts increased when the three and nine months ended September 30, 2024 are compared with the comparable periods of 2023, due to changes in fee structure. Other service charges and fees decreased when the three and nine months ended September 30, 2024 are compared with the comparable periods of 2023, due to lower fees associated with letters of credit and one time fee income received in 2023.
Current wording
Service charges on deposit accounts increased when the three months ended March 31, 2025 are compared with the comparable period of 2024, due to higher levels of deposits.
Previous wording
Credit and debit card fees, net, decreased when the three and nine months ended September 30, 2024 are compared with the comparable periods of 2023, due to higher processing fees.
Current wording
Credit and debit card fees, net, increased when the three months ended March 31, 2025 are compared with the comparable period of 2024, due to transaction volume.
Previous wording
Trust income increased due to higher volume, when the three and nine months ended September 30, 2024 are compared with the comparable periods of 2023.
Current wording
Trust income increased due to higher assets under management, when the three months ended March 31, 2025 are compared with the comparable period of 2024.
Previous wording
BOLI income increased when the three month period ended September 30, 2024 is compared with the comparable period of 2023 due to income from the BOLI policies acquired with the FCB merger. BOLI income decreased when the nine month period ended September 30, 2024 is compared with the comparable period of 2023 due to the settlement of a policy in the second quarter of 2023.
Current wording
BOLI income increased when the three months ended March 31, 2025 is compared with the comparable period of 2024 due to income from policies acquired from FCB.
Previous wording
Other income includes revenue from investment and insurance sales, adjustments to partnership basis and other miscellaneous components. During 2023, the Company recognized an incentive payment from a vendor. These areas fluctuate with market conditions and competitive factors.
Current wording
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 three months ended March 31, 2025 is compared with the comparable period of 2024.
Previous wording
Occupancy, furniture and fixtures expense increased when compared with 2023 due to the addition of assets acquired in the FCB merger and the receipt of a one-time insurance reimbursement during 2023.
Current wording
Occupancy, furniture and fixtures expense increased when the three months ended March 31, 2025 are compared with the comparable period of 2024 due to additional assets acquired from FCB and higher maintenance costs.
Previous wording
During 2024, the Company recorded expenses associated with its acquisition of FCB, including executive and employee severance benefits and legal and consulting fees.
Current wording
During 2024, the Company recorded expenses associated with its acquisition of FCB, including legal and consulting fees.
Previous wording
Included in various categories of noninterest expense are expenses to manage cybersecurity risk. The cost of these measures was $92 for the three months ended September 30, 2024 and $141 for the three months ended September 30, 2023. For the nine months ended September 30, 2024, the total cybersecurity expense was $276 compared to $424 for the nine months ended September 30, 2023. The Company places high priority on cybersecurity. The decrease in expense reflects renegotiation of contracts and licensing.
Current wording
Other operating expenses increased when the three months ended March 31, 2025 are compared with the comparable period 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 $81 for the three months ended March 31, 2025 and $89 for the three months ended March 31, 2024. The Company places high priority on cybersecurity. The decrease in expense reflects renegotiation of contracts and licensing.
Previous wording
The Company’s income tax expense for the three months ended September 30, 2024 was $550. For the three months ended September 30, 2023, the Company recorded an income tax expense of $617. For the nine months ended September 30, 2024, the Company’s income tax expense was $891 and effective tax rate was 16.39%. For the nine months ended September 30, 2023, the Company’s income tax expense was $2,105 and effective tax rate was 15.47%. A significant portion of the merger related expense was not tax deductible, resulting in an increase to the Company’s effective tax rate for 2024. During 2023, the Company recognized a gain on the settlement of a BOLI policy that was not taxable.
Current wording
The Company’s income tax expense for the three months ended March 31, 2025 was $666 and effective tax rate was 17.07%. For the three months ended March 31, 2024, the Company’s income tax expense was $518 and effective tax rate was 19.24%. The merger related expense was not tax deductible, resulting in an increase to the Company’s effective tax rate for 2024.
Previous wording
The Company’s risk analysis as of September 30, 2024 determined an ACLL of $10,328, or 1.03% of loans net of unearned income and deferred fees and costs. This compares with an allowance of $9,094 as of December 31, 2023, or 1.06% 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.
Current wording
The Company’s risk analysis as of March 31, 2025 determined an ACLL of $10,490, or 1.05% 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.
Previous wording
Individually evaluated loans were $10,713 as of September 30, 2024, a slight increase from $10,544 as of December 31, 2023. As of September 30, 2024, four 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 $85.
Current wording
As of March 31, 2025, individually evaluated loans were $10,414. 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 $76.
Previous wording
Collectively evaluated loans totaled $991,528, with an ACLL of $10,243 as of September 30, 2024. As of December 31, 2023, collectively evaluated loans totaled $846,631, with an allowance of $8,522.
Current wording
Collectively evaluated loans totaled $993,491, with an ACLL of $10,414 as of March 31, 2025. As of December 31, 2024, collectively evaluated loans totaled $978,092, with an allowance of $10,182.
Previous wording
Collectively evaluated loans are divided into classes based upon risk characteristics. Utilizing historical loss information and peer data, the Company calculates probability of default and loss given default 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 probability of default and loss given default 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.
Current wording
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.
Previous wording
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 September 30, 2024, and set a period of 12 months to revert to historical losses on a straight-line basis. The forecast applied as of September 30, 2024 projects that unemployment will rise over the next 12 months to a higher level than the forecast applied as of December 31, 2023. The higher unemployment forecast increased the required level of the ACLL when September 30, 2024 is compared with December 31, 2023.
Current wording
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 March 31, 2025, and set a period of 12 months to revert to historical losses on a straight-line basis. The forecast applied as of March 31, 2025 projects that unemployment will be stable 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 March 31, 2025 is compared with December 31, 2024.
Previous wording
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, 2023, business and personal bankruptcies filings increased slightly.
Current wording
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 bankruptcy filings increased while personal bankruptcies filings decreased.
Previous wording
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 September 30, 2024 increased from the data incorporated into the December 31, 2023 calculation. Housing data available as of September 30, 2024 showed higher inventory than as of December 31, 2023, resulting in a higher allocation.
Current wording
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 March 31, 2025 was the same as the data incorporated into the December 31, 2024 calculation. Housing data available as of March 31, 2025 showed higher inventory than as of December 31, 2024, resulting in a higher allocation.
Previous wording
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 0.33% of total loans as of September 30, 2024, an increase from 0.19% as of December 31, 2023.
Current wording
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 0.19% of total loans as of March 31, 2025, a decrease from 0.30% as of December 31, 2024.
Previous wording
The interest rate environment impacts variable rate loans. The Federal Reserve’s substantial interest rate increases between March 2022 and July 2023 have increased and are expected to continue to increase payments on the Company’s variable rate loans as they reach contractual repricing dates, despite the Federal Reserve's recent reduction in their target rate. 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 September 30, 2024, the Company reduced its allocation from December 31, 2023 .
Current wording
The interest rate environment impacts variable rate loans. The Federal Reserve’s substantial interest rate increases between March 2022 and July 2023 have increased and are expected to continue to increase payments on the Company’s variable rate loans as they reach contractual repricing dates, despite the Federal Reserve's recent reduction in their target rate. 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 March 31, 2025, the Company maintained its allocation from December 31, 2024.
Previous wording
Lending policies, loan review procedures and management’s experience influence credit risk. Policies and procedures remain similar to those at December 31, 2023. The Company added an allocation to account for absorption of FCB acquired loans and integration of FCB lenders.
Current wording
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.
Previous wording
The unallocated surplus as of September 30, 2024 is $83, or 0.81% in excess of the calculated requirement. The unallocated surplus at December 31, 2023 was $350, or 4.00% in excess of the calculated requirement. The surplus provides some mitigation of current economic uncertainty that may impact credit risk.
Current wording
The unallocated surplus as of March 31, 2025 was $35, or 0.33% 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 current economic uncertainty that may impact credit risk.
Previous wording
The ACL on unfunded commitments was $241, or 0.14% of unfunded commitments as of September 30, 2024. The ACL on unfunded commitments was $259, or 0.16% as of December 31, 2023.
Current wording
The ACL on unfunded commitments was $250, or 0.15% of unfunded commitments as of March 31, 2025. The ACL on unfunded commitments was $251, or 0.14% as of December 31, 2024.
Previous wording
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 $5 and a recovery of credit losses on unfunded commitments of $10 for the three months ended September 30, 2024, compared with a recovery of credit losses on loans of $401 for the three months ended September 30, 2023 and a provision of $30 for unfunded commitments.
Current wording
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 $277 and a recovery of credit losses on unfunded commitments of $1 for the three months ended March 31, 2025, compared with a provision for credit losses on loans of $5 and a recovery of $15 for unfunded commitments for the three months ended March 31, 2024. The increase in the provision for credit losses on loans was due to growth in the loan portfolio and softening economic factors.
Previous wording
The Company reviews modifications 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. If a modification is made to a borrower experiencing financial difficulty, the loan’s risk rating is downgraded to special mention or classified, resulting in individual evaluation for the ACLL. 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.
Current wording
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. 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.
Previous wording
During the three and nine months ended September 30, 2024 and 2023, the Company modified loans in the normal course of business for borrowers who were not experiencing financial difficulty. During the three months ended September 30, 2024, the Company modified 205 loans totaling $42,969. During the nine months ended September 30, 2024, the Company modified 637 loans totaling $86,905. During the three months ended September 30, 2023, the Company provided 186 modifications to loans totaling $23,054. For the nine months ended September 30, 2023, the Company provided 581 modifications to loans totaling $65,089.
Current wording
During the three months ended March 31, 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 March 31, 2025, the Company modified 195 loans totaling $24,105. During the three months ended March 31, 2024, the Company provided 216 modifications to loans totaling $22,322.
Previous wording
Securities available for sale are presented at fair value as of each reporting date. 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 Federal Reserve's cut to its target rate in September 2024 improved the unrealized loss on securities when September 30, 2024 is compared with December 31, 2023. The Company’s analysis of the securities portfolio determined no identifiable credit risk as of September 30, 2024 and no ACL has been recorded. Please refer to Note 1: General and Summary of Significant Accounting Policies of the 2023 Form 10-K and Note 4: Securities in Part I, Item 1 of this report for additional information on the securities portfolio.
Current wording
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 March 31, 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.
Previous wording
The increase from December 31, 2023 reflects the acquisition of FCB. The higher interest rate environment continues to restrain loan demand. The Company is positioned to make every loan that meets its underwriting standards.
Current wording
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.
Previous wording
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 22% 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 22% are uninsured.
Current wording
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 23% are uninsured.
Previous wording
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. The Bank’s ratios are well above the required minimums as of September 30, 2024. Capital ratios for NBB are shown in the following tables.
Current wording
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.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Included in interest income are loan fees of $147 and $162 for the nine months ended September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Modifications for Borrowers Who Were Not Experiencing Financial Difficulty