NEW PEOPLES BANKSHARES INC

Previous wording

our ability to successfully manage cybersecurity;

Current wording

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

Previous wording

Net income for the three months ended March 31, 2024 was $1.8 million, a decrease of $235,000, or 11.63%, from the same period in 2023. Net interest income declined 1.95%, or $138,000, from $7.1 million for the quarter ended March 31, 2023 to $6.9 million for the quarter ended March 31, 2024. The decrease was primarily due to an increase in the cost of interest-bearing liabilities of 150 basis points (“bps”) to 2.77% during the quarter ended March 31, 2024 compared to 1.27% during the quarter ended March 31, 2023.

Current wording

Net income for the three months ended June 30, 2024 was $1.7 million, a decrease of $39,000, or 2.56%, from the same period in 2023. Net interest income declined 0.43%, or $30,000, from $7.0 million for the quarter ended June 30, 2023 to $7.0 million for the quarter ended June 30, 2024. The decrease was primarily due to an increase in the cost of interest-bearing liabilities of 124 basis points (“bps”) to 2.94% during the quarter ended June 30, 2024 compared to 1.70% during the quarter ended June 30, 2023.

Previous wording

The balance sheet grew to $850.5 million in total assets as of March 31, 2024, from $826.3 million as of December 31, 2023. Gross loans increased $483,000 to $638.6 million as of March 31, 2024. Additionally, interest-bearing deposits in other banks increased $22.4 million to $72.8 million as of March 31, 2024. During the first three months of 2024 total deposits increased $24.3 million or 3.39% to $740.8 million.

Current wording

The balance sheet grew to $855.0 million in total assets as of June 30, 2024, from $826.3 million as of December 31, 2023. Gross loans increased $1.8 million to $639.9 million as of June 30, 2024. Additionally, interest-bearing deposits in other banks increased $22.4 million to $72.8 million as of June 30, 2024. Total deposit liabilities as of June 30, 2024 increased $26.8 million to $743.2 million from December 31, 2023.

Previous wording

During the first quarter of 2024, we extended a previously announced stock repurchase program, to continue through March 31, 2025. Since the inception of the program through March 31, 2024, the Company has repurchased 210,299 shares at an average price of $2.34 per share.

Current wording

During the first quarter of 2024, we extended a previously announced stock repurchase program, to continue through March 31, 2025. During the second quarter of 2024, 35,530 shares were repurchased at an average price of $2.54 per share.

Previous wording

Net interest income for the quarter ended March 31, 2024 was $6.9 million compared to $7.1 million for the quarter ended March 31, 2023. The decrease was primarily due to an increase in the cost of interest-bearing liabilities of 150 bps to 2.77% during the quarter ended March 31, 2024 compared to 1.27% during the quarter ended March 31, 2023. The time deposits portfolio was the primary contributor to the decline in the net interest income, due to an increase of 209 bps in the quarterly cost of time deposits to 3.77% and a $64.1 million increase in the average balance of time deposits due to a combination of new deposits and a shift in the mix from lower cost deposit products. Additionally, while the average cost of borrowed funds decreased 101 bps to 5.82%, the related interest expense increased $190,000 due to the increased average balance related to a Federal Home Loan Bank advance and a Federal Reserve Bank Bank Term Funding Program borrowing, taken in the second and fourth quarters of 2023, respectively, which increased the overall outstanding average balance $18.1 million. The increase in the cost of funds was offset in part by an increase of 70 bps in the yield on earning assets. The yield on loans increased 72 bps to 5.83%, partially assisted by recovery of interest on prior nonperforming loans, combined with an increase in the average balance of $49.5 million and interest rate increases on loan renewals and interest rate reset dates, helping to offset the increased cost of funding during the quarter ended March 31, 2024. These rate and volume activities combined to result in a decrease in net interest income of $138,000, as the net interest margin decreased 35 bps, to 3.48% for the quarter ending March 31, 2024 as compared to the 3.83% margin for the same period in 2023.

Current wording

The Company’s primary source of income is net interest income, which showed a slight decrease of $30,000, or 0.43%, to $7.0 million for the second quarter of 2024 compared to $7.0 million for the second quarter of 2023. Interest income increased $2.0 million due to increases in both the volume and yields for loans and interest-bearing deposits with banks. Average loans increased $39.2 million or 6.5% during the second quarter of 2024, as compared to the second quarter of 2023, while the yield increased 63 bps to 5.89% resulting from a combination of the repricing of existing loans and the origination of new credits. The average balance of interest-bearing deposits with banks increased $31.2 million or 70.4% to $75.5 million for the second quarter of 2024, as compared to the second quarter of 2023, as we actively manage our liquidity position. For the same comparative periods the yield on interest-bearing deposits with banks increased 38 bps to 5.37% due to the higher interest rate environment. Total interest expense increased $2.0 million to $4.0 million as the cost of interest-bearing liabilities rose 124 bps to 2.94% from 1.70% for the comparative three months ended June 30, 2024 and 2023. The time deposits portfolio was the primary contributor to the increase in interest expense due to an increase of 164 bps in the quarterly cost on time deposits to 3.96% and a $57.6 million increase in the average balance of time deposits due to a shift in the mix from lower cost deposit products combined with promotional interest rates offered in response to competition for deposits. Additionally, while the average cost of borrowed funds decreased 63 bps to 5.83%, the related interest expense increased $160,000 due to the increased average balance related to a Federal Home Loan Bank (FHLB) advance and a $10 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program, taken in the second and fourth quarters of 2023, respectively, which increased the overall outstanding average balance $13.3 million.

Previous wording

The recovery of credit losses charged to the income statement for the quarter ended March 31, 2024 was $43,000 compared to a provision of $0 for the three months ended March 31, 2023. The amount of the provision for credit losses was impacted by net loan recoveries of $146,000 during the quarter ended March 31, 2024. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.

Current wording

The provision for credit losses charged to the income statement for the three months ended June 30, 2024 was $472,000 compared to $149,000 for the three months ended June 30, 2023. The amount of the provision for credit losses was impacted by net loan charge-offs of $101,000 during the quarter ended June 30, 2024, combined with a specific allocation to the allowance for credit losses of $263,000 for a single credit relationship. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.

Previous wording

The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, increased to 75.42% during the first quarter of 2024 from 72.56% for the first quarter of 2023. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.

Current wording

The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 71.96% during the second quarter of 2024 from 75.42% for the second quarter of 2023. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.

Previous wording

Income tax expense for the first quarter of 2024 totaled $531,000, a decrease of $45,000, or 7.81% from $576,000 recorded during the same period in 2023. The effective tax rate for the three months ended March 31, 2024, was 22.92%, compared to 22.18% for the same period in 2023.

Current wording

Income tax expense for the second quarter of 2024 totaled $508,000, an increase of $11,000, or 2.21%, from $497,000 recorded during the same period in 2023. The effective tax rate for the three months ended June 30, 2024, was 23.18%, compared to 22.39% for the same period in 2023. A contributor to the increase to the effective tax rate is the increase in revenue generated in states which assess income tax.

Previous wording

Noninterest income decreased $78,000 to $2.3 million for the quarter ended March 31, 2024 from $2.4 million for the comparable quarter in 2023. The decrease is due largely to the sales of bank properties in 2024 and 2023. During the first quarter of 2024, a sales agreement for a former branch office was executed resulting in a loss of $33,000. During the same period of 2023, two former office facilities were sold resulting in a net gain of $130,000. The net year-over-year change of $163,000 resulting from these sales, included in other noninterest income, was partially offset by an increase in financial services revenue of $65,000. Service charge income and revenue from card processing of $915,000 and $895,000, respectively, for the first three months of 2024, remained relatively unchanged from the same period of 2023.

Current wording

During the six months ended June 30, 2024, noninterest income increased $51,000 to $4.9 million from $4.8 million for the same period in 2023. The increase is due largely to earnings from service charges, card processing and financial services, which increased a combined $160,000. Those increases offset the impact of the sales of bank properties in 2024 and 2023. During the first six months of 2024, a former branch office and a lot were sold resulting in a net gain of $20,000. During the same period of 2023, two former office facilities and a vehicle were sold resulting in a net gain of $135,000

Previous wording

Noninterest expense was $7.0 million for the quarter ended March 31, 2024 compared to $6.9 million for the quarter ended March 31, 2023. The $107,000 increase was impacted by the $97,000 increase in salaries and employee benefits, as well as occupancy expenses, which increased $11,000. The increase in salaries and employee benefits related to performance raises, along with severance costs and other contractual payments associated with the recent retirement of the previous chief executive officer and the elimination of several positions during the first quarter of 2024. The increase in occupancy costs are related to the opening of a branch office in Boone, North Carolina during the first quarter of 2024.

Current wording

For the six months ended June 30, 2024, noninterest expense decreased $88,000 to $13.8 million compared to $13.9 million for the six months ended June 30, 2023. The decrease was impacted by reductions in occupancy costs of $22,000 combined with decreases in legal and professional fees, consulting and other real estate owned expenses of $212,000. The expense reductions were partially offset by increases in salaries and employee benefits of $39,000, as well as advertising, ATM network and miscellaneous expenses which combined for an increase of $116,000. The increase in salaries and employee benefits related to performance raises, along with severance costs related to the elimination of several positions during the first quarter of 2024 and other contractual payments associated with the recent retirement of the previous chief executive officer.

Previous wording

Total assets as of March 31, 2024 were $850.5 million, an increase of $24.2 million, or 2.9%, from $826.3 million as of December 31, 2023. Gross loans at March 31, 2024 of $638.6 million were largely unchanged from $638.1 million at December 31, 2023. Liquid assets in the form of interest-bearing deposits with banks increased $22.4 million, or 44.6% during the first quarter of 2024. Investment securities decreased $791,000 during the first quarter of 2024 due to a $1.1 million increase in the unrealized loss on securities available for sale during the quarter, which, combined with payments and amortization of $2.8 million, more than offset purchases of $3.1 million.

Current wording

Total assets as of June 30, 2024 were $854.7 million, an increase of $28.4 million, or 3.43%, from $826.3 million as of December 31, 2023. Gross loans at June 30, 2024 of $639.9 million were largely unchanged from $638.1 million at December 31, 2023. Liquid assets in the form of interest-bearing deposits with banks increased $22.4 million, or 44.6%, during the first six months of 2024. Investment securities increased $2.5 million during the first six months of 2024 due to purchases of $8.0 million offset by an increase in the unrealized loss on securities available for sale of $271,000, combined with payments and amortization of $5.3 million.

Previous wording

Gross loans receivable increased $483,000 to $638.6 million as of March 31, 2024 from $638.1 million as of December 31, 2023. Consumer loans increased $2.4 million or 10.69% which included the purchase of $1.0 million of individual loans during the quarter. Commercial real estate and commercial loans decreased $587,000 and $1.2 million, respectively, during the first quarter of 2024. Residential 1-4 family loans and multifamily loans decreased $808,000 and $77,000, respectively, from December 31, 2023 to March 31, 2024. Loan originations during the first quarter of 2024 were impacted by higher interest rates affecting borrower requests, combined with retrenching from the $11.9 million increase in loans during the fourth quarter of 2023.

Current wording

Consumer loans increased $4.5 million or 20.08% which included the purchase of $1.6 million of individual loans, and the funding of $1.8 million of private student loans during the first six months of 2024. Commercial real estate and multi-family loans increased $1.0 million and $533,000, respectively, during the first six months of 2024. Commercial and Residential 1-4 family loans decreased $2.4 million and $1.6 million, respectively, from December 31, 2023 to June 30, 2024. Loan originations during the first six months of 2024 were impacted by higher interest rates affecting borrower requests.

Previous wording

Total deposits were $740.8 million as of March 31, 2024 compared to $716.5 million as of December 31, 2023. The increase of $24.3 million, or 3.4%, was due to efforts to attract and retain time deposits and money market account relationships, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $15.5 million, including $3.0 million of brokered time deposits, and money market accounts increased $4.8 million during the first three months of 2024, respectively. The increase in time and money market deposits contributed to the increase in our cost of funds, as previously discussed, due to the continuing rising interest rate environment combined with ongoing competition for deposits.

Current wording

Total deposits were $743.2 million as of June 30, 2024 compared to $716.5 million as of December 31, 2023. The increase of $26.8 million, or 3.7%, was due to efforts to attract and retain time deposits and money market account relationships, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $18.6 million, including $3.0 million of brokered time deposits, and money market accounts increased $15.1 million during the first six months of 2024, respectively. The increase in time and money market deposits contributed to the increase in our cost of funds, as previously discussed, due to the continuing rising interest rate environment combined with ongoing competition for deposits.

Previous wording

During the first three months of 2024 total shareholders’ equity decreased $795,000 to $64.0 million as of March 31, 2024, due to earnings of $1.8 million which were offset by dividends paid of $1.7 million, the $835,000 increase in the net unrealized loss on available-for-sale investment securities, and the repurchase of common stock totaling $85,000. Consequently, book value per share decreased to $2.70 as of March 31, 2024 compared to $2.73 at December 31, 2023. The Bank remains well capitalized per regulatory guidance.

Current wording

During the first six months of 2024 total shareholders’ equity increased $1.4 million to $66.2 million as of June 30, 2024, due to earnings of $3.5 million which were offset by dividends paid of $1.7 million, the $214,000 increase in the net unrealized loss on available-for-sale investment securities, and the repurchase of common stock totaling $175,000. Consequently, book value per share increased to $2.80 as of June 30, 2024 compared to $2.73 at December 31, 2023. The Bank remains well capitalized per regulatory guidance.

Previous wording

As previously announced, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2025. As of March 31, 2024, the Company had repurchased 34,113 shares during the first three months of 2024 at an average price of $2.48 per share. Since the commencement of the repurchase plan, 210,299 shares have been repurchased at an average price of $2.34.

Current wording

As previously announced, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2025. As of June 30, 2024, the Company had repurchased 69,843 shares during the first six months of 2024 at an average price of $2.51 per share. Since the commencement of the repurchase plan, 246,029 shares have been repurchased at an average price of $2.37.

Previous wording

The allowance for credit losses as a percentage of total loans was 1.16%, or $7.4 million, as of March 31, 2024, and 1.14%, or $7.3 million, as of December 31, 2023. The allowance for credit losses on unfunded commitments was $238,000 at March 31, 2024 as compared to $285,000 at December 31, 2023.

Current wording

The allowance for credit losses as a percentage of total loans was 1.21%, or $7.7 million, as of June 30, 2024, and 1.14%, or $7.3 million, as of December 31, 2023. The allowance for credit losses on unfunded commitments was $287,000 as of June 30, 2024 as compared to $285,000 at December 31, 2023.

Previous wording

Annualized net charge-offs (recoveries), as a percentage of average loans, was (0.09)% during the first quarter of 2024, compared 0.01% in the first quarter of 2023.

Current wording

Annualized net charge-offs (recoveries), as a percentage of average loans, was (0.01)% during the first six months of 2024, compared to 0.02% in the first six months of 2023.

Previous wording

Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $5.7 million as of March 31, 2024, an increase of $2.0 million, or 55.6%, since year-end 2023. Nonperforming assets as a percentage of total assets were 0.67% as of March 31, 2024, and 0.45% as of December 31, 2023.

Current wording

Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $5.5 million as of June 30, 2024, an increase of $1.8 million, or 49.42%, since year-end 2023. Nonperforming assets as a percentage of total assets were 0.65% as of June 30, 2024, and 0.45% as of December 31, 2023.

Previous wording

Other real estate owned of $157,000 as of March 31, 2024 is unchanged from December 31, 2023. Expenses associated with other real estate owned were $4,000 for the three months ended March 31, 2024, compared to $6,000 during the three months ended March 31, 2023. Nonaccrual loans increased $2.0 million to $5.5 million as of March 31, 2024 from $3.5 million at December 31, 2023, due largely to a single loan relationship that was downgraded and placed in nonaccrual status during the first quarter of 2024.

Current wording

Other real estate owned of $103,000 as of June 30, 2024 represents a $54,000 decrease from December 31, 2023, due to the sale of one parcel that resulted in a gain of $34 thousand, along with the addition of a property valued at $20,000. Expenses associated with other real estate owned were $6,000 for the six months ended June 30, 2024, after excluding the gain recognized on the sale, compared to $16,000 during the six months ended June 30, 2023. On August 12, 2024 a commercial real estate property securing a loan, that was individually evaluated as part of our assessment of the allowance for credit losses, was acquired in a foreclosure sale. As a result, approximately $1.2 million was transferred from the loan portfolio to other real estate owned with no loss recognized. Nonaccrual loans increased $1.9 million to $5.4 million as of June 30, 2024 from $3.5 million as of December 31, 2023, due largely to a single loan relationship that was downgraded and placed in nonaccrual status during the first quarter of 2024.

Previous wording

Loans rated substandard or below totaled $5.5 million as of March 31, 2024, an increase of $2.0 million from $3.5 million as of December 31, 2023. Total past due loans increased to $6.7 million as of March 31, 2024 from $6.2 million as of December 31, 2023.

Current wording

Loans rated substandard or below totaled $6.5 million as of June 30, 2024, an increase of $3.0 million from $3.5 million as of December 31, 2023. Total past due loans increased to $7.4 million as of June 30, 2024 from $6.2 million as of December 31, 2023. The increase in past due loans is largely attributed to the loan relationship that was transferred to nonaccrual status during the first quarter of 2024.

Previous wording

Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the first three months of 2024, we maintained the adjustments to our qualitative factors initiated in 2023, to consider risk factors associated with commercial real estate and residential mortgage loans. Those changes, along with recoveries of loans previously charged off and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a recovery of credit losses of $43,000, of which $4,000 was a provision for the loan portfolio; offset by a reduction of the allowance for unfunded commitments of $47,000. The following table summarizes components of the allowance for credit losses and related loans as of March 31, 2024 and December 31, 2023:

Current wording

The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known impairments within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the first six months of 2024, we maintained the adjustments to our qualitative factors initiated in 2023, to consider risk factors associated with commercial real estate and residential mortgage loans, however the qualitative adjustment for commercial real estate loans was reduced as factors used in determining the adjustment have begun to be reflected in the portfolio as it seasons. Those changes, along with net charge-offs for the period and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a provision for credit losses of $429,000, of which $426,000 was a provision for the loan portfolio; and a provision for unfunded commitments of $3,000. The following table summarizes components of the allowance for credit losses and related loans as of June 30, 2024 and December 31, 2023:

Previous wording

Due to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $3.3 million and $3.1 million, existed as of March 31, 2024 and December 31, 2023, respectively. Our income tax expense was computed at the corporate income tax rate of 21% of taxable income. We have no significant nontaxable income or nondeductible expenses.

Current wording

Due to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $3.2 million and $3.1 million, existed as of June 30, 2024 and December 31, 2023, respectively. Our income tax expense was computed at the corporate income tax rate of 21% of taxable income. We have no significant nontaxable income or nondeductible expenses.

Previous wording

Book value per common share was $2.70 and $2.73 as of March 31, 2024 and December 31, 2023, respectively. The modest decrease in book value was due to the dividend payment of $0.07 per share paid during the first quarter of 2024, combined with the $835,000 increase in unrealized loss on available for sale investment securities and the $85,000 repurchase of common shares during the quarter.

Current wording

Book value per common share was $2.80 and $2.73 as of June 30, 2024 and December 31, 2023, respectively. The modest increase in book value was due to the net income of $3.5 million for the first six months of 2024, which exceeded the dividend payment of $0.07 per share paid during the first quarter of 2024, combined with the $214,000 increase in unrealized loss on available for sale investment securities and the $175,000 repurchase of common shares during the first six months of 2024.

Previous wording

On April 28, 2022 the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock through March 31, 2023. As previously reported, this plan was extended by the Board of Directors through March 31, 2025. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of March 31, 2024, the Company has repurchased 210,299 shares at an average price of $2.34 per share since inception of the plan. During the quarter ended March 31, 2024, the Company repurchased 34,113 shares at an average price of $2.48 per share. There is no assurance that the Company will purchase any additional shares under this program.

Current wording

On April 28, 2022 the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock through June 30, 2023. As previously reported, this plan was extended by the Board of Directors through March 31, 2025. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of June 30, 2024, the Company has repurchased 246,029 shares at an average price of $2.37 per share since inception of the plan. During the quarter ended June 30, 2024, the Company repurchased 35,530 shares at an average price of $2.54 per share. There is no assurance that the Company will purchase any additional shares under this program.

Previous wording

As of March 31, 2024, all of our investment securities were classified as available-for-sale. These investments provide a source of liquidity in the amount of $53.0 million, which is net of the $36.0 million of securities pledged as collateral. Investment securities available-for-sale serve as a source of liquidity and interest rate risk management while generally yielding a higher return versus other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank. Due to the unrealized loss on securities available-for-sale, the sale of investments would not be considered a primary source of liquidity due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowings.

Current wording

As of June 30, 2024, all of our investment securities were classified as available-for-sale. These investments provide a source of liquidity in the amount of $56.9 million, which is net of the $35.4 million of securities pledged as collateral. Investment securities available-for-sale serve as a source of liquidity and interest rate risk management while generally yielding a higher return versus other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank. Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be considered a primary source of liquidity due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowings.

Previous wording

Our loan to deposit ratio was 86.21% and 89.06% as of March 31, 2024 and December 31, 2023, respectively. Generally, our policy has been to manage this ratio at or below 90.00%.

Current wording

Our loan to deposit ratio was 86.10% and 89.06% as of June 30, 2024 and December 31, 2023, respectively. Generally, our policy has been to manage this ratio at or below 90.00%.

Previous wording

We have used our line of credit with the FHLB to issue a letter of credit totaling $12.0 million to the Treasury Board of Virginia for collateral on public funds. No draws on these letters of credit have been issued. The letters of credit are considered to be draws on our FHLB line of credit. In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other general liquidity needs. In December 2023 we borrowed $10.0 million through the Federal Reserve Bank Bank Term Funding Program for one year, which can be prepaid prior to maturity without penalty. An additional $184.6 million was available as of March 31, 2024 on the $206.6 million line of credit, of which $96.4 million is secured by a blanket lien on our residential real estate loans. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.

Current wording

We have used our line of credit with FHLB to issue a letter of credit totaling $12.0 million to the Treasury Board of Virginia for collateral on public funds. No draws on these letters of credit have been issued. The letters of credit are considered to be draws on our FHLB line of credit. In July 2024, we increased our letters of credit to $14.0 million. In May 2023, we borrowed $10.0 million from FHLB, through a fixed rate 5-year advance, to support loan fundings and other general liquidity needs. An additional $190.7 million was available as of June 30, 2024 on the $212.7 million line of credit, of which $95.5 million is secured by a blanket lien on our residential real estate loans. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets. In December 2023 we borrowed $10.0 million through the Federal Reserve Bank Bank Term Funding Program for one year, which can be prepaid prior to maturity without penalty. The Federal Reserve Bank ended the Bank Term Funding Program in March 2024, so at maturity, the repayment or replacement of this borrowing will be dependent on our liquidity and/or interest rate risk needs at that time.

Previous wording

During the first quarter of 2024 we accepted $3.0 million of brokered time deposits to augment our balance sheet liquidity. We held no brokered deposits as of December 31, 2023. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $6.8 million and $6.3 million as of March 31, 2024 and December 31, 2023, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of March 31, 2024 approximately $24.9 million were placed in this product as compared to $20.5 million at December 31, 2023. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.

Current wording

As of June 30, 2024 total deposits included $3.0 million of brokered time deposits, acquired during the first quarter of 2024 to augment our balance sheet liquidity. We held no brokered deposits as of December 31, 2023. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $6.7 million and $6.3 million as of June 30, 2024 and December 31, 2023, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of June 30, 2024 approximately $25.9 million were placed in this product as compared to $20.5 million at December 31, 2023. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.

Previous wording

Additional liquidity is available through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, while we do not anticipate using this as a primary funding source, securities with an estimated market value of $35.3 million were pledged as of March 31, 2024.

Current wording

Additional liquidity is available through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, while we do not anticipate using this as a primary funding source, securities with an estimated market value of $20.7 million were pledged as of June 30, 2024.

Previous wording

Time deposits of $250,000 or more were approximately 6.96% of total deposits at March 31, 2024 and 7.36% of total deposits at December 31, 2023.

Current wording

Time deposits of $250,000 or more were approximately 6.89% of total deposits at June 30, 2024 and 7.36% of total deposits at December 31, 2023.

Previous wording

The bank holding company has approximately $434,000 in cash on deposit at the Bank at March 31, 2024. The holding company receives periodic dividend payments from the Bank which are used to pay operating expenses, to pay trust preferred interest payments and discretionary principal payments, and to fund dividend payments to shareholders and repurchase shares. The Company makes quarterly interest payments on the trust preferred securities.

Current wording

The bank holding company has approximately $430,000 in cash on deposit at the Bank at June 30, 2024. The holding company receives periodic dividend payments from the Bank which are used to pay operating expenses, to pay trust preferred interest payments and discretionary principal payments, to fund dividend payments to shareholders and to repurchase shares. The Company makes quarterly interest payments on the trust preferred securities.

Previous wording

There have been no material changes during the three months ended March 31, 2024, to the off-balance sheet items and the contractual obligations disclosed in our 2023 Form 10-K.

Current wording

There have been no material changes during the six months ended June 30, 2024, to the off-balance sheet items and the contractual obligations disclosed in our 2023 Form 10-K.