NEW PEOPLES BANKSHARES INC
For the period ended Mar 31, 2025. Filed May 15, 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 15, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001903596-24-000665
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001903596-25-000259
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 104 previous paragraphs and 94 current paragraphs.
52 unchanged; 31 reworded; 11 added; 18 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 18 previous and 10 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 (11)
Current report
technology utilized by us, including the successful core operating system conversion in 2025;
Current report
our ability to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic funds transfer fraud;
Current report
A dividend of $0.08 per share was paid to shareholders during the first quarter of 2025, a 14.3% increase over the dividend paid in 2024.
Current report
Volume and Rate Analysis
Current report
Increase (decrease)
Current report
Noninterest income increased $92,000 to $2.4 million for the quarter ended March 31, 2025 from $2.3 million for the comparable quarter in 2024. Modest decreases in earnings from service charges and card processing activities totaling $68,000 were offset by a branded card incentive payment of $141,000. Modest decreases in service charges and card processing revenues over the past several quarters result from changes in customer spending habits.
Current report
Noninterest expense was $7.3 million for the quarter ended March 31, 2025 compared to $7.0 million for the quarter ended March 31, 2024. The $295,000 dollar increase resulted from increases in salaries and benefits, and occupancy costs, which combined for an increase of $266,000, and increases in advertising and ATM network expenses which combined for an increase of $66,000. The increase in salaries and benefits is attributed to normal recurring salary adjustments and staffing costs for the recently opened loan production office. Occupancy costs were impacted by $47,000 in costs incurred in “refreshing” a branch office and $42,000 in costs for snow and ice removal to keep our branch locations open and safe during the winter storms. ATM and card processing expense increases of $52,000 related to normal recurring cost increases, while advertising increases were due to product and service marketing efforts and costs incurred for a brand update. These increases were partially offset by a combined decrease of $31,000 in loan and loan related expenses and other operating expenses.
Current report
The conversion of our core operating system is scheduled for the fourth quarter of 2025. While estimated deconversion costs of approximately $850,000 were accrued for in 2024, we cannot be certain that all costs associated with this transition were captured and that there may be non-capitalized costs incurred and charged to expense during 2025.
Current report
As previously announced, on January 24, 2025, the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2026. During the first quarter of 2025 the Company repurchased 22,777 shares at an average price of $3.00 per share. Since the commencement of the repurchase plan in 2022, 308,139 shares have been repurchased at an average price of $2.46 per share.
Current report
Other real estate owned decreased $30,000 to $57,000 as of March 31, 2025, compared to December 31, 2024, due to the sale of a property during the first quarter of 2025. Expenses associated with other real estate owned were $1,000 for the three months ended March 31, 2025, compared to expenses of $4,000 during the three months ended March 31, 2024.
Current report
In January 2025, we made a voluntary principal payment of $3.0 million on an outstanding trust preferred security. We may consider making future principal payments based on our available liquidity and considering other funding opportunities that may be available.
Removed paragraphs (18)
Previous report
technology utilized by us;
Previous report
On September 27, 2024 Hurricane Helene passed through western North Carolina, southwest Virginia and northeast Tennessee, causing flood and wind damage in its path. We are assessing the impact of this event on our customers and any collateral securing outstanding loans. At this time, we are not aware of any widespread impairment of collateral, but we continue to monitor the effects of this event and will address any situations as needed, including providing payment relief to affected borrowers.
Previous report
On September 18, 2024 the Federal Open Market Committee (“FOMC”) of the Federal Reserve Board lowered the targeted federal funds rate by 50 bps in response to easing inflation and softening employment numbers. This was the first rate cut since the FOMC began increasing rates in March of 2022. On November 7, 2024 the FOMC reduced the federal funds rate another 25 bps. As a result of these actions, interest earned on immediately repriceable loans tied to the prime interest rate and interest-earning funds held with other financial institutions, including the Federal Reserve Bank, have decreased 75 bps. The Bank has responded by lowering the rates on some deposit products. Although there are indications of more rate cuts to follow, future actions by the FOMC cannot be reasonably estimated, due to a number of factors including future economic and unemployment data. We continually monitor our rate sensitive assets and liabilities and assess opportunities to manage these assets and liabilities to maximize returns and mitigate downside risks.
Previous report
Noninterest income was largely unchanged for the comparative three month periods, decreasing $10,000 to $2.4 million for the quarter ended September 30, 2024 from $2.4 million for the comparable quarter in 2023. Modest decreases in earnings from service charges of $25,000, card processing activities of $5,000 and other noninterest income of $23,000, were largely offset by increased revenue from financial services which increased $36,000.
Previous report
Noninterest expense was $6.8 million for the three months ended September 30, 2024 compared to $6.9 million for the quarter ended September 30, 2023. The $54,000 improvement resulted from modest decreases in salaries and benefits of $40,000, and occupancy expenses of $3,000. In addition, legal and professional fees, loan and loan related expenses, included in other operating expenses, decreased by a combined $90,000. These decreases offset increases in data processing and telecommunication expenses and other noninterest expenses of $10,000 and $59,000, respectively.
Previous report
Comparison of the Nine Months ended September 30, 2024 and 2023
Previous report
Year-to-date highlights include:
Previous report
For the nine months ended September 30, 2024, net interest income decreased $27,000 to $21.1 million from $21.1 million for the nine months ended September 30, 2023. The yield on earning assets increased 61 bps to 5.40% for the comparative nine-month periods, while the average balance increased $62.1 million to $819.9 million. The cost of interest-bearing liabilities increased 126 bps to 2.94%, while the average balance increased $71.1 million to $548.7 million during the comparative nine-month periods.
Previous report
Net Interest Margin Analysis
Previous report
Nine Months Ended September 30,
Previous report
(1) Nonaccrual loans and loans held for sale have been included in average loan balances.
Previous report
(2) Tax exempt income is not significant and has been treated as fully taxable.
Previous report
Based on our current assessment of the loan portfolio and related unfunded commitments, a provision of $478,000 was made for the nine months ended September 30, 2024. The allowance for credit losses as a percentage of loans increased from 1.14% at December 31, 2023 to 1.19% as of September 30, 2024. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 2, Summary of Significant Accounting Policies and Note 7, Allowance for Credit Losses, in Item 1 of this Form 10-Q, and Asset Quality, below.
Previous report
For the nine months ended September 30, 2024, noninterest income increased $42,000 to $7.3 million from $7.2 million for the same period in 2023. The increase is due largely to financial services revenue of $998,000, an increase of $168,000, or 20.24%, from the $830,000 recorded during the first nine months of 2023. Service charges and card processing revenue totaling $2.9 million and $2.8 million respectively were largely unchanged from 2023. These improvements were partially offset by the impact of the sales of bank properties in 2024 and 2023. During the first nine months of 2024, a former branch office and a lot were sold, along with the sale of furniture, resulting in a net gain of $23,000. During the same period of 2023, two former office facilities and a vehicle were sold resulting in a net gain of $135,000.
Previous report
For the nine months ended September 30, 2024, noninterest expense decreased $141,000 to $20.6 million compared to $20.8 million for the nine months ended September 30, 2023. The decrease was impacted by reductions in occupancy costs of $26,000 combined with decreases in legal and professional fees of $140,000, consulting fees of $57,000 and loan and other real estate owned expenses of $98,000, excluding net gains on sales of other real estate owned. The expense reductions were partially offset by increases in advertising of $19,000, ATM network expenses of $25,000 and miscellaneous expenses of $131,000 which combined for an increase of $175,000.
Previous report
Other real estate owned increased $903,000 to $1.1 million as of September 30, 2024 compared to December 31, 2023. The increase was due to the foreclosure of a commercial property, which is anticipated to be sold during the fourth quarter of 2024. Expenses associated with other real estate owned were $13,000 for the nine months ended September 30, 2024, excluding the effects of the sales of foreclosed properties during the second and third quarters of 2024 which resulted in a gain of $44,000, compared to expenses of $23,000 during the nine months ended September 30, 2023. Nonaccrual loans increased $550,000 to $4.1 million as of September 30, 2024 from $3.5 million at December 31, 2023, largely due to a commercial real estate loan moving to nonaccrual status.
Previous report
The bank holding company has approximately $20,000 in cash on deposit at the Bank at September 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 report
As discussed in the Capital Resources section, the Company is authorized to repurchase up to 500,000 shares of the Company’s outstanding common stock through March 31, 2025. Payments for any repurchases will be distributed from available funds, or from dividend payments from the Bank, and are not expected to have a material impact on available liquidity.
Reworded paragraphs (31)
Previous wording
geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
Current wording
geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
Previous wording
Net income for the three months ended September 30, 2024 was $2.1 million, an increase of $218,000, or 11.53%, from the same period in 2023. Net interest income increased 1.99%, or $140,000, from $7.0 million for the quarter ended September 30, 2023 to $7.2 million for the quarter ended September 30, 2024. The increase was primarily due to an increase in interest income of $2.0 million to $11.5 million due to the combination of an increase of 57 basis points (“bps”) in the yield on earning assets to 5.51%, and a $65.5 million increase in the average balance of earning assets.
Current wording
Net income for the three months ended March 31, 2025 was $1.9 million, an increase of $122,000, or 6.83%, from the same period in 2024. Net interest income increased 9.81%, or $680,000, from $6.9 million for the quarter ended March 31, 2024 to $7.6 million for the quarter ended March 31, 2025. The increase was primarily due to an increase in the yield and average balance of earning assets, specifically loans which increased 27 basis points (”bps”) and $23.5 million when comparing the first three months of 2025 to 2024.
Previous wording
The balance sheet grew to $880.3 million in total assets as of September 30, 2024, from $826.3 million as of December 31, 2023. Gross loans increased $8.2 million to $646.4 million as of September 30, 2024. Additionally, interest-bearing deposits in other banks increased $40.2 million to $90.6 million as of September 30, 2024. Total deposit liabilities as of September 30, 2024 increased $47.1 million to $763.6 million from December 31, 2023.
Current wording
The balance sheet grew to $880.7 million in total assets as of March 31, 2025, from $854.9 million as of December 31, 2024. Gross loans increased $13.2 million to $670.7 million as of March 31, 2025. Additionally, interest-bearing deposits in other banks increased $12.3 million to $66.6 million as of March 31, 2025. During the first three months of 2025 total deposits increased $26.9 million or 14.53% annualized to $776.9 million.
Previous wording
During the first quarter of 2024, we extended a previously announced stock repurchase program, to continue through March 31, 2025. During the third quarter of 2024, 23,989 shares were repurchased at an average price of $2.67 per share.
Current wording
During the first quarter of 2025, we extended a previously announced stock repurchase program, to continue through March 31, 2026. Since the inception of the program through March 31, 2025, the Company has repurchased 308,139 shares at an average price of $2.46 per share.
Previous wording
During the three months ended September 30, 2024, interest income increased $2.0 million to $11.5 million due to the combination of an increase of 57 basis points (“bps”) in the yield on earning assets to 5.51%, and a $65.5 million increase in the average balance of earning assets. The loan portfolio was the primary driver of both increases, as the yield rose 62 bps to 6.05%, while the average balance increased $21.7 million for the comparative quarters ending September 30, 2024 and 2023. The increased interest income was offset by increased interest expense which rose $1.8 million to $4.4 million during the third quarter of 2024 as compared to $2.5 million reported for the same period in 2023. Interest-bearing deposits accounted for $1.7 million of the increase as the average rate increased 110 bps and the average balance increased $59.7 million for the comparative quarters ending September 30, 2024 and 2023. Additionally, while the average cost of borrowed funds decreased 64 bps to 5.77%, the related interest expense increased $100,000 due to the increased average balance related to a $10.0 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program taken in the fourth quarter of 2023, which increased the overall outstanding average balance by $9.7 million. The net interest margin decreased 20 bps, to 3.43% for the quarter ending September 30, 2024, as compared to the 3.63% net interest margin for the same period in 2023 due to the increase in funding costs outpacing improvements in the yield on earning assets; however, growth in earning assets offset the impact of a smaller net interest margin, resulting in the $140,000 increase in net interest income.
Current wording
During the first quarter of 2025, interest income increased $737,000 to $11.4 million due to the combination of an increase of 19 bps in the yield on earning assets to 5.51% and a $32.7 million increase in the average balance of earning assets. The loan portfolio was the primary driver of both increases, as the yield rose 27 bps to 6.10%, while the average balance increased $23.5 million for the comparative quarters ending March 31, 2025 and 2024. Investment securities contributed $172,000 as the average balance, excluding the unrealized loss, increased $6.7 million and the yield rose 52 bps, as we reinvest cash flows and grow the portfolio in a higher interest rate environment. The increased interest income was partially offset by increased interest expense which rose $57,000 to $3.7 million during the first quarter of 2025 as compared to $3.7 million reported for the same period in 2024. Interest-bearing deposits accounted for $298,000 of the increase as the average rate increased 7 bps and the average balance increased $37.0 million for the comparative quarters ending March 31, 2025 and 2024. The increase attributable to interest-bearing deposits was partially offset by a decrease in the cost of borrowed funds, which decreased 57 bps to 5.26%, as the related interest expense decreased $241,000. The decline was also impacted by the decreased average balance related to a $10 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program that was repaid in October 2024, combined with $4.2 million in principal payments made on trust preferred securities in October 2024 and January 2025. In addition, the variable rate paid on the trust preferred securities decreased as overnight and short-term borrowing rates declined during the last half of 2024. As a result, the cost of total interest-bearing liabilities decreased 4 bps to 2.73% during the first quarter of 2025 as compared to the first quarter of 2024. As a result, net interest income for the quarter ended March 31, 2025 increased $680,000, or 9.81%, when compared to the quarter ended March 31, 2024, while the net interest margin increased 21 bps to 3.69% for the quarter ending March 31, 2025, as compared to 3.48% for the same period in 2024 due to the increase in the yield on earning assets outpacing the cost of funds.
Previous wording
The provision for credit losses charged to the income statement for the three months ended September 30, 2024 was $49,000 compared to a provision of $155,000 for the three months ended September 30, 2023. The provision for credit losses in the third quarter of 2024 was impacted by the resolution of a loan relationship that had resulted in a $263,000 specific allowance allocation during the second quarter of 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 and Asset Quality, below.
Current wording
The provision for credit losses charged to the income statement for the quarter ended March 31, 2025 was $259,000 compared to a net reversal of $43,000 for the three months ended March 31, 2024. The March 2025 provision reflects the impact of valuation allowances for two specifically assessed borrower relationships, while the reversal recorded in 2024, was due to the resolution of a loan relationship for which a specific allowance allocation had been assigned, along with net recoveries on previously charged-off loans recorded during the first quarter of 2024. Also, the provision for credit losses on unfunded commitments was $92,000 for the first quarter of 2025 due to growth in construction loans which are expected to be drawn over the next 12-18 months. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.
Previous wording
The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 71.10% during the third quarter of 2024 from 72.62% for the third 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 72.55% during the first quarter of 2025 from 75.42% for the first quarter of 2024. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.
Previous wording
Income tax expense for the third quarter of 2024 totaled $621,000, an increase of $72,000, or 13.11%, from $549,000 recorded during the same period in 2023. The effective tax rate for the three months ended September 30, 2024, was 22.76%, compared to 22.51% 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.
Current wording
Income tax expense for the first quarter of 2025 totaled $584,000, an increase of $53,000, or 9.98%, from $531,000 recorded during the same period in 2024. The effective tax rate for the three months ended March 31, 2025, was 23.43%, compared to 22.92% for the same period in 2024. The increase in the effective tax rate is largely the result of earnings generated in states that assess an excise or income tax.
Previous wording
Total assets as of September 30, 2024 were $880.3 million, an increase of $54.0 million, or 6.53%, from $826.3 million as of December 31, 2023. Gross loans of $646.4 million as of September 30, 2024 reflected an increase of $8.2 million from $638.1 million at December 31, 2023. Liquid assets in the form of cash and cash equivalents increased $38.8 million or 59.64% during the first nine months of 2024. Investment securities increased $6.8 million during the first nine months of 2024 due to purchases of $14.0 million, which more than offset sales of $2.1 million, and maturities, payments and amortization of $8.2 million and a $3.3 million decrease in the unrealized loss on securities available for sale. During the third quarter of 2024, odd lot investment securities totaling $2.1 million were sold, and the proceeds were used to reinvest in other securities. These sales generated a net gain of $4,000.
Current wording
Total assets as of March 31, 2025 were $880.7 million, an increase of $25.8 million, or 12.25% annualized, from $854.9 million as of December 31, 2024. Gross loans of $670.7 million as of March 31, 2025 reflected an increase of $13.2 million from $657.5 million as of December 31, 2024. Liquid assets in the form of cash and cash equivalents increased $15.6 million, or 93.57% annualized, during the first quarter of 2025. Investment securities increased $2.6 million during the first three months of 2025 due to purchases of $2.9 million, and a decrease in the unrealized loss on available-for-sale securities of $2.4 million which more than offset maturities, payments and amortization of $2.7 million.
Previous wording
Consumer loans increased $5.5 million, or 24.10% which included the purchase of $2.5 million of individual loans, and the funding of $1.8 million of private student loans during the first nine months of 2024. Commercial real estate and commercial loans increased $5.3 million and $3.4 million, respectively, during the first nine months of 2024. Residential 1-4 family loans decreased $6.0 million from December 31, 2023 to September 30, 2024. Loan originations during the first nine months of 2024 were impacted by higher interest rates affecting borrower requests.
Current wording
Gross loans receivable increased $13.2 million to $670.7 million as of March 31, 2025 from $657.5 million as of December 31, 2024. Commercial and residential real estate loans increased $5.5 million and $2.8 million, respectively, from December 31, 2024 to March 31, 2025. Consumer loans increased $1.9 million or 27.04% annualized, which included the purchase of $2.5 million of individual loans during the quarter. Commercial and agriculture loans increased $1.4 million and $979,000, respectively, during the first quarter of 2025.
Previous wording
Total deposits were $763.6 million as of September 30, 2024 compared to $716.5 million as of December 31, 2023. The increase of $47.1 million, or 6.57%, 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 $25.1 million, including $3.0 million of brokered time deposits, and money market accounts increased $27.1 million during the first nine 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 repricing of maturing time deposits in the higher interest rate environment combined with ongoing competition for deposits.
Current wording
Deposits totaled $776.9 million as of March 31, 2025 compared to $750.0 million as of December 31, 2024. The increase of $26.9 million, or 14.53% annualized, 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 and seasonality, total time deposits increased $3.9 million, money market accounts increased $10.0 million, and noninterest bearing deposits increased $9.1 million during the first quarter of 2025. The increase in time and money market deposits contributed to the increase in our cost of interest-bearing deposits, which increased 7 bps to 2.62% for the three months ended March 31, 2025, as compared to the same period in 2024, as previously discussed, due to the shift in the mix of the deposit portfolio as average deposit growth over the last year has mainly occurred in the higher-rate products as depositors seek to maximize their return on these deposits.
Previous wording
As of September 30, 2024, borrowed funds totaled $36.2 million, unchanged from December 31, 2023. Since September 30, 2024, $10.0 million borrowed from the Federal Reserve Bank under the Bank Term Funding Program has been repaid, and a $1.2 million principal reduction was paid toward outstanding trust preferred securities. These repayments made from available liquidity, will improve net interest income and the net interest margin in future periods.
Current wording
As of March 31, 2025, borrowed funds totaled $22.0 million, a decrease of $3.0 million from December 31, 2024. Since December 31, 2024, a $3.0 million principal reduction was paid toward outstanding trust preferred securities. This repayment, made from available liquidity, will improve net interest income and the net interest margin in future periods.
Previous wording
During the first nine months of 2024, total shareholders’ equity increased $6.3 million to $71.1 million as of September 30, 2024, due to net income of $5.6 million and a decrease in the net unrealized loss on available-for-sale investment securities of $2.6 million which was offset by dividends paid to shareholders of $1.7 million and the repurchase of common stock totaling $239,000. Additional discussion of shareholders’ equity is presented in the Capital Resources discussion below.
Current wording
During the first three months of 2025, total shareholders’ equity increased $1.8 million to $72.6 million as of March 31, 2025, due to net income of $1.9 million and a decrease in the net unrealized loss on available-for-sale securities of $1.9 million. These increases to capital were offset by dividends paid to shareholders of $1.9 million, and the repurchase of common stock totaling $68,000. Consequently, book value per share increased to $3.07 as of March 31, 2025, compared to $2.99 as of December 31, 2024. The Bank remains well capitalized per regulatory guidance.
Previous wording
The allowance for credit losses was $7.7 million, or 1.19% as a percentage of total loans, as of September 30, 2024, and $7.3 million, or 1.14%, as of December 31, 2023. The allowance for credit losses on unfunded commitments was $309,000 as of September 30, 2024 as compared to $285,000 at December 31, 2023.
Current wording
The allowance for credit losses was $7.8 million, or 1.17% as a percentage of total loans, as of March 31, 2025, and $7.7 million, or 1.17%, as of December 31, 2024. The allowance for credit losses on unfunded commitments was $496,000 as of March 31, 2025, as compared to $404,000 at December 31, 2024. The increase in the allowance for credit losses on unfunded commitments was due to an increase in loan commitments, specifically residential and commercial real estate construction loan commitments.
Previous wording
Annualized net charge-offs as a percentage of average loans was 0.01% during the first nine months of 2024 compared to 0.03% during the same period of 2023.
Current wording
Annualized net charge-offs (recoveries) as a percentage of average loans were 0.01% during the first three months of 2025 compared to 0.02% during the fourth quarter of 2024 and (0.09)% during the first quarter of 2024.
Previous wording
Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $5.1 million as of September 30, 2024, an increase of $1.4 million, or 39.34%, since year-end 2023. Nonperforming assets as a percentage of total assets were 0.58% as of September 30, 2024 and 0.45% as of December 31, 2023.
Current wording
Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $4.6 million as of March 31, 2025, an increase of $1.2 million, or 35.83%, since year-end 2024. Nonaccrual loans increased $1.2 million during the first three months of 2025 due principally to a single loan relationship totaling $802,000 being placed in nonaccrual status. Nonperforming assets as a percentage of total assets were 0.52% as of March 31, 2025, and 0.39% as of December 31, 2024.
Previous wording
Loans rated substandard or below totaled $4.8 million as of September 30, 2024, an increase of $1.3 million from $3.5 million as of December 31, 2023. Total past due loans increased to $7.3 million as of September 30, 2024 from $6.2 million as of December 31, 2023. The increase in past due loans is largely attributed to an increase in residential mortgage loans 30-59 days past due.
Current wording
Loans rated substandard or below totaled $5.3 million as of March 31, 2025, an increase of $1.3 million from $4.0 million as of December 31, 2024, largely due to a single loan relationship totaling $802,000 that was downgraded during the first quarter of 2025. Total past due loans decreased to $5.0 million as of March 31, 2025 from $6.2 million as of December 31, 2024.
Previous 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 nine 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. Additionally, in consideration of the impact of Hurricane Helene on the financial performance of borrowers and the underlying loan collateral, a qualitative factor adjustment was made for September 30, 2024. 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 $478,000, of which $453,000 was a provision for the loan portfolio; and a provision for unfunded commitments of $25,000. The following table summarizes components of the allowance for credit losses and related loans as of September 30, 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 three months of 2025, we maintained the adjustments to our qualitative factors initiated in 2024, to consider risk factors associated with commercial real estate and residential mortgage loans. Those changes, along with recoveries of loans previously charged off and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a provision for credit losses of $259,000, of which $167,000 was a provision for the loan portfolio; and $92,000 was a provision for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of March 31, 2025 and December 31, 2024:
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 $2.4 million and $3.1 million, existed as of September 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.
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 $2.7 million and $3.2 million, existed as of March 31, 2025 and December 31, 2024, respectively. Our income tax expense was computed at the federal corporate income tax rate of 21% of taxable income and a blended state tax rate of 2.4%. We have no significant nontaxable income or nondeductible expenses.
Previous wording
Book value per common share was $3.00 and $2.73 as of September 30, 2024 and December 31, 2023, respectively. The increase in book value was due to the net income of $5.6 million for the first nine months of 2024, which exceeded the dividend payment of $0.07 per share paid during the first quarter of 2024, combined with the $2.6 million decrease in the unrealized loss on available for sale investment securities and the $239,000 repurchase of common shares during the first nine months of 2024.
Current wording
Book value per common share was $3.07 and $2.99 as of March 31, 2025 and December 31, 2024, respectively. The increase in book value was due largely to a decrease in the unrealized loss on available for sale investment securities earnings for the quarter of $1.9 million combined with net earnings for the quarter of $1.9 million, which more than offset the dividend payment of $0.08 per share and the repurchase of common shares of $68,000 during the first quarter of 2025.
Previous wording
During the first quarter of 2024, the Company paid a cash dividend of $0.07 per common share to our shareholders. Future payments of cash dividends will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.
Current wording
During the first quarter of 2025, the Company paid a cash dividend of $0.08 per common share to our shareholders. Future payments of cash dividends will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.
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. 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 September 30, 2024, the Company has repurchased 270,018 shares at an average price of $2.40 per share since the inception of the plan. During the quarter ended September 30, 2024, the Company repurchased 23,989 shares at an average price of $2.67 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 March 31, 2025. As previously reported, this plan was extended by the Board of Directors through March 31, 2026. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of March 31, 2025, the Company has repurchased 308,139 shares at an average price of $2.46 per share since inception of the plan. During the quarter ended March 31, 2025, the Company repurchased 22,777 shares at an average price of $3.00 per share. There is no assurance that the Company will purchase any additional shares under this program.
Previous wording
We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold, and unpledged available-for-sale securities.
Current wording
We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale investments. Collectively, those balances were $145.8 million as of March 31, 2025, up from $128.5 million as of December 31, 2024. The increase is primarily due to deposit growth exceeding funding needs for loan growth. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs
Previous wording
As of September 30, 2024, all of our investment securities were classified as available-for-sale. These investments provide a source of liquidity in the amount of $50.0 million, which is net of the $38.5 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.
Current wording
As of March 31, 2025, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $62.5 million, which is net of the $36.1 million of securities pledged as collateral. Generally, the investment portfolio serves as a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB). Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds. Total investment securities increased $2.6 million, or 11.16%, annualized during the first quarter of 2025 from $96.0 million as of December 31, 2024 to $98.6 million as of March 31, 2025. The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged.
Previous wording
Our loan to deposit ratio was 84.65% and 89.06% as of September 30, 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 86.34% and 87.67% as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
We have used our line of credit with FHLB to issue letters 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 September 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 was repaid using available liquid funds on October 1, 2024 without penalty.
Current wording
We have used our line of credit with the FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public funds. No draws on these letters of credit have been issued. The letters of credit are considered to be draws on our FHLB line of credit. In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other general liquidity needs. An additional $189.8 million was available as of March 31, 2025 on the $213.8 million line of credit. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.
Previous wording
As of September 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 $7.2 million and $6.3 million as of September 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 September 30, 2024 approximately $26.4 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 March 31, 2025 we held brokered time deposits of $3.0 million, unchanged from December 31, 2024. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $7.3 million and $7.0 million as of March 31, 2025 and December 31, 2024, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of March 31, 2025 approximately $22.0 million were placed in this product as compared to $23.7 million at December 31, 2024. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.
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 $21.4 million were pledged as of September 30, 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 $28.8 million were pledged as of March 31, 2025.
Previous wording
Time deposits of $250,000 or more were approximately 7.22% of total deposits at September 30, 2024 and 7.36% of total deposits at December 31, 2023.
Current wording
Time deposits of $250,000 or more were approximately 7.23% of total deposits at March 31, 2025 and 6.84% of total deposits at December 31, 2024.
Previous wording
With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, etc., some of which are beyond our control.
Current wording
With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. With the current economic uncertainty resulting from inflation, the impact of proposed tariffs and the wars in Ukraine and Gaza, we continue monitoring our liquidity position, specifically cash on hand in order to meet customer demands. Additionally, our contingency funding plan is reviewed quarterly with our Asset Liability Committee.
Previous wording
There have been no material changes during the nine months ended September 30, 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 three months ended March 31, 2025, to the off-balance sheet items and the contractual obligations disclosed in our 2024 Form 10-K.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:
Previous report — wording carried elsewhere
Average Balances, Income and Expense, and Yields and Rates
Previous report — wording carried elsewhere
Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed to rates and volume for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.