NEW PEOPLES BANKSHARES INC

Previous 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.

Current wording

Net interest income for the quarter ended June 30, 2025 was $8.2 million, an increase of $1.2 million, or 17.85%, when compared to the quarter ended June 30, 2024. During the second quarter of 2025, interest income increased $947,000 to $12.0 million due to the combination of an increase of 23 basis points (“bps”) in the yield on earning assets to 5.61% and a $31.7 million increase in the average balance of earning assets when compared to 2024. The loan portfolio was the primary driver of both increases, as the yield rose 31 bps to 6.20%, while the average balance increased $41.9 million compared to the quarter ended June 30, 2024. Investment securities contributed $125,000 as the average balance, excluding the unrealized loss, increased $4.2 million and the yield rose 37 bps, as we reinvest cash flows and grow the portfolio in a higher interest rate environment. Combined with the increased interest income, interest expense decreased $297,000 to $3.7 million during the second quarter of 2025 as compared to $4.0 million reported for the same period in 2024. The reduced interest expense is principally attributed to the cost of borrowed funds, which decreased 55 bps to 5.28%, as the related interest expense decreased $239,000. The decline was due to the decreased average balance related to a $10 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program that was repaid in October 2024, combined with $4.2 million in principal payments made on trust preferred securities in October 2024 and January 2025. These principal payments reduced the average balance of borrowed funds by $14.1 million or 39.09% for the comparative quarters ended June 30, 2025 and 2024. In addition, the variable rate paid on the trust preferred securities decreased as overnight and short-term borrowing rates declined during the last half of 2024. As a result, the cost of total interest-bearing liabilities decreased 28 bps to 2.66% during the second quarter of 2025 as compared to the second quarter of 2024. The net interest margin increased 45 bps to 3.86% for the quarter ending June 30, 2025, as compared to 3.41% for the same period in 2024 due to the increase in the yield on earning assets outpacing the cost of funds.

Previous 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.

Current wording

The provision for credit losses charged to the income statement for the quarter ended June 30, 2025 was $154,000 compared to $472,000 for the three months ended June 30, 2024. The second quarter 2025 provision reflects the impact of the loan growth while the provision recorded in 2024 was due to an increase in past due and nonperforming loans during the second quarter of 2024. The provision for credit losses on unfunded commitments was $0 for the second quarter of 2025 due to a reduction in the growth rate in commitments for construction loans which are expected to be drawn over the next 12-18 months. For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.

Previous wording

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 wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

As of June 30, 2025, borrowed funds totaled $27.0 million, an increase of $2.0 million from December 31, 2024. On June 30, 2025, we took a short-term Federal Home Loan Bank advance of $5.0 million to bolster liquidity based on anticipated loan closings or advances. This advance was repaid in July. During the first quarter of 2025, a $3.0 million principal reduction was paid toward outstanding trust preferred securities. This repayment improved net interest income and the net interest margin during the current reporting periods and should positively impact future periods.

Previous 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.

Current wording

During the six months ended June 30, 2025, total shareholders’ equity increased $4.1 million to $74.8 million, due to net income of $4.4 million and a decrease in the net unrealized loss on available-for-sale securities of $1.7 million. These increases to capital were offset by dividends paid to shareholders of $1.9 million, and the repurchase of common stock totaling $106,000. Consequently, book value per share increased to $3.17 as of June 30, 2025, compared to $2.99 as of December 31, 2024. The Bank remains well capitalized per regulatory guidance.

Previous wording

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 wording

As previously announced, the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2026. During the first six months of 2025, the Company repurchased 35,846 shares at an average price of $2.98 per share. Since the commencement of the repurchase plan in 2022, 321,208 shares have been repurchased at an average price of $2.48 per share.

Previous 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.

Current wording

The allowance for credit losses was $7.9 million, or 1.14% as a percentage of total loans, as of June 30, 2025, and $7.7 million, or 1.17%, as of December 31, 2024. The allowance for credit losses on unfunded commitments was $496,000 as of June 30, 2025, as compared to $404,000 at December 31, 2024. The increase in the allowance for credit losses on unfunded commitments was due to an increase in loan commitments, specifically residential and commercial real estate construction loan commitments.

Previous 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.

Current wording

Annualized net charge-offs (recoveries) as a percentage of average loans were 0.02% during the first six months of 2025 compared to (0.01)% during the same period of 2024 and 0.01% during the first quarter of 2025.

Previous 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.

Current wording

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

Previous wording

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 wording

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

Previous 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.

Current wording

Loans rated substandard or below totaled $5.7 million as of June 30, 2025, an increase of $1.7 million from $4.0 million as of December 31, 2024, due to two loan relationships totaling $2.9 million that were downgraded during the first six months of 2025. The Company is working with one of these borrowers to bring the classified portion of the loan totaling $2.2 million into compliance with applicable loan covenants and does not anticipate any loss will result from this loan. Total past due loans decreased to $4.4 million as of June 30, 2025 from $6.2 million as of December 31, 2024.

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 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:

Current 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 six months of 2025, we maintained the adjustments to our qualitative factors initiated in 2024, to consider risk factors associated with commercial real estate and residential mortgage loans. Those changes, along with recoveries of loans previously charged off and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a provision for credit losses of $413,000, of which $321,000 was a provision for the loan portfolio and $92,000 was a provision for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of June 30, 2025 and December 31, 2024:

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 $2.7 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.

Current wording

Due to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset of $1.6 million is recorded as of June 30, 2025 and December 31, 2024, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $2.7 million and $3.2 million, as of June 30, 2025 and December 31, 2024, respectively. Our income tax expense was computed at the federal corporate income tax rate of 21% of taxable income and a blended state tax rate of 2.4%. We have no significant nontaxable income or nondeductible expenses.

Previous 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.

Current wording

Book value per common share was $3.17 and $2.99 as of June 30, 2025 and December 31, 2024, respectively. The increase in book value was due largely to a decrease in the unrealized loss on available for sale investment securities earnings for the year of $1.7 million combined with net earnings for the year of $4.4 million, which more than offset the dividend payment of $0.08 per share and the repurchase of common shares of $106,000 during the first half of 2025.

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, 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.

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. As previously reported, this plan was extended by the Board of Directors through March 31, 2026. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of June 30, 2025, the Company has repurchased 321,208 shares at an average price of $2.48 per share since inception of the plan. During the quarter ended June 30, 2025, the Company repurchased 13,069 shares at an average price of $2.95 per share. There is no assurance that the Company will purchase any additional shares under this program.

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 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

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 $133.4 million as of June 30, 2025, up from $128.5 million as of December 31, 2024. The increase is primarily due to deposit growth, including brokered certificates of deposit and the short-term FHLB advance taken during June 2025. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs

Previous 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.

Current wording

As of June 30, 2025, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $61.3 million, which is net of the $35.5 million of securities pledged as collateral. Generally, the investment portfolio serves as a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB). Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds. Total investment securities increased $765,000, or 1.61%, annualized during the first half of 2025 from $96.0 million as of December 31, 2024 to $96.7 million as of June 30, 2025. The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged.

Previous wording

Our loan to deposit ratio was 86.34% and 87.67% as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Our loan to deposit ratio was 88.99% and 87.67% as of June 30, 2025 and December 31, 2024, respectively.

Previous 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.

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; and in June 2025 we borrowed an additional $5.0 million which was repaid in July 2025. An additional $191.3 million was available as of June 30, 2025 on the $220.3 million line of credit. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.

Previous 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.

Current wording

As of June 30, 2025 we held brokered time deposits of $18.0 million, an increase of $15.0 million from December 31, 2024. These added brokered deposits supplemented liquidity and supported loan closings and advances and bolstered on-balance-sheet liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $7.6 million and $7.0 million as of June 30, 2025 and December 31, 2024, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of June 30, 2025 approximately $17.9 million were placed in this product as compared to $23.7 million at December 31, 2024. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.

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 $28.8 million were pledged as of March 31, 2025.

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 $28.2 million were pledged as of June 30, 2025.

Previous 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.

Current wording

Time deposits of $250,000 or more were approximately 5.52% of total deposits at June 30, 2025 and 6.84% of total deposits at December 31, 2024.

Previous 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.

Current wording

There have been no material changes during the six months ended June 30, 2025, to the off-balance sheet items and the contractual obligations disclosed in our 2024 Form 10-K.