NEW PEOPLES BANKSHARES INC

Previous wording

New Peoples generates a significant amount of its income from the net interest income earned by the Bank. Net interest income is the difference between interest income and interest expense. Interest income depends on the volume of interest-earning assets outstanding during the period and the interest rates earned thereon. The Bank's interest expense is a function of the average amount of interest-bearing deposits and borrowed money outstanding during the period and the interest rates paid thereon. The quality of the assets further influences the amount of interest income lost on nonaccruing loans and the amount of provision expense added to the allowance for credit losses. The Bank also generates noninterest income from service charges and fees on deposit accounts, debit and credit card interchange income, and commissions on insurance and investment products sold.

Current wording

New Peoples generates a significant amount of its income from the net interest income earned by the Bank. Net interest income is the difference between interest income and interest expense. Interest income depends on the volume of interest-earning assets outstanding during the period and the interest rates earned thereon. The Bank's interest expense is a function of the average amount of interest-bearing deposits and borrowed money outstanding during the period and the interest rates paid thereon. The quality of our assets further influences the amount of interest income lost on nonaccruing loans and the amount of provision expense added to the allowance for credit losses. The Bank also generates noninterest income from service charges and fees on deposit accounts, debit and credit card interchange income, and commissions on insurance and investment products sold.

Previous wording

Results for the year ended December 31, 2024 were impacted by several non-recurring events. On December 31, 2024 the Bank provided notice of termination of the contract with our core systems provider. We plan to complete the conversion to a new core systems provider in the fourth quarter of 2025. As a result of the termination notice, we recorded termination charges and certain conversion costs estimated to be $850,000. During the fourth quarter of 2024, we had two transactions in our bank owned life insurance portfolio (“BOLI”) that disposed of the entire portfolio. One policy was cancelled and redeemed, resulting in a loss of $49,000; and a benefit claim was filed on the second policy resulting in a gain of $1.6 million. After consideration of the tax impact, these non-recurring items increased earnings by $756,000 or $0.03 per basic and diluted share. In 2023, other noninterest income included $257,000 in insurance proceeds recovery related to costs incurred during the cybersecurity incident in 2022. The following non-GAAP table summarizes the impact of these nonrecurring events:

Current wording

In 2024, the Bank provided notice of termination of the contract with our core systems provider. As a result of this decision, termination charges and certain conversion costs were recorded in 2024, totaling an estimated $850,000. Additionally, during the fourth quarter of 2024, we completed two transactions in our bank owned life insurance (“BOLI”) portfolio. One policy was cancelled and redeemed, resulting in a loss of approximately $49,000, while a benefit claim was filed on the second policy, resulting in a gain of $1.6 million. After consideration of the tax impact, these non-recurring items increased 2024 earnings by approximately $756,000, or $0.03 per basic and diluted share. The conversion to the new core systems provider was completed in the fourth quarter of 2025. After consideration of the tax impact, additional conversion-related costs decreased earnings for 2025 by approximately $221,000, or $0.01 per basic and diluted share.

Previous wording

Adjusted net income and net income per share are non-GAAP financial measures that management uses to supplement the evaluation of the Company’s operating results and believes is beneficial to the users of its financial statements in evaluating the Company’s current operating results in relation to past periods.

Current wording

Adjusted net income and net income per share are non-GAAP financial measures that management uses to supplement the evaluation of New Peoples’s operating results and believes is beneficial to the users of its financial statements in evaluating New Peoples’s current operating results in relation to past periods.

Previous wording

As discussed in “Net Interest Income and Net Interest Margin”, net interest income for the year ended December 31, 2024 was $28.5 million compared to $28.0 million for the year ended December 31, 2023. The increase was primarily due to a $59.6 million increase in average earning assets. Average interest-bearing liabilities increased $65.3 million to $549.5 million during the comparative twelve-month periods.

Current wording

As discussed in “Net Interest Income and Net Interest Margin,” net interest income for the year ended December 31, 2025 was $33.2 million compared to $28.5 million for the year ended December 31, 2024. The increase was primarily due to a $41.0 million increase in average earning assets and a 37 basis point improvement in the net interest margin. Average interest-bearing liabilities increased $26.2 million to $575.7 million during the comparative twelve-month periods.

Previous wording

Total assets as of December 31, 2024 were $854.9 million, an increase of $28.6 million, or 3.46%, from $826.3 million as of December 31, 2023. Gross loans increased $19.4 million, or 3.04%, during 2024 due to continuing loan demand. Investment securities increased $6.2 million during 2024 primarily due to securities purchases executed throughout the year. All of the Company's investments are designated as available-for-sale.

Current wording

Total assets as of December 31, 2025 were $909.7 million, an increase of $54.8 million, or 6.41%, from $854.9 million as of December 31, 2024. Gross loans increased $52.1 million, or 7.92%, during 2025 due to continuing loan demand. Investment securities increased approximately $449,000 during 2025 primarily due to a $5.2 million improvement in the unrealized loss on investment securities and purchases executed throughout the year largely offset by maturities, calls, payments, and amortization. All of New Peoples's investments are designated as available-for-sale.

Previous wording

Deposits totaled $750.0 million as of December 31, 2024 compared to $716.5 million as of December 31, 2023. The increase of $33.5 million, or 4.68%, was due to efforts to attract and retain deposits, specifically time deposits through targeted promotional rates and terms and money market accounts through more aggressive pricing of rates, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $16.4 million during the year ended December 31, 2024.

Current wording

Deposits totaled $798.3 million as of December 31, 2025 compared to $750.0 million as of December 31, 2024. The increase of $48.3 million, or 6.44%, was due to efforts to attract and retain deposits, specifically time deposits through targeted promotional rates and terms and money market accounts through disciplined pricing. As a result of these efforts, total time deposits increased $23.1 million and money market and saving accounts increased $28.2 million during the year ended December 31, 2025.

Previous wording

New Peoples Bank remains well-capitalized. The leverage ratio is 10.70% as of December 31, 2024, compared to 11.11% as of December 31, 2023.

Current wording

New Peoples Bank remains well-capitalized as of December 31, 2025 and had a leverage ratio of 10.93% compared to 10.70% as of December 31, 2024.

Previous wording

The Company’s key performance indicators are as follows:

Current wording

New Peoples’s key performance indicators are as follows:

Previous wording

Average Balances, Income and Expense, and Yields and Yields and Rates

Current wording

Average Balances, Income and Expense, and Yields and Rates

Previous wording

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 tables set forth the amounts of the total changes in interest income and interest expense which can be attributed to rates, volume and a combination of rates and volume, for the periods indicated.

Current wording

The following tables set forth the amounts of the total changes in interest income and interest expense which can be attributed to rates, volume and a combination of rates and volume, for the periods indicated.

Previous wording

Our primary source of income is interest earned on loans. Total gross loans increased $19.4 million during 2024, or 3.04%, to $657.5 million as of December 31, 2024 as compared to $638.1 million as of December 31, 2023. The primary drivers of this increase in total loans were increases in construction loans, commercial real estate loans and commercial loans which increased $7.3 million to $36.1 million, $3.5 million to $243.6 million and $7.4 million to $60.6 million, respectively. These increases resulted from small business development efforts throughout 2024 and a commercial loan promotion offered. In addition, consumer installment and all other loans increased $5.9 million due to private student loan originations of $1.8 million and the acquisition of $2.9 million in consumer loans. These increases offset reductions in residential and multi-family mortgage loans which decreased $3.4 million to $234.9 million and $2.2 million to $32.4 million during 2024. For more detail on loan balances, refer to Note 6 of the consolidated financial statements contained in Item 8 of this Form 10-K.

Current wording

Our primary source of income is interest earned on loans. Total gross loans increased $52.1 million during 2025, or 7.92%, to $709.6 million as of December 31, 2025 as compared to $657.5 million as of December 31, 2024. The primary drivers of this increase in total loans were increases in commercial, residential 1-4 family, and multifamily real estate loans of $12.1 million to $255.7 million, $17.8 million to $252.6 million, and $13.6 million to $46.0 million, respectively. These increases resulted from customer relationship development and continued demand for commercial and consumer lending products, and the opening of a loan production office in Wytheville, Virginia during 2025. For more detail on loan balances, refer to Note 7 of the consolidated financial statements contained in Item 8 of this Form 10-K.

Previous wording

Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. Nonaccrual loans negatively affect interest income as these loans are nonearning assets. When doubt about the collectability of a loan exists, it is the Bank’s policy to stop accruing interest on that loan under the following circumstances: (a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when conditions indicate that payment of principal and interest can no longer be expected, or (c) when any such loan becomes delinquent for 90 days and is not both well secured and in the process of collection. All interest accrued but not collected on loans that are placed on nonaccrual is charged off and reversed against interest income in the current period. In the case of a nonaccrual loan that is well secured and in the process of collection, the interest accrued but not collected is not reversed. Interest received on these loans is accounted for on the cash basis or cost-recovery method until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments are made, and prospects for future contractual payments are reasonably assured. For more detail on nonaccrual loans, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.

Current wording

Nonaccrual loans increased approximately $325,000 from $3.3 million as of December 31, 2024 to $3.6 million as of December 31, 2025. Nonaccrual loans negatively affect interest income as these loans are nonearning assets. When doubt about the collectability of a loan exists, it is the Bank’s policy to stop accruing interest on that loan under the following circumstances: (a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when conditions indicate that payment of principal and interest can no longer be expected, or (c) when any such loan becomes delinquent for 90 days and is not both well secured and in the process of collection. All interest accrued but not collected on loans that are placed on nonaccrual is charged off and reversed against interest income in the current period. In the case of a nonaccrual loan that is well secured and in the process of collection, the interest accrued but not collected is not reversed. Interest received on these loans is accounted for on the cash basis or cost-recovery method until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments are made, and prospects for future contractual payments are reasonably assured. For more detail on nonaccrual loans, refer to Note 7 of the consolidated financial statements in Item 8 of this Form 10-K.

Previous wording

Individually evaluated loans increased during 2024 to $1.7 million as of December 31, 2024, from $1.1 million as of December 31, 2023. Interest income and cash receipts on individually evaluated loans are handled differently depending on whether or not the loan is on nonaccrual status. If the individually evaluated loan is not on nonaccrual status, the interest income on the loan is computed using the effective interest method. For more detail onindividually evaluated loan balances, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.

Current wording

Individually evaluated loans increased during 2025 to $2.2 million as of December 31, 2025, from $1.7 million as of December 31, 2024. Interest income and cash receipts on individually evaluated loans are handled differently depending on whether or not the loan is on nonaccrual status. If the individually evaluated loan is not on nonaccrual status, the interest income on the loan is computed using the effective interest method. For more detail on individually evaluated loan balances, refer to Note 7 of the consolidated financial statements in Item 8 of this Form 10-K.

Previous wording

The Company maintains its allowance for credit losses based on the expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

Current wording

New Peoples maintains its allowance for credit losses based on the expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

Previous wording

The Company primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff, the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral values, concentrations of credit, and legal or regulatory requirements and competition.

Current wording

New Peoples primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, New Peoples may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff, the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral values, concentrations of credit, and legal or regulatory requirements and competition.

Previous wording

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “classified” as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the discounted cash flow (“DCF”) method.

Current wording

New Peoples measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. New Peoples designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “classified” as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the discounted cash flow (“DCF”) method.

Previous wording

The allowance for credit losses increased to $7.7 million as of December 31, 2024 from $7.3 million as of December 31, 2023. The allowance for credit losses at the end of 2024 was approximately 1.17% of total loans as compared to 1.14% at the end of 2023. Provisions for credit losses for loans receivable of approximately $506,000 and $712,000 were recorded during the years ended December 31, 2024 and 2023, respectively. Loans charged off, net of recoveries, totaled approximately $78,000, or 0.01% of average loans, for the year ended December 31, 2024, compared to approximately $103,000, or 0.02% of average loans, in 2023. The allowance for credit losses represents an amount that, in the Company's judgment, will be adequate to absorb expected and estimable losses inherent in the loan portfolio. The judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time, changes in the nature and volume of the loan portfolio, current reasonable and supportable forecasts of economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.

Current wording

The allowance for credit losses increased to $8.1 million as of December 31, 2025 from $7.7 million as of December 31, 2024. The allowance for credit losses at the end of 2025 was approximately 1.14% of total loans as compared to 1.17% at the end of 2024. Provisions for credit losses for loans receivable of approximately $739,000 and $506,000 were recorded during the years ended December 31, 2025 and 2024, respectively. Loans charged off, net of recoveries, totaled approximately $316,000, or 0.05% of average loans, for the year ended December 31, 2025, compared to approximately $78,000, or 0.01% of average loans, in 2024. The allowance for credit losses represents an amount that, in New Peoples's judgment, will be adequate to absorb expected and estimable losses inherent in the loan portfolio. The judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time, changes in the nature and volume of the loan portfolio, current reasonable and supportable forecasts of economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.

Previous wording

Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. The amount of interest income that would have been recognized on these loans had they been accruing interest was approximately $49,000 and $61,000 in the years ended December 31, 2024 and 2023, respectively. There were no loans past due 90 days or greater and still accruing interest at either December 31, 2024 or 2023. There are no commitments to lend additional funds to non-performing borrowers.

Current wording

Nonaccrual loans increased approximately $325,000 from $3.3 million as of December 31, 2024 to $3.6 million as of December 31, 2025. The amount of interest income that would have been recognized on these loans had they been accruing interest was approximately $49,000 for both of the years ended December 31, 2025 and 2024. Loans past due 90 days or greater and still accruing interest totaled approximately $165,000 at December 31, 2025. There were no loans past due 90 days or greater and still accruing interest as of December 31, 2024. There are no commitments to lend additional funds to non-performing borrowers.

Previous wording

With regard to the Bank’s consumer and consumer real estate loan portfolio, we use the guidance found in the Uniform Retail Credit Classification and Account Management Policy which affects our estimate of the allowance for credit losses. Under this approach, a consumer or consumer real estate loan must initially have a credit risk grade of Pass or better. Subsequently, if the loan becomes contractually 90 days past due or the borrower files for bankruptcy protection, the loan is downgraded to Substandard and placed in nonaccrual status. If the loan is unsecured upon being deemed Substandard, the entire loan amount is charged-off.

Current wording

With regard to the Bank’s consumer and consumer real estate loan portfolio, we use the guidance found in the Uniform Retail Credit Classification and Account Management Policy which affects our estimate of the allowance for credit losses. Under this approach, a consumer or consumer real estate loan must initially have a credit risk grade of Pass or better. Subsequently, if the loan becomes contractually 90 days past due or the borrower files for bankruptcy protection, the loan is downgraded to Substandard and generally placed in nonaccrual status. If the loan is unsecured upon being deemed Substandard, the entire loan amount is charged off.

Previous wording

For non-1-4 family residential loans that are 90 days or more past due or in bankruptcy, the collateral value less estimated liquidation costs are compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient, then no charge-off is necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged-off against the allowance for credit losses. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days past due, or at the time of foreclosure, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan balance to calculate any deficiency. Subsequently, any noted deficiency is then charged-off against the allowance for credit losses when the loan becomes contractually 180 days past due, or at the time of foreclosure. If the customer has filed bankruptcy, then within 60 days of the bankruptcy notice, any calculated deficiency is charged-off against the allowance for credit losses. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation ensues.

Current wording

For non-1-4 family residential loans that are 90 days or more past due or in bankruptcy, the collateral value less estimated liquidation costs are compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient, then no charge-off is necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged off against the allowance for credit losses. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days past due, or at the time of foreclosure, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan balance to calculate any deficiency. Subsequently, any noted deficiency is then charged off against the allowance for credit losses when the loan becomes contractually 180 days past due, or at the time of foreclosure. If the customer has filed bankruptcy, then within 60 days of the bankruptcy notice, any calculated deficiency is charged off against the allowance for credit losses. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation.

Previous wording

Annualized net charge-offs, as a percentage of average loans, was 0.01% during the year ended December 31, 2024, compared to 0.02% for the same period of 2023. The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known credit losses 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 year ended December 31, 2024, we made modest adjustments to our qualitative factors to consider risk factors associated with commercial real estate and residential mortgage loans and the impacts of the hurricane Helene. Those changes, along with the assessment of the historical and specific risks associated with the loan portfolio, resulted in a net provision for credit losses of $625,000, of which $506,000 was provided for the loan portfolio and $119,000 was provided to the allowance for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of December 31, 2024 and 2023:

Current wording

As discussed, the allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known credit losses 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 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; however, we removed the qualitative factor related to Hurricane Helene. During the third quarter of 2024, customers residing in North Carolina, southwest Virginia, northeast Tennessee and southern West Virginia were impacted by Hurricane Helene. We assessed the impact of the storm on our customers and any collateral securing outstanding loans and adjusted the allowance for credit losses. Additionally, we worked with customers impacted by this natural disaster and provided short-term payment deferrals to affected borrowers. These deferral periods have expired, and at this time, we are not aware of any widespread impairment of collateral other than one property in which a $138,000 partial charge-off was taken during 2025. Accordingly, we eliminated the adjustment in the allowance for credit losses for the potential impacts of the storm. Those changes, along with the assessment of the historical and specific risks associated with the loan portfolio, resulted in a net provision for credit losses of approximately $806,000, of which $739,000 was provided for the loan portfolio and $67,000 was provided to the allowance for unfunded commitments.

Previous wording

Total investment securities increased $6.2 million, or 6.88%, to $96.0 million as of December 31, 2024 from $89.8 million as of December 31, 2023. All securities are classified as available-for-sale for liquidity purposes. The increase in investment securities during 2024 was due to purchases of $23.3 million, which more than offset sales of $2.1 million, and maturities, payments and amortization of $14.6 million and a $419,000 increase 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.There were no sales of securities during 2023. During 2023, there were maturities, calls and paydowns of $9.4 million, and the Company purchased $0.5 million in investment securities. Investment securities with a carrying value of $35.2 million and $36.8 million as of December 31, 2024 and 2023, respectively, were pledged to secure public deposits and for other purposes required, or permitted, by law.

Current wording

Total investment securities increased approximately $449,000 to $96.4 million as of December 31, 2025 from $96.0 million as of December 31, 2024. All securities are classified as available-for-sale for liquidity purposes. The increase in investment securities during 2025 was due to purchases of $9.3 million and a decrease in the unrealized loss on available-for-sale securities of $5.2 million which more than offset maturities, calls, payments, and amortization of $14.0 million. Investment securities with a carrying value of $32.5 million and $35.2 million as of December 31, 2025 and 2024, respectively, were pledged to secure public deposits and for other purposes required, or permitted, by law.

Previous wording

The fair value of our investment portfolio is substantially affected by changes in interest rates. Losses could be realized if liquidity and/or business strategy necessitate the sale of securities in a loss position, due to Federal Reserve actions, U.S. fiscal policies or other factors affecting market interest rates. As of December 31, 2024, we had a net unrealized loss in our investment portfolio totaling $15.2 million as compared to a $14.8 million loss as of December 31, 2023. As market interest rates increase, the level of unrealized losses could change substantially. However, these changes would have no impact on earnings or regulatory capital, unless the securities were sold at a loss. We believe that all unrealized losses resulted from temporary changes in interest rates and current market conditions and are not a result of credit deterioration. No allowance for credit losses on available-for-sale securities was recorded as of December 31, 2024 and 2023. We monitor our portfolio regularly and use it to maintain liquidity, manage interest rate risk and enhance earnings.

Current wording

The fair value of our investment portfolio is substantially affected by changes in interest rates. Losses could be realized if liquidity and/or business strategy necessitate the sale of securities in a loss position due to Federal Reserve actions, U.S. fiscal policies or other factors affecting market interest rates. As of December 31, 2025, we had a net unrealized loss in our investment portfolio totaling $10.0 million as compared to a $15.2 million loss as of December 31, 2024. As market interest rates fluctuate, the level of unrealized losses could change substantially. However, these changes would have no impact on earnings or regulatory capital unless the securities were sold at a loss. We believe that all unrealized losses resulted from temporary changes in interest rates and current market conditions and are not a result of credit deterioration. No allowance for credit losses on available-for-sale securities was recorded as of December 31, 2025 and 2024. We monitor our portfolio regularly and use it to maintain liquidity, manage interest rate risk, and enhance earnings.

Previous wording

As of December 31, 2024 and 2023, the Bank had an aggregate total cash surrender value of $0 and $4.6 million, respectively, on life insurance policies covering former key officers. During 2024, one policy was surrendered at market value resulting in a loss of $49,000. In December 2024, a death benefit receivable of $5.4 million was recorded, resulting in an income accrual of $1.6 million.

Current wording

During 2024 one bank owned life insurance policy was surrendered at market value resulting in a loss of approximately $49,000. In December 2024, a death benefit receivable of $5.4 million was recorded, resulting in an income accrual of $1.6 million.

Previous wording

Total deposits were $750.0 million as of December 31, 2024, an increase of $33.5 million, or 4.68%, from $716.5 million as of December 31, 2023, due to efforts to attract and retain deposits, specifically time deposits, combined with more aggressive pricing on money market accounts and cyclical fund inflows. Most of the increase was driven by money market deposits which increased $30.2 million, or 55.9%, to $84.1 million, and time deposits, which increased $16.4 million, or 6.51%, to $268.7 million as of December 31, 2024 and 2023. These increases more than offset a reduction in noninterest bearing demand deposits of $8.9 million. The increases in time and money market deposits resulted from small business development efforts throughout 2024, revamping certain accounts to better suit customer needs and offering periodic rate promotions.

Current wording

Total deposits were $798.3 million as of December 31, 2025, an increase of $48.3 million, or 6.44%, from $750.0 million as of December 31, 2024, 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 fund inflows. Most of the increase was driven by money market deposits which increased $28.9 million, or 34.4%, to $113.0 million, and time deposits, which increased $23.1 million, or 8.5%, to $294.2 million as of December 31, 2025.

Previous wording

Core deposits are considered to include demand deposits and other types of transaction accounts, such as commercial relationships and savings and money market products. Noninterest bearing demand deposits decreased $8.9 million in 2024, while interest bearing demand deposits, savings and money market deposits increased $26.0 million. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.

Current wording

Core deposits are considered to include demand deposits and other types of transaction accounts, such as commercial relationships and savings and money market products. Noninterest-bearing demand deposits decreased $4.1 million in 2025, while interest-bearing demand deposits, savings and money market deposits increased $32.4 million. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.

Previous wording

As of December 31, 2024 and 2023, uninsured deposits are estimated to be $91.9 million and $93.8 million, respectively. Estimated uninsured deposits represented 12.3% and 13.1% of total deposits as of December 31, 2024 and 2023, respectively. Included in estimated uninsured deposits are $22.9 million and $27.9 million of public funds, for such respective periods, considered secured via pledged securities or letters of credit we have with the Federal Home Loan Bank of Atlanta (the FHLB).

Current wording

As of December 31, 2025 and 2024, uninsured deposits are estimated to be $120.3 million and $91.9 million, respectively. Estimated uninsured deposits represented 15.1% and 12.3% of total deposits as of December 31, 2025 and 2024, respectively. Included in estimated uninsured deposits are $28.7 million and $22.9 million of public funds, for such respective periods, considered secured via pledged securities or letters of credit we have with the Federal Home Loan Bank of Atlanta (the “FHLB”).

Previous wording

As of December 31, 2024 and 2023, $35.2 million and $36.8 million of securities, respectively, were pledged to collateralize public deposits, including time deposits, held in our Tennessee offices, and as collateral for credit facilities available through FRB. Additionally, we held letters of credit from the FHLB for $14.0 million and $12.0 million at December 31, 2024 and 2023, respectively, to secure public deposits, including time deposits, held in our Virginia offices.

Current wording

As of December 31, 2025 and 2024, $32.5 million and $35.2 million of securities, respectively, were pledged to collateralize public deposits, including time deposits, held in our Tennessee offices, and as collateral for credit facilities available through the Federal Reserve Bank (“FRB”). Additionally, we held letters of credit from the FHLB for $14.0 million at both December 31, 2025 and 2024 to secure public deposits, including time deposits, held in our Virginia offices.

Previous wording

We held $3.0 million in brokered deposits at December 31, 2024, and no brokered deposits as of December 31, 2023. While not a primary source of funding, brokered deposits provide a means to efficiently manage funding and liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the average rate paid on deposits is shown in the net interest margin analysis table in the “Net Interest Income and Net Interest Margin” section. Total Certificate of Deposit Registry Service (“CDARS”) time deposits were $7.0 million and $6.3 million at December 31, 2024 and 2023, respectively.

Current wording

We held $8.0 million in brokered deposits at December 31, 2025, and $3.0 million as of December 31, 2024. While not a primary source of funding, brokered deposits provide a means to efficiently manage funding and liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the average rate paid on deposits is shown in the net interest margin analysis table in the “Net Interest Income and Net Interest Margin” section. Total Certificate of Deposit Registry Service (“CDARS”) time deposits were $7.0 million at December 31, 2025 and 2024.

Previous wording

While we experienced no significant losses resulting from fraud in 2024, we experienced an increase in the volume and sophistication of fraudulent transaction attempts. These fraudulent transaction attempts ranged from unauthorized electronic transactions to check theft and forgery. We work continuously with customers to educate them on identifying potential fraud and the efforts they can take to reduce the risk of fraud. We expect increased fraudulent transaction attempts to continue for the foreseeable future.

Current wording

While we experienced no significant losses resulting from fraud in 2025, we continued to experience an increase in the volume and sophistication of fraudulent transaction attempts. These fraudulent transaction attempts ranged from unauthorized electronic transactions to check theft, forgery, and what is commonly referred to as friendly fraud, which is the dispute of a valid, authorized transaction by the cardholder resulting in a chargeback despite delivery of the underlying product or service. We work continuously with customers to educate them on identifying potential fraud and the efforts they can take to reduce the risk of fraud. We expect increased fraudulent transaction attempts to continue for the foreseeable future.

Previous wording

Our efficiency ratio, a non-GAAP measure, is defined as noninterest expense divided by the sum of net interest income plus noninterest income and was 72.40% in 2024 compared to 73.71% in 2023. The performance improvement in this ratio is a result of the increase in net interest income, as discussed in the “Net Interest Income and Net Interest Margin” section earlier in this Item 7. After adjusting for non-recurring items, the efficiency ratio increases slightly to 73.01%, as shown in the table below. We continue to seek opportunities to operate more efficiently through the use of technology, improving processes, reducing nonperforming assets and increasing productivity.

Current wording

Our efficiency ratio, a non-GAAP measure, is defined as noninterest expense divided by the sum of net interest income plus noninterest income and was 67.61% in 2025 compared to 72.40% in 2024. The performance improvement in this ratio is a result of the increase in net interest income, as discussed in the “Net Interest Income and Net Interest Margin” section earlier in this Item 7. After adjusting for non-recurring items, the efficiency ratio improves slightly to 66.94%, as shown in the table below. We continue to seek opportunities to operate more efficiently through the use of technology, improving processes, reducing nonperforming assets, and increasing productivity.

Previous wording

Income taxes were $2.1 million for the year ended December 31, 2024, compared to $2.1 million for the same period in 2023. The effective tax rates were 20.76%, and 23.01% for 2024 and 2023, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally due to the lessened impact of tax preference items, along with the effect of certain state income taxes. The lower effective tax rate in 2024 is the result of non-taxable income resulting from the BOLI insurance benefit accrual included in pre-tax earnings.

Current wording

Income taxes were $3.0 million for the year ended December 31, 2025, compared to $2.1 million for the same period in 2024. The effective tax rates were 23.18%, and 20.76% for 2025 and 2024, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally due to the lessened impact of tax preference items, along with the effect of certain state income taxes. The lower effective tax rate in 2024 is the result of non-taxable income resulting from the BOLI insurance benefit accrual included in pre-tax earnings.

Previous wording

Deferred tax assets represent the future tax benefit of future deductible differences. If it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. The Company has evaluated positive and negative evidence to assess the realizability of its deferred taxes. Based on the evidence, including taxable income projections, the Company believes it is more likely than not that its deferred tax assets will be realizable. Accordingly, the Company did not include a valuation allowance against its deferred tax assets as of December 31, 2024 or 2023.

Current wording

Deferred tax assets represent the future tax benefit of future deductible differences. If it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. New Peoples has evaluated positive and negative evidence to assess the realizability of its deferred taxes. Based on the evidence, including taxable income projections, New Peoples believes it is more likely than not that its deferred tax assets will be realizable. Accordingly, New Peoples did not include a valuation allowance against its deferred tax assets as of December 31, 2025 or 2024.

Previous wording

Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a position will be sustained upon examination. If a tax position meets the more likely than not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being recognized. The Company classifies interest and penalties as a component of income tax expense.

Current wording

Tax positions are evaluated in a two-step process. New Peoples first determines whether it is more likely than not that a position will be sustained upon examination. If a tax position meets the more likely than not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being recognized. New Peoples classifies interest and penalties as a component of income tax expense.

Previous wording

During the year ended December 31, 2024, total shareholders’ equity increased $5.9 million to $70.7 million due to the earnings of $8.2 million which was partially offset by a cash dividend payment of $1.7 million, the repurchase of common stock totaling $282,000 and the $331,000 increase in the net unrealized loss on available-for-sale investment securities, net of taxes.

Current wording

During the year ended December 31, 2025, total shareholders’ equity increased $12.1 million to $82.9 million due to earnings of $10.1 million and the $4.1 million decrease in the net unrealized loss on available-for-sale investment securities, net of taxes which were partially offset by a cash dividend payment of $1.9 million and the repurchase of common stock totaling approximately $212,000.

Previous wording

As previously reported, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2025. During 2024, the Company repurchased 109,176 shares at an average price of $2.58 per share. Since commencement of the stock repurchase program, 285,362 shares have been repurchased at an average rate of $2.42.

Current wording

During 2025, New Peoples repurchased 69,711 shares at an average price of $3.04 per share. Since commencement of the stock repurchase program, 355,073 shares have been repurchased at an average rate of $2.54.

Previous wording

The Company meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement and does not report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.

Current wording

New Peoples meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement and does not report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.

Previous wording

The Company paid a cash dividend of $0.07 per share in 2024. On February 24, 2025, the Board of Directors declared a dividend of $0.08 per share, to be paid on March 31, 2025. 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 parent company.

Current wording

New Peoples paid a cash dividend of $0.08 per share in 2025. On February 23, 2026, the Board of Directors declared a dividend of $0.09 per share, to be paid on March 31, 2026. 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 parent company.

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 $128.5 million as of December 31, 2024, up from $118.0 million as of December 31, 2023. 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 $141.1 million as of December 31, 2025, up from $128.5 million as of December 31, 2024. The increase is primarily due to the receipt of the insurance receivable, earnings, and cash flows from investment securities exceeding reinvestment activity. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs.

Previous wording

The Bank’s primary funding source is deposits from customers in the markets in which it provides banking services. As discussed previously, deposits increased during 2024 but competition for deposits remains intense from both bank and non-bank institutions. The Company expects that pressure on the rates paid on deposits will continue and that it may be required to pay higher rates than currently projected to retain existing customers and attract new deposit relationships to fund loans and other activities. As discussed below, the Company has other liquidity sources to manage its liquidity needs as they arise.

Current wording

The Bank’s primary funding source is deposits from customers in the markets in which it provides banking services. As discussed previously, deposits increased during 2025 but competition for deposits remains intense from both bank and non-bank institutions. New Peoples expects that pressure on the rates paid on deposits will continue and that it may be required to pay higher rates than currently projected to retain existing customers and attract new deposit relationships to fund loans and other activities. As discussed below, New Peoples has other liquidity sources to manage its liquidity needs as they arise.