https://files.reportify.cc/media/production/N FOR IMMEDIATE RELEASE CONTACTS: Lara E. Ramsey, President and CEO Lora M. Jones, Treasurer & CFO (540) 951-6250 lramsey@nbbank.com (540) 951-6238 ljones@nbbank.com EXHIBIT 99.1 National Bankshares, Inc. Reports Results for the Three and Twelve Months Ended December 31, 2025 BLACKSBURG, VA., January 22, 2026 -- National Bankshares, Inc. ("the Company") (Nasdaq: NKSH), parent company of The National Bank of Blacksburg ("the Bank") and National Bankshares Financial ...

Financial Performance - Total interest income for the three months ended September 30, 2025, was $19,010,000, an increase of 1.9% from $18,651,000 in the same period of 2024[12] - Net income for the three months ended September 30, 2025, was $4,420,000, representing a 65% increase compared to $2,677,000 in the prior year[12] - Noninterest income for the three months ended September 30, 2025, was $2,537,000, an increase of 10.9% from $2,288,000 in the same period of 2024[12] - Basic net income per common share for the three months ended September 30, 2025, was $0.70, up from $0.42 in the same period of 2024[12] - Total comprehensive income for the three months ended September 30, 2025, was $10,435,000, down from $18,792,000 in the prior year[14] - Net income for the nine months ended September 30, 2025, was $9,945,000, a significant increase from $4,544,000 in the same period of 2024, representing a growth of 119%[26] - Cash dividends paid for the nine months ended September 30, 2025, totaled $4,645,000, compared to $4,303,000 in 2024, reflecting an increase of 8%[26] - The company reported a net cash provided by operating activities of $10,748,000 for the nine months ended September 30, 2025, compared to $4,020,000 in 2024, indicating a growth of 167%[26] Assets and Loans - Total assets as of September 30, 2025, were $1,802,407,000, a slight decrease from $1,811,636,000 as of December 31, 2024[10] - Total loans increased to $1,016,945,000 as of September 30, 2025, up from $988,613,000 at the end of 2024, marking a growth of 2.9%[10] - Total loans reached $1,016,945 million as of September 30, 2025, with a significant increase from $1,005,541 million in the prior period[58] - The gross loans portfolio as of September 30, 2025, was $1,016,945 million, up from $988,613 million at the end of 2024[43] - As of September 30, 2025, the total loans, net of deferred fees and costs, were $1,005,823 million, an increase from $977,688 million as of December 31, 2024[43] - The consumer real estate loans increased to $324.597 billion as of September 30, 2025, from $307.855 billion as of December 31, 2024[43] Credit Losses and Provisions - The provision for credit losses for the three months ended September 30, 2025, was $306,000, compared to a recovery of $5,000 in the same period of 2024[12] - The provision for credit losses was $618,000 for the nine months ended September 30, 2025, down from $1,287,000 in 2024, showing a decrease of 52%[26] - The provision for credit losses for the nine months ended September 30, 2025, was $581 million, compared to a recovery of $3 million in the same period of the previous year[47] - The allowance for credit losses on loans increased to $10,579 million as of September 30, 2025, compared to $10,262 million as of December 31, 2024[43] - The total provision for credit losses for the nine months ended September 30, 2025, was $37 million, reflecting ongoing risk management efforts[65] Acquisition and Market Expansion - The acquisition of Frontier Community Bank contributed $14,299,000 to additional paid-in capital as of December 31, 2023[23] - The acquisition of Frontier Community Bank expanded the company's operations into the Waynesboro, Staunton, and Lynchburg, Virginia markets, enhancing its market presence[37] - The total purchase price consideration for the acquisition of FCB was $16,349 million, consisting of $14,299 million in stock consideration and $2,050 million in cash consideration[41] - The fair value of identifiable assets acquired was $148,513 million, while the total identifiable liabilities assumed amounted to $137,038 million, resulting in a fair value of net assets acquired of $11,475 million[41] - Goodwill recorded from the acquisition was $4,874 million, reflecting expected management and operational synergies[41] Securities and Investments - As of September 30, 2025, the total amortized cost of securities available for sale was $687,097 million, with a fair value of $630,483 million, resulting in gross unrealized losses of $56,646 million[66] - The fair value of securities available for sale as of September 30, 2025, was $630.483 million, categorized under Level 2[90] - The company had 534 securities with a fair value of $603,882 million in an unrealized loss position, attributed to noncredit-related factors such as changes in interest rates[67] - The deferred tax asset for the net unrealized loss on securities available for sale was $11,889 million as of September 30, 2025, down from $16,506 million as of December 31, 2024[71] - The fair value of mortgage-backed securities was $177,663 million as of September 30, 2025, with an amortized cost of $181,664 million[66] Deposits and Equity - Total deposits decreased to $1,561,904,000 as of September 30, 2025, from $1,644,752,000 at the end of 2024, a decline of 5%[10] - The total carrying amount of deposits as of September 30, 2025, was $1.561 billion, with an estimated fair value of $1.561 billion[90] - The total stockholders' equity increased to $179,220 thousand as of September 30, 2025, up from $156,409 thousand as of December 31, 2024, representing an increase of 14.5%[10] Miscellaneous - The company recognized stock-based compensation expenses of $143,000 for the nine months ended September 30, 2025, up from $93,000 in 2024, representing a rise of 54%[26] - The company borrowed $40 million from the Federal Home Loan Bank of Atlanta and $10 million from the Federal Reserve Discount Window during Q3 2025, with a weighted average interest rate of 3.99%[113] - The company plans to keep the measurement of goodwill open until December 31, 2024, to reflect any adjustments to the fair value of assets acquired and liabilities assumed[41]

National Bankshares (NKSH) came out with quarterly earnings of $0.69 per share, beating the Zacks Consensus Estimate of $0.66 per share. This compares to earnings of $0.42 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +4.55%. A quarter ago, it was expected that this holding company for the National Bank of Blacksburg would post earnings of $0.64 per share when it actually produced earnings of $0.61, delivering a surprise of ...

Financial Performance - National Bankshares, Inc. reported net income of $9.95 million or $1.56 per diluted common share for the nine months ended September 30, 2025, compared to $4.54 million or $0.75 per diluted common share for the same period in 2024, representing an increase of 119%[2] - For the third quarter of 2025, net income was $4.42 million or $0.69 per diluted common share, up from $2.68 million or $0.42 per diluted common share in the third quarter of 2024, reflecting a growth of 65%[2] - Net income for the three months ended September 30, 2025, was $4,420,000, compared to $2,289,000 in June 2025, marking a 93.1% increase[22] - Adjusted net income for the nine months ended September 30, 2025, was $11,417 thousand, compared to $8,040 thousand in 2024, representing a 42.5% increase[47] Assets and Equity - Total assets as of September 30, 2025, were $1.80 billion[2] - Total assets as of September 30, 2025, were $1,802,407,000, a slight decrease from $1,806,610,000 in June 2025[20] - Total assets increased to $1,807,982 thousand as of September 30, 2025, compared to $1,726,899 thousand in 2024, reflecting a growth of 4.9%[34] - Stockholders' equity increased due to net income and improvement in unrealized losses on available-for-sale securities, with the Bank considered well capitalized[14] - Total stockholders' equity rose to $171,594 as of September 30, 2025, compared to $166,971 as of June 30, 2025[30] - Total stockholders' equity rose to $166,579 thousand as of September 30, 2025, from $143,444 thousand in 2024, marking an increase of 16.1%[34] Income and Expenses - Net interest income for the three months ended September 30, 2025, was $11,674,000, up from $10,991,000 in June 2025, representing a 6.2% increase[22] - Noninterest income for the three months ended September 30, 2025, was $2,537,000, an increase from $2,279,000 in June 2025, reflecting a 11.3% growth[22] - Total noninterest expense for the three months ended September 30, 2025, was $8,524,000, down from $10,583,000 in June 2025, reflecting a decrease of 19.4%[22] - The efficiency ratio improved to 62.57% for the nine months ended September 30, 2025, down from 68.93% in 2024, indicating enhanced operational efficiency[46] Loans and Credit Quality - Loans increased primarily due to growth in construction, consumer real estate, and commercial non-real estate loans, with low credit risk metrics[13] - Total loans as of September 30, 2025, amounted to $1,016,945,000, a slight increase from $1,011,135,000 in June 2025[20] - Provision for credit losses for the three months ended September 30, 2025, was $306,000, up from $36,000 in June 2025[22] - Nonperforming loans to total loans ratio decreased to 0.20% as of September 30, 2025, from 0.23% in 2024, indicating better asset quality[38] - The allowance for credit losses on loans increased to $10,579 as of September 30, 2025, from $10,422 as of June 30, 2025[30] - The allowance for credit losses on loans to total loans ratio remained stable at 1.04% as of September 30, 2025, consistent with the previous year[38] Market and Growth Strategies - The company reported a revenue of $14 billion for the quarter, reflecting a year-over-year increase of 10%[14] - User data showed an increase in active users to 150 million, representing a growth of 15% compared to the previous quarter[14] - The company provided guidance for the next quarter, expecting revenue to be in the range of $15 to $16 billion, indicating a potential growth of 7% to 14%[14] - New product launches contributed to a 20% increase in sales, with the latest product line accounting for $2 billion in revenue[14] - The company is investing $500 million in research and development for new technologies aimed at enhancing user experience[14] - Market expansion efforts have led to a 25% increase in market share in the Asia-Pacific region[14] - The company completed a strategic acquisition for $1 billion, expected to enhance its product offerings and market reach[14] - The gross margin improved to 45%, up from 42% in the previous quarter, due to cost optimization strategies[14] - The company plans to implement a new marketing strategy that is projected to increase customer engagement by 30%[14] - Overall, the company remains optimistic about future growth, citing strong demand and a robust pipeline of new products[14]

Company Performance - National Bankshares (NKSH) reported quarterly earnings of $0.61 per share, missing the Zacks Consensus Estimate of $0.64 per share, compared to a loss of $0.05 per share a year ago [1] - The earnings surprise for this quarter was -4.69%, and the company has not surpassed consensus EPS estimates over the last four quarters [2] - The company posted revenues of $13.27 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 0.67%, but showing an increase from year-ago revenues of $10.95 million [3] Market Comparison - National Bankshares shares have increased by approximately 3.3% since the beginning of the year, while the S&P 500 has gained 9.6% [4] - The current consensus EPS estimate for the upcoming quarter is $0.66 on revenues of $13.87 million, and for the current fiscal year, it is $2.49 on revenues of $54.04 million [8] Industry Outlook - The Zacks Industry Rank for Banks - Southeast is currently in the top 5% of over 250 Zacks industries, indicating a favorable outlook for the industry [9] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [6]

FORM 10-Q Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides basic identification, filing compliance, and classification details for National Bankshares, Inc - Registrant: **National Bankshares, Inc. (NKSH)**[2](index=2&type=chunk) - Filing Type: **Quarterly Report (Form 10-Q)** for the period ended June 30, 2025[2](index=2&type=chunk) - Filing Status: Complied with all Section 13 or 15(d) filing requirements and submitted all required Interactive Data Files[4](index=4&type=chunk) - Company Classification: **Non-accelerated filer** and **Smaller reporting company**[5](index=5&type=chunk) Registrant Details | Metric | Value | | :--- | :--- | | Common Stock Trading Symbol | NKSH | | Exchange Registered | Nasdaq Capital Market | | Outstanding Common Shares (as of Aug 13, 2025) | 6,366,001 | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) The table of contents outlines the structure of the Form 10-Q, dividing it into Part I and Part II - The report is structured into two main parts: **Part I – Financial Information** and **Part II – Other Information**[8](index=8&type=chunk) - Part I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosures About Market Risk, and Controls and Procedures[8](index=8&type=chunk) - Part II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, Mine Safety Disclosures, Other Information, and Exhibits[8](index=8&type=chunk) Part I – Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and detailed notes for National Bankshares, Inc [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show a decrease in total assets and deposits, while loans and stockholders' equity increased Key Balance Sheet Metrics | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Assets | $1,806,610 | $1,811,635 | $(5,025) | | Total Loans, net | $1,000,275 | $977,688 | $22,587 | | Total Deposits | $1,627,675 | $1,644,752 | $(17,077) | | Total Stockholders' Equity | $168,736 | $156,409 | $12,327 | - Cash and cash equivalents decreased from **$108,117 thousand** at December 31, 2024, to **$92,849 thousand** at June 30, 2025[10](index=10&type=chunk) - Securities available for sale decreased from **$601,898 thousand** to **$590,021 thousand**[10](index=10&type=chunk) - Noninterest-bearing demand deposits increased by **$16,339 thousand**, while interest-bearing demand, savings, and time deposits all decreased[10](index=10&type=chunk) [Consolidated Statements of Income (Loss) (Three Months)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) For Q2 2025, the company reported a significant turnaround from a net loss, driven by increased net interest income Q2 Income Statement Highlights | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Interest Income | $18,537 | $17,095 | $1,442 | | Total Interest Expense | $7,546 | $8,418 | $(872) | | Net Interest Income | $10,991 | $8,677 | $2,314 | | Provision for Credit Losses | $36 | $1,302 | $(1,266) | | Total Noninterest Income | $2,279 | $2,267 | $12 | | Total Noninterest Expense | $10,583 | $10,127 | $456 | | Income (Loss) Before Income Tax | $2,651 | $(485) | $3,136 | | Net Income (Loss) | $2,289 | $(307) | $2,596 | | Basic Net Income (Loss) Per Common Share | $0.36 | $(0.05) | $0.41 | | Diluted Net Income (Loss) Per Common Share | $0.36 | $(0.05) | $0.41 | - Net interest income increased by **$2,314 thousand**, primarily due to higher interest and fees on loans and lower interest expense on deposits[12](index=12&type=chunk) - Provision for credit losses significantly decreased from **$1,302 thousand** in Q2 2024 to **$36 thousand** in Q2 2025[12](index=12&type=chunk) - Noninterest expense increased by **$456 thousand**, largely driven by conversion expenses offsetting the absence of merger-related expenses[12](index=12&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) (Three Months)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income improved substantially, driven by net income and a significant unrealized gain on securities Q2 Comprehensive Income Highlights | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $2,289 | $(307) | $2,596 | | Unrealized holding gain (loss) on AFS securities, net of tax | $3,763 | $(150) | $3,913 | | Total Comprehensive Income (Loss) | $6,052 | $(457) | $6,509 | - The significant increase in total comprehensive income is largely attributable to a **positive unrealized holding gain** on available-for-sale securities in 2025[14](index=14&type=chunk) [Consolidated Statements of Income (Six Months)](index=7&type=section&id=Consolidated%20Statements%20of%20Income%20(Six%20Months)) For the six months ended June 30, 2025, net income increased substantially due to higher net interest income YTD Income Statement Highlights | Metric (in thousands, except per share) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Total Interest Income | $36,734 | $33,101 | $3,633 | | Total Interest Expense | $15,493 | $16,194 | $(701) | | Net Interest Income | $21,241 | $16,907 | $4,334 | | Provision for Credit Losses | $312 | $1,292 | $(980) | | Total Noninterest Income | $4,839 | $4,482 | $357 | | Total Noninterest Expense | $19,215 | $17,889 | $1,326 | | Income Before Income Tax Expense | $6,553 | $2,208 | $4,345 | | Net Income | $5,525 | $1,867 | $3,658 | | Basic Net Income Per Common Share | $0.87 | $0.31 | $0.56 | | Diluted Net Income Per Common Share | $0.87 | $0.31 | $0.56 | - Net interest income increased by **$4,334 thousand**, driven by higher interest on loans and a decrease in total interest expense[16](index=16&type=chunk) - Provision for credit losses decreased significantly by **$980 thousand**, contributing to the improved net income[16](index=16&type=chunk) - Noninterest expense increased by **$1,326 thousand**, primarily due to higher salaries, occupancy costs, and conversion expenses[16](index=16&type=chunk) [Consolidated Statements of Comprehensive Income (Loss) (Six Months)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Six%20Months)) Total comprehensive income saw a substantial positive shift due to increased net income and a large unrealized gain on securities YTD Comprehensive Income Highlights | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Net Income | $5,525 | $1,867 | $3,658 | | Unrealized holding gain (loss) on AFS securities, net of tax | $11,353 | $(3,488) | $14,841 | | Total Comprehensive Income (Loss) | $16,878 | $(1,621) | $18,499 | - The significant improvement in total comprehensive income is largely driven by a substantial **unrealized holding gain** on available-for-sale securities in 2025[18](index=18&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Three Months)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Three%20Months)) Total stockholders' equity increased in Q2 2025, driven by net income and other comprehensive income Q2 Changes in Stockholders' Equity | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balances at March 31 | $167,278 | $139,390 | | Net Income (Loss) | $2,289 | $(307) | | Cash Dividends ($0.73 per share) | $(4,645) | $(4,303) | | Other Comprehensive Income (Loss) | $3,763 | $(150) | | Stock Based Compensation | $51 | $33 | | Balances at June 30 | $168,736 | $148,962 | - Total stockholders' equity increased from **$167,278 thousand** at March 31, 2025, to **$168,736 thousand** at June 30, 2025[21](index=21&type=chunk) - The increase was driven by net income of **$2,289 thousand** and other comprehensive income of **$3,763 thousand**, partially offset by cash dividends[21](index=21&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Six Months)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Six%20Months)) For the six months ended June 30, 2025, total stockholders' equity increased significantly due to net income and OCI YTD Changes in Stockholders' Equity | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Balances at December 31 | $156,409 | $140,522 | | Net Income | $5,525 | $1,867 | | Cash Dividends ($0.73 per share) | $(4,645) | $(4,303) | | Other Comprehensive Income (Loss) | $11,353 | $(3,488) | | Stock Based Compensation | $94 | $65 | | Balances at June 30 | $168,736 | $148,962 | - Total stockholders' equity increased from **$156,409 thousand** at December 31, 2024, to **$168,736 thousand** at June 30, 2025[23](index=23&type=chunk) - The increase was driven by net income of **$5,525 thousand** and a significant other comprehensive income of **$11,353 thousand**[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the Company experienced a net decrease in cash due to financing activities YTD Cash Flow Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $4,633 | $882 | | Net Cash Provided by Investing Activities | $1,922 | $9,570 | | Net Cash (Used in) Provided by Financing Activities | $(21,823) | $1,829 | | Net Change in Cash and Cash Equivalents | $(15,268) | $12,281 | | Cash and Cash Equivalents at End of Period | $92,849 | $98,884 | - Operating activities generated **$4,633 thousand** in cash, a significant increase from the prior year[25](index=25&type=chunk) - Investing activities provided **$1,922 thousand**, a decrease from the prior year, mainly due to lower proceeds from securities[25](index=25&type=chunk) - Financing activities used **$21,823 thousand**, a reversal from the prior year, primarily due to a net change in time deposits and dividends paid[25](index=25&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The Notes provide detailed explanations for the unaudited interim financial statements, covering key accounting policies and disclosures [Note 1: General and Summary of Significant Accounting Policies](index=12&type=section&id=Note%201:%20General%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's adherence to GAAP, use of estimates, key risks, and recently adopted accounting standards - The consolidated financial statements conform to **GAAP** and general practices within the banking industry, requiring management estimates[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company is monitoring risks such as **inflation** and **U.S. monetary policy**, which could impact financial condition[32](index=32&type=chunk) - ASU 2023-09 (Income Taxes) was effective January 1, 2025, and is not expected to materially impact financial statements[33](index=33&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 2: Business Combination](index=14&type=section&id=Note%202:%20Business%20Combination) This note details the acquisition of Frontier Community Bank (FCB) on June 1, 2024, and its accounting treatment - On June 1, 2024, National Bankshares, Inc. **acquired Frontier Community Bank (FCB)**, expanding its market presence[36](index=36&type=chunk) - The acquisition was accounted for as a business combination using the **acquisition method**, recording assets and liabilities at fair value[37](index=37&type=chunk) - The Company issued **464,855 shares** of common stock and paid **$2,050 thousand** in cash consideration to former FCB shareholders[36](index=36&type=chunk)[40](index=40&type=chunk) Acquisition Summary | Metric (in thousands) | Value | | :--- | :--- | | Total Purchase Price Consideration | $16,349 | | Fair Value of Net Assets Acquired | $11,475 | | Goodwill Recognized | $4,874 | [Note 3: Loans and Allowance for Credit Losses](index=16&type=section&id=Note%203:%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note provides a comprehensive overview of the Company's loan portfolio, credit quality, and allowance for credit losses [Loans](index=16&type=section&id=Loans) The loan portfolio increased from December 31, 2024, to June 30, 2025, with growth in consumer and commercial real estate Loan Portfolio Composition | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Real estate construction | $44,529 | $50,798 | $(6,269) | | Consumer real estate | $317,949 | $307,855 | $10,094 | | Commercial real estate | $494,755 | $478,078 | $16,677 | | Commercial non real estate | $51,383 | $51,844 | $(461) | | Public sector and IDA | $56,347 | $57,171 | $(824) | | Consumer non real estate | $46,172 | $42,867 | $3,305 | | Gross loans | $1,011,135 | $988,613 | $22,522 | | Loans, net of deferred fees and costs | $1,010,697 | $987,950 | $22,747 | [Past Due and Nonaccrual Loans](index=16&type=section&id=Past%20Due%20and%20Nonaccrual%20Loans) Past due loans increased, while nonaccrual loans slightly decreased from December 31, 2024, to June 30, 2025 Delinquency Status | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accruing Loans 30 – 89 Days Past Due | $5,053 | $2,949 | | Accruing Loans 90 or More Days Past Due | $21 | $548 | | Nonaccrual Loans | $2,111 | $2,222 | | Total Loans | $1,011,135 | $988,613 | - Commercial real estate owner-occupied loans represent the largest portion of **nonaccrual loans**[45](index=45&type=chunk) [Allowance for Credit Losses on Loans ("ACLL")](index=18&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans%20(%22ACLL%22)) The Allowance for Credit Losses on Loans (ACLL) increased slightly from December 31, 2024, to June 30, 2025 ACLL Activity | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balance, ACLL | $10,422 | $10,262 | | Charge-offs (Six Months) | $(253) | $(519) | | Recoveries (Six Months) | $91 | $270 | | Provision for Credit Losses (Six Months) | $322 | $1,242 | - As of June 30, 2025, **$141 thousand** of ACLL was individually evaluated, while **$10,281 thousand** was collectively evaluated[51](index=51&type=chunk) [Collateral Dependent Loans](index=20&type=section&id=Collateral%20Dependent%20Loans) As of June 30, 2025, the Company had three collateral-dependent loans totaling $8,906 thousand, all adequately collateralized - Three individually evaluated loans were collateral dependent as of June 30, 2025, and December 31, 2024[55](index=55&type=chunk) Collateral Dependent Loan Balances | Loan Category (in thousands) | June 30, 2025 Balance | December 31, 2024 Balance | | :--- | :--- | :--- | | Commercial Real Estate, owner occupied | $8,224 | $8,387 | | Commercial Real Estate, other | $682 | $872 | | Total Collateral Dependent Loans | $8,906 | $9,259 | - **No related allowance** was required for these collateral-dependent loans as they were adequately collateralized[55](index=55&type=chunk) [Credit Quality](index=20&type=section&id=Credit%20Quality) The majority of loans were rated 'Pass' as of June 30, 2025, with a small portion in 'Special Mention' or 'Classified' - Loans are categorized into **Pass, Special Mention, and Classified** based on credit quality and potential weaknesses[57](index=57&type=chunk) Credit Quality by Risk Rating | Loan Category (in thousands) | June 30, 2025 Pass | June 30, 2025 Special Mention | June 30, 2025 Classified | June 30, 2025 Total | | :--- | :--- | :--- | :--- | :--- | | Total Loans | $999,511 | $6,460 | $5,164 | $1,011,135 | - Gross charge-offs for the six months ended June 30, 2025, totaled **$253 thousand**, primarily from consumer non-real estate loans[58](index=58&type=chunk) [Loan Modifications to Borrowers Experiencing Financial Difficulty](index=23&type=section&id=Loan%20Modifications%20to%20Borrowers%20Experiencing%20Financial%20Difficulty) No loans were modified for borrowers experiencing financial difficulty during the first half of 2025 - **No loans were modified** for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025[61](index=61&type=chunk) - During the six months ended June 30, 2024, two loans were modified for borrowers experiencing financial difficulty, totaling **$6,403 thousand**[61](index=61&type=chunk)[62](index=62&type=chunk) - As of June 30, 2024, these modified loans were in **current status** and individually evaluated, with no subsequent payment defaults[62](index=62&type=chunk) [Consumer Real Estate Loans In Process of Foreclosure](index=23&type=section&id=Consumer%20Real%20Estate%20Loans%20In%20Process%20of%20Foreclosure) As of June 30, 2025, the Company had no consumer real estate loans in the process of foreclosure - **No consumer real estate loans** were in the process of foreclosure as of June 30, 2025[63](index=63&type=chunk) - As of December 31, 2024, three consumer real estate loans totaling **$37 thousand** were in the process of foreclosure[63](index=63&type=chunk) [ACL for Unfunded Commitments](index=23&type=section&id=ACL%20for%20Unfunded%20Commitments) The Allowance for Credit Losses (ACL) on unfunded commitments slightly decreased from December 31, 2024 ACL on Unfunded Commitments | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balance, ACL for Unfunded Commitments | $241 | $251 | | Recovery of Credit Losses (Six Months) | $(10) | $(15) | [Note 4: Securities](index=24&type=section&id=Note%204:%20Securities) This note details the securities portfolio, which saw a decrease in fair value but a reduction in net unrealized losses [Securities Available for Sale](index=24&type=section&id=Securities%20Available%20for%20Sale) The fair value of securities available for sale decreased, with a notable reduction in gross unrealized losses AFS Securities Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amortized Cost | $654,249 | $680,496 | | Gross Unrealized Gains | $26 | $24 | | Gross Unrealized Losses | $(64,254) | $(78,622) | | Fair Value | $590,021 | $601,898 | - As of June 30, 2025, the Company had 537 securities with a fair value of **$569,718 thousand** in an unrealized loss position[67](index=67&type=chunk) - The Company **does not intend to sell** these securities and expects fair value to recover as they approach maturity[67](index=67&type=chunk)[68](index=68&type=chunk) [Maturity of Securities Available for Sale](index=26&type=section&id=Maturity%20of%20Securities%20Available%20for%20Sale) The maturity schedule for securities available for sale shows a significant portion maturing after five years AFS Securities Maturity Schedule | Maturity Period | Amortized Cost (in thousands) | Fair Value (in thousands) | | :--- | :--- | :--- | | Due in one year or less | $28,007 | $27,804 | | Due after one year through five years | $223,195 | $211,373 | | Due after five years through ten years | $230,691 | $199,529 | | Due after ten years | $172,356 | $151,315 | | Total | $654,249 | $590,021 | [Realized Securities Gains and Losses](index=26&type=section&id=Realized%20Securities%20Gains%20and%20Losses) There were no sales of securities, and consequently, no realized gains or losses during the first half of 2025 or 2024 - **No sales of securities** occurred during the six months ended June 30, 2025, and 2024[72](index=72&type=chunk) [Restricted Stock](index=26&type=section&id=Restricted%20Stock) The Company held $1,848 thousand in restricted stock due to membership requirements in the Federal Reserve and FHLB - Restricted stock held was **$1,848 thousand** as of June 30, 2025, and December 31, 2024[73](index=73&type=chunk) - These investments are required for membership in the **Federal Reserve and FHLB**, providing borrowing eligibility[73](index=73&type=chunk)[74](index=74&type=chunk) - **No impairment** was determined for the FHLB stock as of June 30, 2025[74](index=74&type=chunk) [Note 5: Defined Benefit Plan](index=26&type=section&id=Note%205:%20Defined%20Benefit%20Plan) The Company's defined benefit plan generated net periodic benefit income for the first half of 2025 Net Periodic Benefit Income (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Service cost | $248 | $261 | | Interest cost | $324 | $302 | | Expected return on plan assets | $(692) | $(608) | | Net periodic benefit income | $(120) | $(12) | Net Periodic Benefit Income (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Service cost | $496 | $522 | | Interest cost | $648 | $604 | | Expected return on plan assets | $(1,385) | $(1,216) | | Net periodic benefit income | $(241) | $(24) | - Service cost is included in salaries and employee benefits, while other components are in other operating expense[76](index=76&type=chunk) [Note 6: Fair Value Measurements](index=27&type=section&id=Note%206:%20Fair%20Value%20Measurements) This note details the Company's fair value measurements, categorizing financial instruments into a three-level hierarchy [Financial Instruments Measured at Fair Value on a Recurring Basis](index=27&type=section&id=Financial%20Instruments%20Measured%20at%20Fair%20Value%20on%20a%20Recurring%20Basis) Securities available for sale are measured at fair value on a recurring basis, primarily using Level 2 inputs - Fair value measurements are categorized into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[81](index=81&type=chunk) Recurring Fair Value Measurements | Asset (in thousands) | June 30, 2025 Balance | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | U.S. government agencies and corporations | $303,421 | $- | $303,421 | $- | | States and political subdivisions | $148,236 | $- | $148,236 | $- | | Mortgage-backed securities | $132,538 | $- | $132,538 | $- | | Corporate debt securities | $5,826 | $- | $5,826 | $- | | Total securities available for sale | $590,021 | $- | $590,021 | $- | - The Company's securities portfolio is valued using **Level 2 inputs**, relying on an independent third-party vendor[82](index=82&type=chunk) [Financial Instruments Measured at Fair Value on a Non-Recurring Basis](index=28&type=section&id=Financial%20Instruments%20Measured%20at%20Fair%20Value%20on%20a%20Non-Recurring%20Basis) Loans held for sale are carried at the lower of cost or fair value, while collateral-dependent loans are measured for ACLL - Loans held for sale are measured at the lower of cost or fair value, with fair value based on **Level 2** inputs[84](index=84&type=chunk) - Collateral-dependent loans are measured for ACLL based on the fair value of collateral, using appraisals (**Level 2**) or discounted appraisals (**Level 3**)[85](index=85&type=chunk)[86](index=86&type=chunk) - As of June 30, 2025, three commercial real estate loans totaling **$8,906 thousand** were collateral dependent, valued using Level 2 appraisals[88](index=88&type=chunk) [Fair Value Summary](index=28&type=section&id=Fair%20Value%20Summary) The fair value summary provides a comprehensive overview of the Company's financial instruments by level Fair Value of Financial Instruments | Financial Instrument (in thousands) | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value (Level 1) | June 30, 2025 Estimated Fair Value (Level 2) | June 30, 2025 Estimated Fair Value (Level 3) | | :--- | :--- | :--- | :--- | :--- | | Cash and due from banks | $9,798 | $9,798 | $- | $- | | Interest-bearing deposits | $83,051 | $83,051 | $- | $- | | Securities available for sale | $590,021 | $- | $590,021 | $- | | Loans, net | $1,000,275 | $- | $- | $953,810 | | Deposits | $1,627,675 | $- | $1,299,117 | $327,378 | [Note 7: Components of Accumulated Other Comprehensive Loss](index=29&type=section&id=Note%207:%20Components%20of%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss improved significantly due to a substantial unrealized gain on securities Changes in AOCI | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net Unrealized Loss on Securities | $(50,740) | $(62,093) | | Adjustments Related to Pension Benefits | $328 | $328 | | Accumulated Other Comprehensive Loss | $(50,412) | $(61,765) | - The change reflects an **$11,353 thousand unrealized holding gain** on available-for-sale securities (net of tax) for the six months ended June 30, 2025[92](index=92&type=chunk) [Note 8: Revenue Recognition](index=30&type=section&id=Note%208:%20Revenue%20Recognition) This note details revenue recognition policies for noninterest income streams under ASC Topic 606 [Service Charges on Deposit Accounts](index=30&type=section&id=Service%20Charges%20on%20Deposit%20Accounts) Service charges on deposit accounts are recognized either over time for recurring services or at a point in time for transactions - Monthly service fees are recognized **over the period** service is provided[94](index=94&type=chunk) - Transactional fees (overdraft, ATM, wire transfer) are recognized **at a point in time** when the performance obligation is satisfied[94](index=94&type=chunk) [Other Service Charges and Fees](index=30&type=section&id=Other%20Service%20Charges%20and%20Fees) Other service charges are recognized either over time for recurring services or at a point in time for transactions - Safe deposit box rental fees are recognized **on an annual basis** upon receipt of payment[95](index=95&type=chunk) - Check ordering charges and ATM fees to other cardholders are transaction-based and recognized **at a point in time**[95](index=95&type=chunk) [Credit and Debit Card Fees](index=30&type=section&id=Credit%20and%20Debit%20Card%20Fees) Credit and debit card fees are recognized when services are rendered and are presented net of associated expenses - Interchange fees and merchant services income are recognized **when services are rendered** or upon completion[96](index=96&type=chunk) - Credit and debit card fee income is presented **net of associated expense**, in compliance with Topic 606[96](index=96&type=chunk) [Trust Income](index=30&type=section&id=Trust%20Income) Trust income is recognized over time based on assets under management, with estate fees recognized upon closure - Fees from trust management and administration are recognized **monthly**, based on month-end market value of assets[97](index=97&type=chunk) - Estate management fees are recognized partially during administration and the remainder **upon estate closure**[98](index=98&type=chunk) [Insurance and Investment](index=32&type=section&id=Insurance%20and%20Investment) Insurance commissions are recognized upon policy issuance, while investment commissions are recognized on trade date - Insurance commissions are recognized **upon the issuance** of the insurance policy[99](index=99&type=chunk) - Commissions from mutual funds, annuities, and other investments are recognized on **trade date**[100](index=100&type=chunk) - Periodic service fees (trailers) from mutual funds are recorded **over time**, usually monthly or quarterly[100](index=100&type=chunk) [Noninterest Income Segregation](index=32&type=section&id=Noninterest%20Income%20Segregation) Noninterest income is segregated into in-scope and out-of-scope categories for Topic 606, showing an overall increase Noninterest Income by Topic 606 Scope (Three Months) | Noninterest Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | In-scope of Topic 606 | $1,921 | $1,827 | | Out-of-scope of Topic 606 | $358 | $440 | | Total Noninterest Income | $2,279 | $2,267 | Noninterest Income by Topic 606 Scope (Six Months) | Noninterest Income (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | In-scope of Topic 606 | $4,053 | $3,725 | | Out-of-scope of Topic 606 | $786 | $757 | | Total Noninterest Income | $4,839 | $4,482 | [Note 9: Leases](index=33&type=section&id=Note%209:%20Leases) This note details the Company's lease accounting under ASC Topic 842, including capitalization and maturity schedules [Lease Accounting Policy](index=33&type=section&id=Lease%20Accounting%20Policy) The Company accounts for leases under ASC Topic 842, capitalizing operating and finance leases as right-of-use assets - Leases are categorized as short-term (not capitalized), operating, or finance leases[104](index=104&type=chunk) - Operating and finance leases are capitalized as **right-of-use assets** and **lease liabilities**[104](index=104&type=chunk) - The acquisition of FCB on June 1, 2024, added two long-term branch leases, increasing ROU assets and lease liabilities by **$548 thousand**[105](index=105&type=chunk) [Lease Payments](index=33&type=section&id=Lease%20Payments) Short-term lease payments are expensed, while operating and finance lease payments are incorporated into lease liability calculations - Short-term lease payments are recognized as lease expense on a **straight-line basis** or in the period incurred[106](index=106&type=chunk) - Fixed operating and finance lease payments are included in the cash flows for **lease liability determination**[106](index=106&type=chunk) [Options to Extend, Residual Value Guarantees, Restrictions and Covenants](index=33&type=section&id=Options%20to%20Extend,%20Residual%20Value%20Guarantees,%20Restrictions%20and%20Covenants) Lease extension options are included in liability calculations when reasonably certain, and agreements lack restrictive covenants - Lease extension options are included in lease liability calculations if **reasonably certain** of being exercised[107](index=107&type=chunk) - Lease agreements do not provide for residual value guarantees or contain **restrictions/covenants** impacting dividends[107](index=107&type=chunk) [Lease Information Tables](index=33&type=section&id=Lease%20Information%20Tables) Lease liabilities and right-of-use assets increased from December 31, 2024, to June 30, 2025 Lease Balance Sheet Information | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Lease liability | $1,676 | $1,523 | | Right-of-use asset | $1,471 | $1,305 | | Weighted average remaining lease term (years) | 4.57 | 4.76 | | Weighted average discount rate | 3.91% | 3.87% | Lease Expense (Three Months) | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating lease expense | $104 | $99 | | Short-term lease expense | $- | $6 | | Total lease expense | $104 | $105 | Lease Expense (Six Months) | Lease Expense (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating lease expense | $210 | $188 | | Short-term lease expense | $- | $11 | | Total lease expense | $210 | $199 | [Maturity Schedule of Undiscounted Cash Flows](index=35&type=section&id=Maturity%20Schedule%20of%20Undiscounted%20Cash%20Flows) The undiscounted cash flow maturity schedule indicates total future lease payments of $1,818 thousand Lease Liability Maturity | Period | Undiscounted Cash Flow (in thousands) | | :--- | :--- | | Twelve months ending June 30, 2026 | $431 | | Twelve months ending June 30, 2027 | $395 | | Twelve months ending June 30, 2028 | $381 | | Twelve months ending June 30, 2029 | $303 | | Twelve months ending June 30, 2030 | $180 | | Thereafter | $128 | | Total undiscounted cash flows | $1,818 | | Less: discount | $(142) | | Lease liability | $1,676 | [Note 10: Stock Based Compensation](index=35&type=section&id=Note%2010:%20Stock%20Based%20Compensation) This note describes the 2023 Stock Incentive Plan, under which RSAs and RSUs are granted to directors and executives [Restricted Stock Awards](index=35&type=section&id=Restricted%20Stock%20Awards) Restricted stock awards and units are granted under the 2023 Stock Incentive Plan, with expense recognized over one year - The **2023 Stock Incentive Plan** allows for grants of RSAs and RSUs, with a maximum of 120,000 shares available[110](index=110&type=chunk) - Stock-based compensation expense was **$51 thousand** for the three months and **$94 thousand** for the six months ended June 30, 2025[111](index=111&type=chunk) Nonvested Restricted Stock Activity | Metric | Shares | Weighted Average Grant-Date Fair Value | | :--- | :--- | :--- | | Nonvested at January 1, 2025 | 4,961 | $30.98 | | Granted | 2,630 | $26.59 | | Vested and released | (2,563) | $30.00 | | Nonvested at June 30, 2025 | 5,028 | $29.18 | [Note 11: Net Income (Loss) Per Common Share](index=35&type=section&id=Note%2011:%20Net%20Income%20(Loss)%20Per%20Common%20Share) This note presents the computation of basic and diluted net income (loss) per common share, showing a positive shift in 2025 EPS Calculation (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic Net Income (Loss) Per Common Share | $0.36 | $(0.05) | | Diluted Net Income (Loss) Per Common Share | $0.36 | $(0.05) | | Weighted Average Common Shares Outstanding, Basic | 6,358,917 | 6,028,220 | | Weighted Average Common Shares Outstanding, Diluted | 6,361,582 | 6,028,220 | EPS Calculation (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic Net Income Per Common Share | $0.87 | $0.31 | | Diluted Net Income Per Common Share | $0.87 | $0.31 | | Weighted Average Common Shares Outstanding, Basic | 6,358,665 | 5,958,953 | | Weighted Average Common Shares Outstanding, Diluted | 6,360,990 | 5,961,037 | - Dilutive shares are associated with RSAs; RSAs were **anti-dilutive** for the three months ended June 30, 2024[113](index=113&type=chunk) [Note 12: Goodwill and Other Intangibles](index=36&type=section&id=Note%2012:%20Goodwill%20and%20Other%20Intangibles) This note provides information on goodwill and core deposit intangible assets, which decreased due to amortization Goodwill and Intangible Assets | Intangible Asset (in thousands) | Beginning Balance | Additions | Period Adjustment | Accumulated Amortization | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | | Goodwill | $10,718 | $- | $- | $- | $10,718 | | Core deposit intangible | $1,863 | $- | $- | $(192) | $1,671 | - Core deposit intangible amortization expense was **$95 thousand** for the three months and **$192 thousand** for the six months ended June 30, 2025[114](index=114&type=chunk) Estimated Future Amortization Expense | Year Ending December 31 | Amortization Expense (in thousands) | | :--- | :--- | | 2025 | $181 | | 2026 | $331 | | 2027 | $290 | | 2028 | $248 | | 2029 | $207 | | 2030 | $165 | | Thereafter | $249 | | Total | $1,671 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results of operations, highlighting key impacts and performance drivers [Cautionary Statement Regarding Forward-Looking Statements](index=37&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section warns readers about forward-looking statements, which are subject to significant risks and uncertainties - Forward-looking statements are based on management's views and assumptions and are subject to **significant risks and uncertainties**[117](index=117&type=chunk) - Key factors that could cause actual results to differ include **inflation, interest rate changes, liquidity, and economic conditions**[118](index=118&type=chunk)[119](index=119&type=chunk) - Readers are cautioned not to place undue reliance on these statements and should consider the 'Risk Factors' in the Company's 2024 Form 10-K[118](index=118&type=chunk) [Overview](index=38&type=section&id=Overview) National Bankshares, Inc. is a financial holding company whose primary revenue source is The National Bank of Blacksburg - NBI is a financial holding company, organized in 1986, listed on Nasdaq Capital Market under '**NKSH**'[120](index=120&type=chunk) - Wholly-owned subsidiaries are **The National Bank of Blacksburg (NBB)**, the primary revenue source, and National Bankshares Financial Services, Inc[120](index=120&type=chunk) - NBB operates **28 office locations** and one loan production office[120](index=120&type=chunk) [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) The Company's critical accounting policies involve significant management judgments, particularly for the allowance for credit losses - Financial statements are based on GAAP, requiring management's **difficult, subjective, and complex judgments**[121](index=121&type=chunk)[122](index=122&type=chunk) - Critical policies include the **allowance for credit losses, goodwill, pension plan, and acquired loans**[122](index=122&type=chunk) - These estimates are continuously evaluated and updated, with potential material impact if conditions differ from assumptions[122](index=122&type=chunk) [Acquisition of Frontier Community Bank](index=38&type=section&id=Acquisition%20of%20Frontier%20Community%20Bank) The acquisition of Frontier Community Bank (FCB) on June 1, 2024, significantly impacted the Company's consolidated results - The Company acquired **Frontier Community Bank (FCB)** on June 1, 2024[123](index=123&type=chunk) - FCB's balances and results of operations are included in the Company's consolidated results **starting from June 1, 2024**[123](index=123&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP measures, including Net Interest Margin (FTE) and Efficiency Ratio, to provide supplemental insights [Net Interest Margin](index=38&type=section&id=Net%20Interest%20Margin) The Net Interest Margin (FTE) improved for both the three and six months ended June 30, 2025, compared to the prior year - Net interest margin is calculated on a **fully taxable equivalent (FTE) basis** to measure profitability of interest-generating activities[125](index=125&type=chunk) Net Interest Margin (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income, FTE (non-GAAP) | $11,235 | $8,920 | | Net Interest Margin (non-GAAP) | 2.56% | 2.13% | Net Interest Margin (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income, FTE (non-GAAP) | $21,723 | $17,395 | | Net Interest Margin (non-GAAP) | 2.49% | 2.10% | [Efficiency Ratio](index=40&type=section&id=Efficiency%20Ratio) The efficiency ratio improved for both the three and six months ended June 30, 2025, indicating enhanced operational efficiency - The efficiency ratio measures operational efficiency by dividing **adjusted noninterest expense** by **adjusted total income**[128](index=128&type=chunk) Efficiency Ratio (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Noninterest Expense (non-GAAP) | $8,606 | $7,697 | | Total Income for Efficiency Ratio (non-GAAP) | $13,514 | $11,187 | | Efficiency Ratio (non-GAAP) | 63.68% | 68.80% | Efficiency Ratio (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Noninterest Expense (non-GAAP) | $17,192 | $14,975 | | Total Income for Efficiency Ratio (non-GAAP) | $26,562 | $21,877 | | Efficiency Ratio (non-GAAP) | 64.72% | 68.45% | [Adjusted Return on Average Assets and Adjusted Return on Average Equity](index=40&type=section&id=Adjusted%20Return%20on%20Average%20Assets%20and%20Adjusted%20Return%20on%20Average%20Equity) Adjusted return on average assets and equity significantly improved, reflecting enhanced profitability after exclusions - Adjusted return on average assets and equity are calculated by **annualizing net income** and dividing by average assets or equity[130](index=130&type=chunk) Adjusted Returns (Three Months) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Net Income (non-GAAP) | $3,882 | $2,695 | | Adjusted Return on Average Assets (non-GAAP) | 0.77% | 0.46% | | Adjusted Return on Average Equity (non-GAAP) | 8.37% | 5.68% | Adjusted Returns (Six Months) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Adjusted Net Income (non-GAAP) | $6,957 | $5,219 | | Adjusted Return on Average Assets (non-GAAP) | 0.69% | 0.42% | | Adjusted Return on Average Equity (non-GAAP) | 7.69% | 5.22% | [Performance Summary](index=42&type=section&id=Performance%20Summary) The Company's performance significantly improved, driven by the FCB acquisition, favorable interest rates, and a system conversion - Key drivers include the **FCB acquisition**, a **favorable interest rate environment**, and a **system conversion** completed in Q2 2025[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) Key Performance Indicators (Three Months) | Key Performance Indicator | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $2,289 | $(307) | | Return on average assets | 0.51% | (0.07)% | | Adjusted return on average assets | 0.77% | 0.46% | | Net interest margin | 2.56% | 2.13% | | Efficiency ratio | 63.68% | 68.80% | Key Performance Indicators (Six Months) | Key Performance Indicator | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income | $5,525 | $1,867 | | Return on average assets | 0.61% | 0.22% | | Adjusted return on average assets | 0.69% | 0.42% | | Net interest margin | 2.49% | 2.10% | | Efficiency ratio | 64.72% | 68.45% | [Net Interest Income](index=42&type=section&id=Net%20Interest%20Income) Net interest income increased significantly, driven by higher yields on earning assets and lower costs of liabilities Net Interest Income Analysis (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Interest Income | $18,781 | $17,338 | | Total Interest Expense | $7,546 | $8,418 | | Net Interest Income | $11,235 | $8,920 | | Net Interest Margin | 2.56% | 2.13% | Net Interest Income Analysis (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Interest Income | $37,216 | $33,589 | | Total Interest Expense | $15,493 | $16,194 | | Net Interest Income | $21,723 | $17,395 | | Net Interest Margin | 2.49% | 2.10% | - The **yield on earning assets increased**, and the **cost of interest-bearing liabilities decreased**, improving the net interest margin[145](index=145&type=chunk) - Federal Reserve interest rate cuts reduced deposit pricing pressure and allowed adjustable-rate loans to reprice higher[145](index=145&type=chunk) [Noninterest Income](index=45&type=section&id=Noninterest%20Income) Total noninterest income increased, driven by higher service charges, trust income, and BOLI income Noninterest Income Analysis (Three Months) | Noninterest Income Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Service charges on deposits | $735 | $678 | $57 | | Credit and debit card fees, net | $366 | $423 | $(57) | | Trust income | $578 | $513 | $65 | | BOLI income | $297 | $269 | $28 | | Total noninterest income | $2,279 | $2,267 | $12 | Noninterest Income Analysis (Six Months) | Noninterest Income Category (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Service charges on deposits | $1,433 | $1,311 | $122 | | Credit and debit card fees, net | $783 | $797 | $(14) | | Trust income | $1,157 | $1,016 | $141 | | BOLI income | $589 | $527 | $62 | | Other income | $642 | $580 | $62 | | Total noninterest income | $4,839 | $4,482 | $357 | - Service charges on deposit accounts increased due to **higher deposit levels**[146](index=146&type=chunk) - Trust income increased due to **higher assets under management**[147](index=147&type=chunk) - BOLI income increased due to **policies acquired from FCB**[147](index=147&type=chunk) [Noninterest Expense](index=46&type=section&id=Noninterest%20Expense) Total noninterest expense increased, driven by higher salaries, occupancy costs, and significant conversion expenses Noninterest Expense Analysis (Three Months) | Noninterest Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $5,203 | $4,687 | $516 | | Occupancy, furniture and fixtures | $731 | $637 | $94 | | Data processing and ATM | $701 | $800 | $(99) | | Intangible asset amortization | $95 | $35 | $60 | | Professional services | $509 | $272 | $237 | | Merger-related expenses | $- | $2,257 | $(2,257) | | Conversion expenses | $1,977 | $173 | $1,804 | | Total noninterest expense | $10,583 | $10,127 | $456 | Noninterest Expense Analysis (Six Months) | Noninterest Expense Category (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $10,391 | $9,153 | $1,238 | | Occupancy, furniture and fixtures | $1,470 | $1,260 | $210 | | Data processing and ATM | $1,684 | $1,566 | $118 | | Intangible asset amortization | $192 | $35 | $157 | | Professional services | $808 | $512 | $296 | | Merger-related expenses | $- | $2,741 | $(2,741) | | Conversion expenses | $2,023 | $173 | $1,850 | | Total noninterest expense | $19,215 | $17,889 | $1,326 | - Salaries and employee benefits increased due to the **addition of FCB employees**[150](index=150&type=chunk) - **Conversion expenses** significantly increased due to payments to the former core system vendor and other related costs[154](index=154&type=chunk) - Cybersecurity expense decreased for the six months ended June 30, 2025, reflecting **renegotiation of contracts**[155](index=155&type=chunk) [Income Tax](index=48&type=section&id=Income%20Tax) The Company reported income tax expense, a significant change from an income tax benefit in the prior year's Q2 Income Tax Analysis (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income Tax Expense (Benefit) | $362 | $(178) | Income Tax Analysis (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Income Tax Expense | $1,028 | $341 | | Effective Tax Rate | 15.69% | 15.44% | - The effective tax rate for 2024 was impacted by **non-tax deductible merger-related expenses**[156](index=156&type=chunk) [Asset Quality](index=48&type=section&id=Asset%20Quality) The Company's asset quality indicators show a stable to improving trend, with a decrease in nonaccrual loans [Asset Quality Indicators](index=48&type=section&id=Asset%20Quality%20Indicators) Key asset quality indicators show a decrease in nonaccrual loans and an improved ratio of ACLL to nonperforming loans Key Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Nonaccrual loans | $2,111 | $2,222 | | Loans past due 90 days or more, and still accruing | $21 | $548 | | ACLL to loans net of deferred fees and costs | 1.03% | 1.04% | | Net charge-off ratio | 0.03% | 0.03% | | Ratio of nonperforming loans to loans, net of deferred fees and costs | 0.21% | 0.22% | | Ratio of ACLL to nonperforming loans | 493.70% | 461.84% | [Individually Evaluated Loans](index=48&type=section&id=Individually%20Evaluated%20Loans) Individually evaluated loans totaled $10,849 thousand as of June 30, 2025, with a $141 thousand allocation for credit losses - Individually evaluated loans were **$10,849 thousand** as of June 30, 2025, resulting in an ACLL allocation of **$141 thousand**[160](index=160&type=chunk) - As of December 31, 2024, individually evaluated loans were **$10,521 thousand**, with an ACLL allocation of **$80 thousand**[161](index=161&type=chunk) - Three collateral-dependent loans were **adequately collateralized** and did not result in an individual allocation for either period[160](index=160&type=chunk)[161](index=161&type=chunk) [Collectively Evaluated Loans](index=48&type=section&id=Collectively%20Evaluated%20Loans) Collectively evaluated loans increased to $1,000,286 thousand with an ACLL of $10,281 thousand as of June 30, 2025 - Collectively evaluated loans totaled **$1,000,286 thousand** with an ACLL of **$10,281 thousand** as of June 30, 2025[162](index=162&type=chunk) - The ACLL for these loans is calculated using historical loss information, peer data, PD, and LGD, adjusted for forecasts and qualitative factors[163](index=163&type=chunk) [Reasonable and Supportable Forecast](index=48&type=section&id=Reasonable%20and%20Supportable%20Forecast) The Company uses national unemployment forecasts for a 12-month period, which decreased the required ACLL level - A **12-month period** is used for the reasonable and supportable forecast, reverting to historical losses on a straight-line basis[164](index=164&type=chunk) - The forecast for June 30, 2025, projects a slight increase in unemployment, leading to a **decreased required ACLL**[164](index=164&type=chunk) [Qualitative Factors: Economic](index=48&type=section&id=Qualitative%20Factors:%20Economic) Economic qualitative factors, including bankruptcy filings and housing inventory, influenced the ACLL - Business and personal bankruptcy filings **decreased**, indicating a beneficial impact on credit risk[166](index=166&type=chunk) - Residential vacancy rates **increased**, resulting in a higher ACLL allocation[167](index=167&type=chunk)[169](index=169&type=chunk) - Housing inventory also **increased**, leading to a higher ACLL allocation[169](index=169&type=chunk) [Qualitative Factors: Asset Quality Indicators](index=50&type=section&id=Qualitative%20Factors:%20Asset%20Quality%20Indicators) Accruing loans past due 30-89 days increased to 0.50% of total loans, primarily due to loans awaiting renewal - Accruing loans past due 30-89 days increased to **0.50%** of total loans as of June 30, 2025, from **0.30%** at December 31, 2024[170](index=170&type=chunk) - This increase is primarily attributed to certain loans **awaiting renewal**, which management expects to be approved[170](index=170&type=chunk) [Qualitative Factors: Other Considerations](index=50&type=section&id=Qualitative%20Factors:%20Other%20Considerations) Other qualitative factors include the interest rate environment, competition, and integration of FCB lenders - **No ACLL allocation** was included for interest rate changes as of June 30, 2025[172](index=172&type=chunk) - Competitive, legal, and regulatory environments remained **similar** to December 31, 2024[173](index=173&type=chunk) - An allocation was maintained to account for the **integration of FCB lenders**[174](index=174&type=chunk) - Total **high-risk loans increased** from December 31, 2024, impacting the required ACLL allocation[175](index=175&type=chunk) [Unallocated Surplus](index=50&type=section&id=Unallocated%20Surplus) The unallocated surplus in the ACLL decreased from $50 thousand at year-end to $10 thousand at June 30, 2025 - Unallocated surplus was **$10 thousand** (0.10% of calculated requirement) as of June 30, 2025[176](index=176&type=chunk) - This is a decrease from **$50 thousand** (0.49% of calculated requirement) at December 31, 2024[176](index=176&type=chunk) [Conclusion](index=50&type=section&id=Conclusion) Management believes the Allowance for Credit Losses on Loans (ACLL) is reasonable for the credit risk in the loan portfolio - Management believes the **ACLL is reasonable** for the credit risk in the loan portfolio as of June 30, 2025[177](index=177&type=chunk) - The conclusion is based on analysis of historical indicators, asset quality, and economic factors[177](index=177&type=chunk) [ACL on Unfunded Commitments](index=50&type=section&id=ACL%20on%20Unfunded%20Commitments) The Allowance for Credit Losses (ACL) on unfunded commitments decreased slightly to $241 thousand ACL on Unfunded Commitments | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ACL on Unfunded Commitments | $241 | $251 | | % of Unfunded Commitments | 0.14% | 0.14% | [Provision for (Recovery of) Credit Losses](index=50&type=section&id=Provision%20for%20(Recovery%20of)%20Credit%20Losses) The Company recorded a lower provision for credit losses on loans and a recovery on unfunded commitments for H1 2025 Provision for Credit Losses (Six Months) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Provision for credit losses on loans | $322 | $1,307 | | Recovery of credit losses on unfunded commitments | $10 | $15 | Provision for Credit Losses (Three Months) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Provision for credit losses on loans | $45 | $1,302 | | Recovery of credit losses on unfunded commitments | $9 | $- | - The Q2 2024 provision included **$1,290 thousand** for loans acquired on June 1, 2024[179](index=179&type=chunk) [Loan Modifications](index=50&type=section&id=Loan%20Modifications) The Company modified a significant number of loans for borrowers not experiencing financial difficulty during H1 2025 - The Company modified **173 loans** totaling **$17,750 thousand** during Q2 2025, and **368 loans** totaling **$41,855 thousand** during H1 2025[183](index=183&type=chunk) - These modifications were for borrowers **not experiencing financial difficulty**[183](index=183&type=chunk) - Loan modifications may include rate reductions, payment extensions, or changes in amortization terms[180](index=180&type=chunk) [Key Assets and Liabilities](index=52&type=section&id=Key%20Assets%20and%20Liabilities) This section analyzes changes in key assets and liabilities, highlighting the impact of organic growth and capital management [Average Balances](index=52&type=section&id=Average%20Balances) Year-to-date daily average balances show an increase in total assets, loans, and stockholders' equity YTD Average Balances | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Average Total Assets | $1,817,524 | $1,744,440 | $73,084 | | Average Interest-bearing deposits | $92,458 | $76,211 | $16,247 | | Average Securities available for sale, at fair value | $596,989 | $610,298 | $(13,309) | | Average Loans, net | $991,099 | $928,293 | $62,806 | | Average Total Deposits | $1,641,845 | $1,583,113 | $58,732 | | Average Stockholders' equity | $163,857 | $147,474 | $16,383 | [Securities](index=53&type=section&id=Securities) The fair value of securities decreased, but the net unrealized loss improved significantly, attributed to interest rate risk AFS Securities Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Amortized cost | $654,249 | $680,496 | $(26,247) | | Unrealized loss, net | $(64,228) | $(78,598) | $14,370 | | Securities available for sale, at fair value | $590,021 | $601,898 | $(11,877) | - The unrealized loss is due to **interest rate risk, not credit risk**, and no ACL on securities was recorded[188](index=188&type=chunk) [Loans](index=53&type=section&id=Loans) Loans, net of deferred fees and costs, increased by 2.30% from year-end, driven by organic growth Loan Portfolio Composition | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Real estate construction | $44,529 | $50,798 | $(6,269) | | Consumer real estate | $317,949 | $307,855 | $10,094 | | Commercial real estate | $494,755 | $478,078 | $16,677 | | Commercial non real estate | $51,383 | $51,844 | $(461) | | Public sector and IDA | $56,347 | $57,171 | $(824) | | Consumer non real estate | $46,172 | $42,867 | $3,305 | | Loans, net of deferred fees and costs | $1,010,697 | $987,950 | $22,747 | - The increase in loans is a result of **organic growth**[189](index=189&type=chunk) [Deposits](index=53&type=section&id=Deposits) Total deposits decreased by 1.04% from year-end, primarily due to decreases in interest-bearing accounts Deposit Composition | Deposit Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Noninterest-bearing demand deposits | $306,427 | $290,088 | $16,339 | | Interest-bearing demand deposits | $852,405 | $864,753 | $(12,348) | | Savings deposits | $140,285 | $143,109 | $(2,824) | | Time deposits | $328,558 | $346,802 | $(18,244) | | Total deposits | $1,627,675 | $1,644,752 | $(17,077) | - The Company's depositors are diverse, with **no brokered deposits**[190](index=190&type=chunk) - Approximately **24% of non-municipal deposits are uninsured**, and municipal deposits have additional security from pledged bonds[190](index=190&type=chunk) [Capital Resources](index=53&type=section&id=Capital%20Resources) Total stockholders' equity increased by 7.88% from year-end, and NBB remains well-capitalized Stockholders' Equity | Capital Component (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Common stock and additional paid in capital | $21,925 | $21,831 | $94 | | Retained earnings | $197,223 | $196,343 | $880 | | Accumulated other comprehensive loss | $(50,412) | $(61,765) | $11,353 | | Total stockholders' equity | $168,736 | $156,409 | $12,327 | - The increase in equity reflects **improved unrealized losses** on securities and net income[192](index=192&type=chunk) Regulatory Capital Ratios | Regulatory Capital Ratio | June 30, 2025 | December 31, 2024 | Regulatory Capital Minimum Ratios with Capital Conservation Buffer | | :--- | :--- | :--- | :--- | | Common Equity Tier I Capital Ratio | 16.13% | 15.28% | 7.00% | | Tier I Capital Ratio | 16.13% | 15.28% | 8.50% | | Total Capital Ratio | 17.02% | 16.14% | 10.50% | | Leverage Ratio | 10.49% | 10.25% | 4.00% | - NBB is considered **well capitalized** and exceeds all regulatory capital minimums[194](index=194&type=chunk)[198](index=198&type=chunk) [Liquidity](index=55&type=section&id=Liquidity) The Company maintains sufficient liquidity through diverse sources and manages its loan-to-deposit ratio and investment strategy - Diverse liquidity sources include customer deposits, loan repayments, securities sales, and **FHLB advances**[195](index=195&type=chunk) - As of June 30, 2025, the Company had **$292,916 thousand** in FHLB borrowing capacity and **$173,226 thousand** in Federal Reserve discount window capacity[196](index=196&type=chunk) - The Company monitors liquidity needs, performs stress testing, and manages its **loan-to-deposit ratio (62.09%)**[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company extends lines of credit and sells mortgages on the secondary market, with mitigated risk - Off-balance sheet arrangements include **lines of credit** and **letters of credit** extended to customers[202](index=202&type=chunk) - The Company sells mortgages on the secondary market with recourse provisions, but considers the risk **not significant**[204](index=204&type=chunk) - In case of substantial draws, the Company can access lines of credit, raise deposits, or sell securities/loans[203](index=203&type=chunk)[204](index=204&type=chunk) [Contractual Obligations](index=57&type=section&id=Contractual%20Obligations) As of June 30, 2025, the Company had no finance lease, purchase obligations, or long-term debt - The Company had **no finance lease or purchase obligations** as of June 30, 2025[205](index=205&type=chunk) - The Company had **no long-term debt** as of June 30, 2025[205](index=205&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is marked as 'Not applicable,' indicating no material disclosures beyond what is already presented - This section is marked as '**Not applicable**' by the Company[206](index=206&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2025[207](index=207&type=chunk) - **No material changes** in internal control over financial reporting occurred during the three months ended June 30, 2025[208](index=208&type=chunk) - The Company acknowledges that no control system can provide **absolute assurance** due to inherent limitations[209](index=209&type=chunk) Part II - OTHER INFORMATION [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) There are no pending or threatened legal proceedings that may materially impact the Company's financial condition - **No pending or threatened legal proceedings** are expected to materially impact the Company's financial condition[210](index=210&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the 'Risk Factors' previously disclosed in the Company's 2024 Form 10-K - Readers are referred to the '**Risk Factors**' in Item 1A of the 2024 Form 10-K[211](index=211&type=chunk) - Additional risk factors are discussed under '**Cautionary Statement Regarding Forward-Looking Statements**' in Part I, Item 2 of this Form 10-Q[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reports that there were no unregistered sales of equity securities and no use of proceeds - **No unregistered sales** of equity securities occurred[212](index=212&type=chunk) - **No use of proceeds** from such sales[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports that there were no defaults upon senior securities during the period - **No defaults** upon senior securities occurred[213](index=213&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20D

Financial Performance - National Bankshares, Inc. reported net income of $5.53 million or $0.87 per diluted common share for the first half of 2025, a significant increase from $1.87 million or $0.31 per diluted common share in the same period of 2024[3] - Net income for the three months ended June 30, 2025, was $2,289,000, compared to a net loss of $307,000 in the same period last year[23] - Basic net income per common share for the three months ended June 30, 2025, was $0.36, compared to a loss of $0.05 per share in the same period last year[23] - Adjusted net income for Q2 2025 was $3,882, representing a 26.3% increase from $3,075 in Q1 2025 and a 44.1% increase from $2,695 in Q2 2024[47] - The annualized net income for ratio calculation for Q2 2025 was $13,978, up from $12,632 in Q1 2025 and significantly higher than $7,837 in Q2 2024[47] Assets and Equity - Total assets as of June 30, 2025, were $1.81 billion, compared to $1.81 billion as of June 30, 2024[3] - Stockholders' equity increased to $168.74 million as of June 30, 2025, compared to $148.96 million in the same period of 2024[21] - Total stockholders' equity increased to $166,971 thousand as of June 30, 2025, compared to $137,873 thousand a year ago, representing a growth of 21.14%[31] - Tangible common equity (non-GAAP) increased to $156,347 as of June 30, 2025, compared to $154,794 as of March 31, 2025, and $136,165 a year ago[50] Loans and Deposits - Loans increased to $1.01 billion as of June 30, 2025, driven by growth in consumer real estate and consumer non-real estate loans[14] - Total deposits reached $1,635,780 thousand as of June 30, 2025, an increase from $1,563,130 thousand in June 2024, marking a growth of 4.62%[31] - Loans, gross, reached $1,008,420 thousand for the three months ended June 30, 2025, compared to $904,399 thousand in the same period last year, reflecting a growth of 11.51%[31] Income and Expenses - The company experienced higher interest income from repriced loans, lower deposit costs, and steady loan growth contributing to improved net interest income[4] - Total interest income for the three months ended June 30, 2025, was $18,537,000, an increase of 8.4% from $17,095,000 in the same period last year[23] - Net interest income after provision for credit losses for the three months ended June 30, 2025, was $10,955,000, up 48.5% from $7,375,000 year-over-year[23] - Total noninterest expense increased to $10,583,000 for the three months ended June 30, 2025, from $10,127,000 a year ago, representing a rise of 4.5%[23] - Noninterest income increased due to higher service charges on deposits and growth in bank-owned life insurance (BOLI) income, reflecting the impact of the Frontier Community Bank acquisition[8] Credit Quality - The provision for credit losses for the six months ended June 30, 2025, was $312,000, significantly lower than $1,292,000 in the same period last year, indicating improved credit quality[25] - Nonperforming loans as a percentage of total loans decreased to 0.21% as of June 30, 2025, compared to 0.25% a year ago, reflecting improved asset quality[39] - The allowance for credit losses on loans to total loans was 1.03% as of June 30, 2025, slightly down from 1.06% in June 2024, indicating stable credit risk management[39] Efficiency and Profitability - The efficiency ratio improved to 63.68% for the three months ended June 30, 2025, down from 65.81% in the previous quarter and 68.80% a year ago, indicating better cost management[31] - The return on average assets improved to 0.77% for the three months ended June 30, 2025, compared to 0.69% in the previous quarter and 0.46% a year ago[31] - The net interest margin improved to 2.49% for the six months ended June 30, 2025, compared to 2.10% in the same period of 2024, indicating enhanced profitability from interest-earning assets[29] - The net interest margin for Q2 2025 improved to 2.56%, up from 2.41% in Q1 2025 and 2.13% in Q2 2024[46] Dividends - The company paid a dividend of $0.73 to shareholders on June 1, 2025[15] - Dividends declared per common share remained stable at $0.73 for both the three and six months ended June 30, 2025, consistent with the previous year[25] Acquisitions and Technology - The company acquired Frontier Community Bank on June 1, 2024, which added $118.7 million in loans and $129.7 million in customer deposits[5] - The company upgraded to a new core banking system, enhancing technology across its operations[4]

Financial Performance - Net income for the three months ended March 31, 2025, was $3,236 thousand, a 48.9% increase compared to $2,174 thousand for the same period in 2024[12] - Basic net income per common share increased to $0.51 for the three months ended March 31, 2025, compared to $0.37 for the same period in 2024, representing a growth of 37.8%[12] - Total comprehensive income for the three months ended March 31, 2025, was $10,826 thousand, compared to a loss of $1,164 thousand in the same period of 2024[14] - Total interest income for Q1 2025 was $18,203,000, a 13.6% increase from $16,021,000 in Q1 2024[12] - Noninterest income for the first quarter of 2025 was $2,555 thousand, an increase of 16.2% from $2,199 thousand in the same quarter of 2024[12] - Total noninterest expense increased to $8,633 thousand for the first quarter of 2025, up from $7,762 thousand in the same quarter of 2024, a rise of 11.2%[12] Asset and Loan Growth - Total assets increased to $1,835,717 thousand as of March 31, 2025, up from $1,811,636 thousand at December 31, 2024, representing a growth of 1.3%[10] - Total loans increased to $1,003,905 thousand as of March 31, 2025, compared to $988,613 thousand at December 31, 2024, marking a growth of 1.5%[10] - The total loans, net of deferred fees and costs, as of March 31, 2025, were $992,774,000, up from $977,688,000 at the end of 2024, reflecting a growth of 1.1%[36] - The loan portfolio composition as of March 31, 2025, included $497,072,000 in commercial real estate loans, an increase from $478,078,000 at the end of 2024, showing a growth of 4.0%[36] - Residential closed-end first liens increased to $175,178 million as of March 31, 2025, from $171,382 million on December 31, 2024, marking a growth of about 2.3%[40] - The total amount of commercial real estate loans was $198,762 million as of March 31, 2025, compared to $193,795 million on December 31, 2024, showing an increase of about 2.5%[40] Credit Losses and Allowances - The allowance for credit losses was $10,490 thousand as of March 31, 2025, compared to $10,262 thousand at December 31, 2024, reflecting a slight increase of 2.2%[10] - The provision for credit losses for the three months ended March 31, 2025, was $277 million, compared to a recovery of $15 million for the same period in 2024[42] - The total Allowance for Credit Losses on Loans (ACLL) was $10.49 billion, an increase from $10.26 billion on December 31, 2024[42] - The balance of individually evaluated loans as of March 31, 2025, was $76 million, while collectively evaluated loans totaled $10.41 billion[44] - The company reported charge-offs of $112 million for the three months ended March 31, 2025, compared to $109 million for the same period in 2024[42] Securities and Investments - The total securities available for sale had an amortized cost of $665.244 million and a fair value of $596.253 million as of March 31, 2025, reflecting unrealized losses of $69.020 million[58] - The company reported unrealized holding gains on securities available for sale of $9,607,000 in Q1 2025, compared to losses of $4,225,000 in Q1 2024[21] - The fair value of U.S. government agencies and corporations securities was $306,927 million as of March 31, 2025, down from $311,124 million at December 31, 2024[73] - The company had 545 securities with a fair value of $571,226 million in an unrealized loss position, attributed to noncredit-related factors such as interest rate changes[64] - The company did not record any impairment on FHLB stock as of March 31, 2025, indicating stable investment conditions[66] Acquisitions and Strategic Moves - The acquisition of Frontier Community Bank was completed on June 1, 2024, with a total purchase price consideration of $16,349,000, which included $2,050,000 in cash and stock consideration valued at $14,299,000[31] - The identifiable assets acquired from Frontier Community Bank totaled $148,513,000, while the identifiable liabilities assumed were $137,038,000, resulting in a fair value of net assets acquired of $11,475,000[34] - The company issued 464,855 shares of common stock valued at $30.76 per share as part of the acquisition of Frontier Community Bank, reflecting a strategic move to enhance its market presence[38] Risk Management and Economic Factors - The company is closely monitoring risks related to high inflation and U.S. monetary policy, which may impact customer demand for banking services and loan repayment capabilities[27] - The company does not expect the adoption of recent accounting standards (ASU 2023-09 and ASU 2024-03) to have a material impact on its consolidated financial statements[28][30] Other Financial Metrics - Cash flows from operating activities provided $2,566,000 in Q1 2025, down from $3,840,000 in Q1 2024, reflecting a decrease of 33.2%[20] - The company reported a net change in cash and cash equivalents of $14,418,000 for Q1 2025, compared to $34,580,000 in Q1 2024, indicating a decrease of 58.3%[20] - The lease liability as of March 31, 2025, was $1,422, down from $1,523 as of December 31, 2024, indicating a decrease of 6.6%[99] - The weighted average discount rate for leases was 3.89% as of March 31, 2025, slightly up from 3.87% at the end of 2024[99] - The company recognized an amortization expense of $97,000 for intangible assets in Q1 2025[12]

Financial Performance - National Bankshares, Inc. reported a net income of $3.24 million or $0.51 per diluted common share for Q1 2025, compared to $2.17 million or $0.37 per diluted common share in Q1 2024, representing a 49.3% increase in net income year-over-year [2]. - Net income for the three months ended March 31, 2025, was $3,236,000, up from $3,079,000 in the previous quarter, representing a 5.1% increase [22]. - Basic net income per common share increased to $0.51 for the three months ended March 31, 2025, up from $0.48 in the previous quarter [22]. - Adjusted net income for the three months ended March 31, 2025, was $3,075 thousand, compared to $3,052 thousand in the previous quarter [1]. Asset and Deposit Growth - Total assets as of March 31, 2025, were $1.84 billion, reflecting the company's growth and stability [2]. - Total assets increased to $1,835,717,000 as of March 31, 2025, compared to $1,811,636,000 at December 31, 2024, reflecting a growth of 1.4% [20]. - Total assets increased to $1,819,747 thousand as of March 31, 2025, compared to $1,796,684 thousand as of December 31, 2024, reflecting a growth of 1.9% [1]. - Total deposits rose to $1,657,760,000 as of March 31, 2025, compared to $1,644,752,000 at December 31, 2024, marking a 0.7% increase [20]. - Total deposits rose to $1,647,550 thousand as of March 31, 2025, from $1,622,653 thousand as of December 31, 2024, marking a 1.5% increase [1]. Loan Performance - Loans increased from December 31, 2024, mainly due to growth in commercial real estate loans, with low credit risk metrics reflected in charge-off and past due levels [13]. - Total loans reached $1,003,905,000 as of March 31, 2025, an increase of 1.3% from $988,613,000 at December 31, 2024 [20]. - The allowance for credit losses was $10,490,000 as of March 31, 2025, slightly higher than $10,262,000 at December 31, 2024 [20]. - Allowance for credit losses on loans to total loans remained stable at 1.05% as of March 31, 2025, consistent with the previous quarter [1]. - Nonperforming loans to total loans ratio was 0.22% as of March 31, 2025, unchanged from the previous quarter [1]. Income and Expense Analysis - Net interest income after provision for credit losses was $9,980,000 for the three months ended March 31, 2025, compared to $10,064,000 in the previous quarter [22]. - Noninterest income increased in Q1 2025 compared to Q4 2024, driven by higher credit and debit card transaction volumes and contributions from the FCB acquisition [7]. - Noninterest income totaled $2,555,000 for the three months ended March 31, 2025, compared to $2,243,000 in the previous quarter, reflecting a 13.9% increase [22]. - Noninterest expense rose slightly in Q1 2025 compared to Q4 2024, primarily due to conversion expenses related to an upcoming system upgrade and costs associated with the FCB acquisition [9]. - Total noninterest expense was $8,633,000 for the three months ended March 31, 2025, compared to $8,620,000 in the previous quarter, indicating a marginal increase [22]. Capital and Liquidity Position - Stockholders' equity increased as of March 31, 2025, due to net income and improvements in unrealized losses on available-for-sale securities, indicating a strong capital position [14]. - The company maintains a solid liquidity position with substantial borrowing capacity from the Federal Home Loan Bank and the Federal Reserve, ensuring it can meet foreseeable liquidity demands [12]. - Approximately 24% of the company's deposits are municipal deposits, which have additional security from bonds pledged as collateral, enhancing the safety of these deposits [11]. Operational Efficiency - The net interest margin improved in Q1 2025 compared to Q4 2024 due to lower deposit costs and higher asset yields, indicating better profitability from interest-earning assets [6]. - The net interest margin improved to 2.41% for the three months ended March 31, 2025, compared to 2.34% in the previous quarter [23]. - The efficiency ratio (non-GAAP) improved to 65.81% for the three months ended March 31, 2025, down from 68.84% in the previous quarter [1]. - The company is undergoing a system upgrade aimed at enhancing efficiency and product offerings, which is reflected in the conversion expenses reported [1].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2024 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________. Commission File Number: 0-15204 NATIONAL BANKSHARES, INC. (Exact name of registrant as specified in its charter) Virginia (State or other ...