NATIONAL BANKSHARES INC 10-Q

Item 1. Financial Statements National Bankshares, Inc. Consol idated Balance Sheets (Unaudited) (in thousands, except share and per share data) June 30, 2025 December 31, 2024 Assets Cash and due from banks $ 9,798 $ 13,564 Interest-bearing deposits 83,051 94,254 Federal funds sold - 299 Total cash and cash equivalents 92,849 108,117 Securities available for sale, at fair value 590,021 601,898 Mortgage loans held for sale 1,072 619 Loans: Real estate construction loans 44,529 50,798 Consumer real estate loans 317,949 307,855 Commercial real estate loans 494,755 478,078 Commercial non real estate loans 51,383 51,844 Public sector and IDA loans 56,347 57,171 Consumer non real estate loans 46,172 42,867 Total loans 1,011,135 988,613 Less: deferred fees and costs ( 438 ) ( 663 ) Loans, net of deferred fees and costs 1,010,697 987,950 Less: allowance for credit losses ( 10,422 ) ( 10,262 ) Loans, net 1,000,275 977,688 Premises and equipment, net 17,829 16,826 Accrued interest receivable 6,413 6,469 Goodwill 10,718 10,718 Core deposit intangible, net 1,671 1,863 Bank-owned life insurance ("BOLI") 47,958 47,369 Other assets 37,804 40,068 Total assets $ 1,806,610 $ 1,811,635 Liabilities and Stockholders' Equity Noninterest-bearing demand deposits $ 306,427 $ 290,088 Interest-bearing demand deposits 852,405 864,753 Savings deposits 140,285 143,109 Time deposits 328,558 346,802 Total deposits 1,627,675 1,644,752 Accrued interest payable 1,522 1,462 Other liabilities 8,677 9,013 Total liabilities 1,637,874 1,655,227 Commitments and contingencies Stockholders' Equity Preferred stock, no par value, 5,000,000 shares authorized; no ne issued and outstanding $ - $ - Common stock of $ 1.25 par value and additional paid in capital. Authorized 10,000,000 shares; issued and outstanding 6,366,001 (including 5,028 unvested) shares as of June 30, 2025 and 6,363,371 (including 4,961 unvested) shares as of December 31, 2024 21,925 21,831 Retained earnings 197,223 196,343 Accumulated other comprehensive loss, net ( 50,412 ) ( 61,765 ) Total stockholders' equity 168,736 156,409 Total liabilities and stockholders' equity $ 1,806,610 $ 1,811,636 See accompanying notes to consolidated financial statements. 3 Table of Contents National Bankshares, Inc. Consolidated Statements of Income (Loss) (Unaudited) Three Months Ended June 30, (in thousands, except share and per share data) 2025 2024 Interest Income Interest and fees on loans $ 13,495 $ 11,305 Interest on federal funds sold 2 10 Interest on interest-bearing deposits 978 1,229 Interest on securities – taxable 3,725 4,213 Interest on securities – nontaxable 337 338 Total interest income 18,537 17,095 Interest Expense Interest on time deposits 3,058 3,090 Interest on other deposits 4,488 5,326 Interest on borrowings - 2 Total interest expense 7,546 8,418 Net interest income 10,991 8,677 Provision for credit losses 36 1,302 Net interest income after provision for credit losses 10,955 7,375 Noninterest Income Service charges on deposit accounts 735 678 Other service charges and fees 72 87 Credit and debit card fees, net 366 423 Trust income 578 513 BOLI income 297 269 Gain on sale of mortgage loans held for sale 54 58 Other income 177 239 Total noninterest income 2,279 2,267 Noninterest Expense Salaries and employee benefits 5,203 4,687 Occupancy, furniture and fixtures 731 637 Data processing and ATM 701 800 FDIC assessment 210 192 Intangible asset amortization 95 35 Franchise taxes 358 358 Professional services 509 272 Merger-related expense - 2,257 Conversion expense 1,977 173 Other operating expenses 799 716 Total noninterest expense 10,583 10,127 Income (loss) before income tax 2,651 ( 485 ) Income tax expense (benefit) 362 ( 178 ) Net Income (Loss) $ 2,289 $ ( 307 ) Basic net income (loss) per common share $ 0.36 $ ( 0.05 ) Diluted net income (loss) per common share $ 0.36 $ ( 0.05 ) Weighted average number of common shares outstanding, basic 6,358,917 6,028,220 Weighted average number of common shares outstanding, diluted 6,361,582 6,028,220 Dividends declared per common share $ 0.73 $ 0.73 4 Table of Contents National Bankshares, Inc. Consolidated Statements of Comprehensive Income (Loss) Three Months Ended June 30, 2025 and 2024 (Unaudited) Three months ended June 30, (in thousands) 2025 2024 Net Income (Loss) $ 2,289 $ ( 307 ) Other Comprehensive Income (Loss), Net of Tax Unrealized holding gain (loss) on available for sale securities net of tax of $ 1,000 and ($ 40 ) for the periods ended June 30, 2025 and 2024, respectively 3,763 ( 150 ) Other comprehensive income (loss), net of tax 3,763 ( 150 ) Total Comprehensive Income (Loss) $ 6,052 $ ( 457 ) 5 Table of Contents National Bankshares, Inc. Consolidated Statements of Income (Unaudited) For the Six Months Ended June 30, (in thousands, except share and per share data) 2025 2024 Interest Income Interest and fees on loans $ 26,454 $ 21,589 Interest on federal funds sold 5 10 Interest on interest-bearing deposits 2,017 2,358 Interest on securities – taxable 7,585 8,467 Interest on securities – nontaxable 673 677 Total interest income 36,734 33,101 Interest Expense Interest on time deposits 6,369 5,822 Interest on other deposits 9,124 10,370 Interest on borrowings - 2 Total interest expense 15,493 16,194 Net interest income 21,241 16,907 Provision for credit losses 312 1,292 Net interest income after provision for credit losses 20,929 15,615 Noninterest Income Service charges on deposit accounts 1,433 1,311 Other service charges and fees 156 169 Credit and debit card fees, net 783 797 Trust income 1,157 1,016 BOLI income 589 527 Gain on sale of mortgage loans held for sale 79 82 Other income 642 580 Total noninterest income 4,839 4,482 Noninterest Expense Salaries and employee benefits 10,391 9,153 Occupancy, furniture and fixtures 1,470 1,260 Data processing and ATM 1,684 1,566 FDIC assessment 417 379 Intangible asset amortization 192 35 Franchise taxes 731 708 Professional services 808 512 Merger-related expense - 2,741 Conversion expense 2,023 173 Other operating expenses 1,499 1,362 Total noninterest expense 19,215 17,889 Income before income tax expense 6,553 2,208 Income tax expense 1,028 341 Net Income $ 5,525 $ 1,867 Basic net income per common share $ 0.87 $ 0.31 Diluted net income per common share $ 0.87 $ 0.31 Weighted average number of common shares outstanding, basic 6,358,665 5,958,953 Weighted average number of common shares outstanding, diluted 6,360,990 5,961,037 Dividends declared per common share $ 0.73 $ 0.73 6 Table of Contents National Bankshares, Inc. Consolidate d Statements of Comprehensive Income (Loss) Six Months Ended June 30, 2025 and 2024 (Unaudited) For the Six Months Ended June 30, (in thousands) 2025 2024 Net Income $ 5,525 $ 1,867 Other Comprehensive Income (Loss), Net of Tax Unrealized holding gain (loss) on available for sale securities net of tax of $ 3,017 and ($ 927 ) for the periods ended June 30, 2025 and 2024, respectively 11,353 ( 3,488 ) Other comprehensive income (loss), net of tax 11,353 ( 3,488 ) Total Comprehensive Income (Loss) $ 16,878 $ ( 1,621 ) See accompanying notes to consolidated financial statements. 7 Table of Contents National Bankshares, Inc. Consolidated Statem ents of Changes in Stockholders’ Equity Three Months Ended June 30, 2025 and 2024 (Unaudited) (in thousands except share data) Common Stock and Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Balances at March 31, 2024 $ 7,436 $ 200,158 $ ( 68,204 ) $ 139,390 Net loss – ( 307 ) – ( 307 ) Acquisition of Frontier Community Bank 14,299 – – 14,299 Cash dividends of $ 0.73 per share – ( 4,303 ) – ( 4,303 ) Other comprehensive loss, net of tax of ($ 40 ) – – ( 150 ) ( 150 ) Stock based compensation 33 – – 33 Balances at June 30, 2024 $ 21,768 $ 195,548 $ ( 68,354 ) $ 148,962 Balances at March 31, 2025 $ 21,874 $ 199,579 $ ( 54,175 ) $ 167,278 Net income – 2,289 – 2,289 Cash dividends of $ 0.73 per share – ( 4,645 ) – ( 4,645 ) Other comprehensive income, net of tax of $ 1,000 – – 3,763 3,763 Stock based compensation 51 – – 51 Balances at June 30, 2025 $ 21,925 $ 197,223 $ ( 50,412 ) $ 168,736 Six Months Ended June 30, 2025 and 2024 (Unaudited) (in thousands except per share data) Common Stock and Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Balances at December 31, 2023 $ 7,404 $ 197,984 $ ( 64,866 ) $ 140,522 Net income – 1,867 – 1,867 Acquisition of Frontier Community Bank 14,299 – – 14,299 Cash dividends of $ 0.73 per share – ( 4,303 ) – ( 4,303 ) Other comprehensive loss, net of tax of ($ 927 ) – – ( 3,488 ) ( 3,488 ) Stock based compensation 65 – – 65 Balances at June 30, 2024 $ 21,768 $ 195,548 $ ( 68,354 ) $ 148,962 Balances at December 31, 2024 $ 21,831 $ 196,343 $ ( 61,765 ) $ 156,409 Net income – 5,525 – 5,525 Cash dividends of $ 0.73 per share – ( 4,645 ) – ( 4,645 ) Other comprehensive income, net of tax of $ 3,017 – – 11,353 11,353 Stock based compensation 94 – – 94 Balances at June 30, 2025 $ 21,925 $ 197,223 $ ( 50,412 ) $ 168,736 See accompanying notes to consolidated financial statements. 8 Table of Contents National Bankshares, Inc. Consolidat ed Statements of Cash Flows Six Months Ended June 30, 2025 and 2024 (Unaudited) For the Six Months Ended June 30, (in thousands) 2025 2024 Cash Flows from Operating Activities Net income $ 5,525 $ 1,867 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 312 1,292 Depreciation of premises and equipment 509 424 Amortization of premiums and accretion of discounts on securities, net 525 520 Amortization of core deposit intangible 192 35 Accretion of fair value of acquired loans ( 615 ) ( 111 ) Amortization of fair value of acquired time deposits and leases 92 56 Origination of mortgage loans held for sale ( 5,270 ) ( 5,125 ) Proceeds from sale of mortgage loans held for sale 4,896 5,488 Gain on sale of mortgage loans held for sale ( 79 ) ( 82 ) Increase in cash value of bank-owned life insurance ( 589 ) ( 527 ) Equity based compensation expense 94 65 Net change in: Accrued interest receivable 56 35 Other assets ( 352 ) ( 5,690 ) Accrued interest payable 60 974 Other liabilities ( 723 ) 1,661 Net cash provided by operating activities 4,633 882 Cash Flows from Investing Activities Proceeds from repayments of mortgage-backed securities 6,722 6,765 Proceeds from calls, sales and maturities of securities available for sale 19,000 11,024 Net change in restricted stock - 265 Purchase of loan participations ( 17,027 ) ( 12,228 ) Collection of loan participations 2,060 5,321 Loan originations and principal collections, net ( 7,418 ) ( 7,247 ) Recoveries on loans charged off 91 103 Purchases of premises and equipment ( 1,506 ) ( 1,331 ) Cash acquired in the acquisition, net of cash paid - 6,898 Net cash provided by investing activities 1,922 9,570 Cash Flows from Financing Activities Net change in time deposits ( 18,345 ) 12,786 Net change in other deposits 1,167 ( 1,425 ) Cash dividends paid ( 4,645 ) ( 4,302 ) Repayment of borrowings - ( 5,230 ) 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 beginning of period 108,117 86,603 Cash and cash equivalents at end of period $ 92,849 $ 98,884 9 Table of Contents For the Six Months Ended June 30, (in thousands) 2025 2024 Supplemental Disclosures of Cash Flow Information Cash payments for: Interest on deposits and borrowings $ 15,433 $ 15,220 Income taxes 1,076 715 Supplemental Disclosure of Noncash Activities Loans charged against the allowance for credit losses $ 253 $ 177 Unrealized holding gain on securities available for sale 14,370 ( 4,415 ) Lease liabilities arising from obtaining right-of-use assets during the period 354 548 See accompanying notes to consolidated financial statements. 10 Table of Contents National Bankshares, Inc. Notes t o Consolidated Financial Statements June 30, 2025 (Unaudited) $ in thousands, except per share data Note 1: General and Summary of Significant Accounting Policies The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (the “Bank” or “NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. All intercompany accounts and transactions between the Company and its subsidiaries have been eliminated. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of the Company’s management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. Application of the principles of GAAP and practices within the banking industry require management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statement; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on loans and acquisition accounting. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of results of operations for the full year or any other interim period. The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). The Company’s significant accounting policies followed in preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the Company's 2024 Form 10-K. All amounts and disclosures included in this quarterly report as of December 31, 2024, were derived from the Company’s audited consolidated financial statements. Certain items in the prior period financial statements have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or stockholders’ equity. The Company posts all reports required to be filed under the Securities Exchange Act of 1934 on its web site at www.nationalbankshares.com . Risks and Uncertainties The Company is closely monitoring risks that may impact its business, including inflation, along with U.S. monetary policy maneuvers to manage inflation. Inflation and U.S. monetary policy maneuvers to reduce it may impact the Company’s customers’ demand for banking services and ability to qualify for and/or repay loans. These risks could adversely affect the Company’s business, financial condition, results of operations, cash flows, credit risk, asset valuations and capital position. Recently Adopted Accounting Developments ASU 2023-09 In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 was effective for the Company on January 1, 2025 and applies to annual periods beginning after December 15, 2024. Adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements ASU 2024-03 In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public 11 Table of Contents companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. Note 2: Business Combination On June 1, 2024 (the “Acquisition Date”), the Company completed its acquisition of Frontier Community Bank ("FCB"), a Virginia chartered commercial bank headquartered in Waynesboro, Virginia, in accordance with the definitive merger agreement entered on January 23, 2024, by and among the Company, the Bank and FCB. Upon completion of the merger, FCB merged with and into the Bank. Each share of FCB common stock was converted into either $ 14.48 in cash or 0.4250 shares of the Company’s common stock, with FCB shareholders having the ability to elect the merger consideration to be received, subject to the allocation and proration procedures set forth in the FCB Merger Agreement. The Company issued 464,855 shares of common stock and paid cash consideration of $ 2,050 to former FCB shareholders in the acquisition. As a result of the transaction, the Bank expanded its operations into the Waynesboro, Staunton and Lynchburg, Virginia markets. The acquisition of FCB was accounted for as a business combination using the acquisition method of accounting. Assets acquired, liabilities assumed, and consideration paid were recorded at estimated fair value on the Acquisition Date. The excess of the purchase price over the fair value of the net assets was recorded as provisional goodwill and represents the benefit from the transaction that is not otherwise quantifiable, including expected management and operational synergies and intangible assets that do not qualify for separate recognition. The Company does not expect that any portion of goodwill will be deductible. Please refer to the Company’s 2024 Form 10-K, Note 22: Business Combination for additional information of the acquisition of FCB. 12 Table of Contents The following table presents the calculation of the purchase price and the fair value of the identifiable assets and liabilities as of the Acquisition Date. June 1, 2024 As Recorded by FCB Estimated Fair Value Adjustments Estimated Fair Values as Recorded by NBI Purchase Price Consideration: Stock consideration (1) $ 14,299 Cash consideration (2) 2,050 Total purchase price consideration $ 16,349 Identifiable assets: Cash and cash equivalents $ 8,993 $ ( 59 ) $ 8,934 Securities 9,325 ( 5 ) 9,320 Loans, gross, purchased performing 115,589 ( 7,720 ) 107,869 Loans, gross, purchased credit deteriorated 11,157 ( 822 ) 10,335 Loans in process 539 – 539 Deferred fees and costs on loans 34 ( 34 ) – Allowance for credit losses on loans ( 881 ) 881 – Premises and equipment 3,003 449 3,452 Core deposit intangible – 2,100 2,100 Other assets 4,998 966 5,964 Total identifiable assets acquired $ 152,757 $ ( 4,244 ) $ 148,513 Identifiable Liabilities Deposits $ 130,323 $ ( 606 ) $ 129,717 Borrowings 5,250 ( 20 ) 5,230 Other liabilities 1,960 131 2,091 Total identifiable liabilities assumed $ 137,533 $ ( 495 ) $ 137,038 Fair value of net assets acquired $ 11,475 Goodwill (3) $ 4,874 (1) The Company issued 464,855 shares of its common stock valued at $ 30.76 per share, which was the closing price of the Company’s common stock on May 31, 2024, the last day of trading prior to the consummation of the acquisition. (2) Cash consideration was paid for shareholder elections, fractional shares and to settle outstanding vested stock options. The merger agreement provided for up to 10 % of consideration to be paid in cash of $ 14.48 per FCB common share, at the shareholders’ election. Payments for shareholder elections and fractional shares totaled $ 1,769 . Outstanding and vested options were settled at the difference between $ 14.48 and the strike price and totaled $ 281 . (3) The Company kept the measurement of goodwill open until December 31, 2024 in order to reflect any adjustments to the fair value of assets acquired and liabilities assumed that arose during the Company’s final review procedures. The Company recorded a small measurement period adjustment to goodwill between the acquisition date and December 31, 2024. For more information, please refer to the Company’s 2024 Form 10-K, Note 17: Goodwill and Other Intangibles. 13 Table of Contents Note 3: Loans and Allowance for Credit Losses Loans Loans include acquired loans and originated loans. Acquired loans are presented at their outstanding principal balance, net of the remaining purchase discount of $ 6,949 as of June 30, 2025 and $ 7,564 as of December 31, 2024. Originated loans as of June 30, 2025 and December 31, 2024 are presented at amortized cost, net of deferred fees and costs. The following table presents the composition of the loan portfolio, excluding mortgage loans held for sale, as of the dates indicated. June 30, December 31, 2025 2024 Real estate construction $ 44,529 $ 50,798 Consumer real estate 317,949 307,855 Commercial real estate 494,755 478,078 Commercial non real estate 51,383 51,844 Public sector and IDA 56,347 57,171 Consumer non real estate 46,172 42,867 Gross loans $ 1,011,135 $ 988,613 Less deferred fees and costs ( 438 ) ( 663 ) Loans, net of deferred fees and costs $ 1,010,697 $ 987,950 Allowance for credit losses on loans ( 10,422 ) ( 10,262 ) Total loans, net $ 1,000,275 $ 977,688 Accrued interest receivable of $ 3,382 at June 30, 2025 and $ 3,299 at December 31, 2024 is not included in total loans above. Past Due and Nonaccrual Loans The following tables present the aging of past due loans, by loan pool, as of the dates indicated. June 30, 2025 Accruing Current Loans Accruing Loans 30 – 89 Days Past Due Accruing Loans 90 or More Days Past Due Nonaccrual Loans Total Loans Accruing and Nonaccrual 90 or More Days Past Due Real Estate Construction Construction, 1-4 family residential $ 13,773 $ 332 $ - $ - $ 14,105 $ - Construction, other 30,424 - - - 30,424 - Consumer Real Estate Equity line 24,055 177 - - 24,232 - Residential closed-end first liens 192,628 1,322 - - 193,950 - Residential closed-end junior liens 9,437 8 - - 9,445 - Investor-owned residential real estate 90,322 - - - 90,322 - Commercial Real Estate Multifamily residential real estate 160,083 194 - - 160,277 - Commercial real estate, owner-occupied 134,950 975 - 2,111 138,036 199 Commercial real estate, other 195,051 1,391 - - 196,442 - Commercial Non Real Estate Commercial and industrial 51,145 238 - - 51,383 - Public Sector and IDA States and political subdivisions 56,347 - - - 56,347 - Consumer Non Real Estate Credit cards 4,975 13 5 - 4,993 5 Automobile 12,091 126 9 - 12,226 9 Other consumer loans 28,669 277 7 - 28,953 7 Total $ 1,003,950 $ 5,053 $ 21 $ 2,111 $ 1,011,135 $ 220 14 Table of Contents December 31, 2024 Accruing Current Loans Accruing Loans 30 – 89 Days Past Due Accruing Loans 90 or More Days Past Due Nonaccrual Loans Total Loans Accruing and Nonaccrual 90 or More Days Past Due Real Estate Construction Construction, 1-4 family residential $ 16,162 $ - $ - $ - $ 16,162 $ - Construction, other 34,636 - - - 34,636 - Consumer Real Estate Equity line 22,551 67 - - 22,618 - Residential closed-end first liens 170,110 949 323 - 171,382 323 Residential closed-end junior liens 8,565 9 - - 8,574 - Investor-owned residential real estate 104,756 347 178 - 105,281 178 Commercial Real Estate Multifamily residential real estate 143,444 186 - - 143,630 - Commercial real estate, owner-occupied 138,284 147 - 2,222 140,653 209 Commercial real estate, other 193,249 546 - - 193,795 - Commercial Non Real Estate Commercial and industrial 51,547 253 44 - 51,844 44 Public Sector and IDA States and political subdivisions 57,171 - - - 57,171 - Consumer Non Real Estate Credit cards 4,696 2 - - 4,698 - Automobile 12,802 193 - - 12,995 - Other consumer loans 24,921 250 3 - 25,174 3 Total $ 982,894 $ 2,949 $ 548 $ 2,222 $ 988,613 $ 757 The following table presents nonaccrual loans, by loan class, as of the dates indicated: June 30, 2025 December 31, 2024 With No Allowance With an Allowance Total With No Allowance With an Allowance Total Commercial Real Estate Commercial real estate owner-occupied $ 1,912 $ 199 $ 2,111 $ 2,013 $ 209 $ 2,222 Total $ 1,912 $ 199 $ 2,111 $ 2,013 $ 209 $ 2,222 No accrued interest receivable was reversed against interest income during the three and six months ended June 30, 2025 or June 30, 2024. Allowance for Credit Losses on Loans (“ACLL”) The following tables present the activity in the ACLL by portfolio segment for the periods indicated: Activity in the ACLL for the Six Months Ended June 30, 2025 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2024 $ 348 $ 3,926 $ 4,299 $ 655 $ 336 $ 648 $ 50 $ 10,262 Charge-offs - ( 3 ) - - - ( 250 ) - ( 253 ) Recoveries - - 16 31 - 44 - 91 Provision for (recovery of) credit losses 18 9 116 ( 62 ) ( 13 ) 294 ( 40 ) 322 Balance, June 30, 2025 $ 366 $ 3,932 $ 4,431 $ 624 $ 323 $ 736 $ 10 $ 10,422 15 Table of Contents Activity in the ACLL for the Six Months Ended June 30, 2024 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2023 $ 408 $ 3,162 $ 3,576 $ 682 $ 333 $ 583 $ 350 $ 9,094 Charge-offs - - - ( 20 ) - ( 157 ) - ( 177 ) Recoveries - - 29 3 - 71 - 103 Provision for (recovery of) credit losses 131 376 594 79 ( 10 ) 87 50 1,307 Merger adjustment (1) 10 97 55 4 - 9 - 175 Balance, June 30, 2024 $ 549 $ 3,635 $ 4,254 $ 748 $ 323 $ 593 $ 400 $ 10,502 Activity in the ACLL for the Year Ended December 31, 2024 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Balance, December 31, 2023 $ 408 $ 3,162 $ 3,576 $ 682 $ 333 $ 583 $ 350 $ 9,094 Charge-offs - - - ( 166 ) - ( 353 ) - ( 519 ) Recoveries - - 53 79 - 138 - 270 Provision for (recovery of) credit losses ( 70 ) 667 615 56 3 271 ( 300 ) 1,242 Merger adjustment (1) 10 97 55 4 - 9 - 175 Balance, December 31, 2024 $ 348 $ 3,926 $ 4,299 $ 655 $ 336 $ 648 $ 50 $ 10,262 (1) Adjustment for PCD acquired loans. The following tables present information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated. ACLL by Segment and Evaluation Method June 30, 2025 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated $ – $ 28 $ 113 $ – $ – $ – $ – $ 141 Collectively evaluated 366 3,904 4,318 624 323 736 10 10,281 Total $ 366 $ 3,932 $ 4,431 $ 624 $ 323 $ 736 $ 10 $ 10,422 ACLL by Segment and Evaluation Method December 31, 2024 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Unallocated Total Individually evaluated $ - $ 31 $ 49 $ - $ - $ - $ - $ 80 Collectively evaluated 348 3,895 4,250 655 336 648 50 10,182 Total $ 348 $ 3,926 $ 4,299 $ 655 $ 336 $ 648 $ 50 $ 10,262 The following tables present information about individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated. Loans by Segment and Evaluation Method June 30, 2025 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Total Individually evaluated $ – $ 481 $ 10,368 $ – $ – $ – $ 10,849 Collectively evaluated 44,529 317,468 484,387 51,383 56,347 46,172 1,000,286 Total $ 44,529 $ 317,949 $ 494,755 $ 51,383 $ 56,347 $ 46,172 $ 1,011,135 Loans by Segment and Evaluation Method December 31, 2024 Real Estate Construction Consumer Real Estate Commercial Real Estate Commercial Non Real Estate Public Sector and IDA Consumer Non Real Estate Total Individually evaluated $ - $ 497 $ 10,024 $ - $ - $ - $ 10,521 Collectively evaluated 50,798 307,358 468,054 51,844 57,171 42,867 978,092 Total $ 50,798 $ 307,855 $ 478,078 $ 51,844 $ 57,171 $ 42,867 $ 988,613 16 Table of Contents Collateral Dependent Loans Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACLL on collateral dependent loans based upon the fair value of the collateral. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACLL is required. As of June 30, 2025 and December 31, 2024, three of the Company’s individually evaluated loans were collateral dependent and secured by real estate. The following table provides detail on collateral dependent loans as of the dates indicated: June 30, 2025 December 31, 2024 Balance Related Allowance Balance Related Allowance Commercial Real Estate Commercial real estate, owner occupied $ 8,224 $ - $ 8,387 $ - Commercial real estate, other 682 - 872 - Total Loans $ 8,906 $ - $ 9,259 $ - Credit Quality The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, payment history, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows: • Pass: loans with acceptable credit quality are rated pass. • Special mention: loans with potential weakness due to challenging economic or financial conditions are rated special mention. • Classified: loans with well-defined weaknesses that heighten the risk of default are rated classified. The following tables present the amortized cost basis of the loan portfolio by year of origination, loan class and credit quality as of June 30, 2025 and December 31, 2024, and gross charge-offs by year of origination for the six months ended June 30, 2025 and the year ended December 31, 2024 . 17 Table of Contents Term Loans Amortized Cost Basis by Origination Year Revolving Loans Converted June 30, 2025 Prior 2021 2022 2023 2024 2025 Revolving to Term Total Construction, residential Pass $ - $ - $ - $ 793 $ 3,535 $ 1,134 $ 5,514 $ 3,129 $ 14,105 Construction, other Pass $ 4,284 $ 777 $ 1,645 $ 12,053 $ 2,704 $ 3,852 $ 5,059 $ 50 $ 30,424 Equity lines Pass $ - $ - $ - $ - $ - $ - $ 24,232 $ - $ 24,232 Residential closed-end first liens Pass $ 58,727 $ 33,918 $ 36,630 $ 27,473 $ 22,490 $ 12,317 $ 824 $ 1,374 $ 193,753 Special Mention 1 - 134 - - - - - 135 Classified 62 - - - - - - - 62 Total $ 58,790 $ 33,918 $ 36,764 $ 27,473 $ 22,490 $ 12,317 $ 824 $ 1,374 $ 193,950 Residential closed-end junior liens Pass $ 1,557 $ 259 $ 2,014 $ 1,403 $ 2,920 $ 1,260 $ 32 $ - $ 9,445 Investor-owned residential real estate Pass $ 46,978 $ 16,957 $ 12,020 $ 3,318 $ 3,785 $ 4,679 $ 2,104 $ - $ 89,841 Classified 481 - - - - - - - 481 Total $ 47,459 $ 16,957 $ 12,020 $ 3,318 $ 3,785 $ 4,679 $ 2,104 $ - $ 90,322 Multifamily residential real estate Pass $ 41,084 $ 38,987 $ 40,357 $ 4,182 $ 13,124 $ 22,204 $ 145 $ - $ 160,083 Classified 194 - - - - - - - 194 Total $ 41,278 $ 38,987 $ 40,357 $ 4,182 $ 13,124 $ 22,204 $ 145 $ - $ 160,277 Commercial real estate, owner occupied Pass $ 73,254 $ 6,998 $ 27,363 $ 9,328 $ 5,750 $ 3,801 $ 2,049 $ - $ 128,543 Special mention 6,312 - - - - - - - 6,312 Classified 2,927 - - - - - 254 - 3,181 Total $ 82,493 $ 6,998 $ 27,363 $ 9,328 $ 5,750 $ 3,801 $ 2,303 $ - $ 138,036 Commercial real estate, other Pass $ 101,833 $ 35,456 $ 31,381 $ 16,798 $ 6,265 $ 1,979 $ 1,504 $ - $ 195,216 Classified 682 - 544 - - - - - 1,226 Total $ 102,515 $ 35,456 $ 31,925 $ 16,798 $ 6,265 $ 1,979 $ 1,504 $ - $ 196,442 Commercial and industrial Pass $ 7,425 $ 10,735 $ 3,547 $ 4,392 $ 6,778 $ 6,350 $ 12,148 $ 8 $ 51,383 Public sector and IDA Pass $ 19,360 $ 24,693 $ 5,717 $ 6,524 $ 53 $ - $ - $ - $ 56,347 Credit cards Pass $ - $ - $ - $ - $ - $ - $ 4,993 $ - $ 4,993 Automobile Pass $ 136 $ 412 $ 1,064 $ 3,086 $ 4,456 $ 3,057 $ - $ - $ 12,211 Special Mention - - - 2 - - - - 2 Classified - 4 - - 9 - - - 13 Total $ 136 $ 416 $ 1,064 $ 3,088 $ 4,465 $ 3,057 $ - $ - $ 12,226 Other consumer Pass $ 456 $ 585 $ 1,440 $ 3,654 $ 8,234 $ 13,145 $ 1,421 $ - $ 28,935 Special Mention - - - - 7 4 - - 11 Classified - - - 3 4 - - - 7 Total $ 456 $ 585 $ 1,440 $ 3,657 $ 8,245 $ 13,149 $ 1,421 $ - $ 28,953 Total Loans Pass $ 355,094 $ 169,777 $ 163,178 $ 93,004 $ 80,094 $ 73,778 $ 60,025 $ 4,561 $ 999,511 Special Mention 6,313 - 134 2 7 4 - - 6,460 Classified 4,346 4 544 3 13 - 254 - 5,164 Total $ 365,753 $ 169,781 $ 163,856 $ 93,009 $ 80,114 $ 73,782 $ 60,279 $ 4,561 $ 1,011,135 Gross Charge Offs by Origination Year for the Six Months Ended June 30, 2025 Revolving Loans Converted Prior 2021 2022 2023 2024 2025 Revolving to Term Total Residential closed-end first liens $ 3 $ - $ - $ - $ - $ - $ - $ - $ 3 Credit cards - - - - - - 19 - 19 Automobile - - 13 33 7 - - - 53 Other consumer - - 20 14 66 78 - - 178 Total Gross Charge-Offs $ 3 $ - $ 33 $ 47 $ 73 $ 78 $ 19 $ - $ 253 18 Table of Contents Term Loans Amortized Cost Basis by Origination Year Revolving Loans Converted December 31, 2024 Prior 2020 2021 2022 2023 2024 Revolving to Term Total Construction, residential Pass $ - $ - $ - $ 337 $ 2,312 $ 3,328 $ 10,185 $ - $ 16,162 Construction, other Pass $ 2,938 $ 1,138 $ 805 $ 10,795 $ 8,669 $ 6,194 $ 4,097 $ - $ 34,636 Equity lines Pass $ 363 $ 249 $ 387 $ 470 $ 816 $ 402 $ 19,894 $ 12 $ 22,593 Classified - - - - - - 25 - 25 Total $ 363 $ 249 $ 387 $ 470 $ 816 $ 402 $ 19,919 $ 12 $ 22,618 Residential closed-end first liens Pass $ 42,211 $ 18,111 $ 33,630 $ 35,557 $ 21,593 $ 18,991 $ - $ 303 $ 170,396 Special mention 367 - - - - - - - 367 Classified 441 - - 178 - - - - 619 Total $ 43,019 $ 18,111 $ 33,630 $ 35,735 $ 21,593 $ 18,991 $ - $ 303 $ 171,382 Residential closed-end junior liens Pass $ 1,596 $ - $ 277 $ 2,048 $ 1,597 $ 3,004 $ 31 $ 21 $ 8,574 Investor-owned residential real estate Pass $ 28,919 $ 22,946 $ 19,280 $ 16,242 $ 8,175 $ 3,266 $ 1,907 $ 3,668 $ 104,403 Special mention - - - 138 - - - - 138 Classified 740 - - - - - - - 740 Total $ 29,659 $ 22,946 $ 19,280 $ 16,380 $ 8,175 $ 3,266 $ 1,907 $ 3,668 $ 105,281 Multifamily residential real estate Pass $ 39,665 $ 2,055 $ 39,879 $ 40,198 $ 8,470 $ 13,205 $ 158 $ - $ 143,630 Commercial real estate, owner occupied Pass $ 52,916 $ 24,539 $ 7,432 $ 28,753 $ 10,351 $ 3,810 $ 3,422 $ 83 $ 131,306 Special mention 6,375 - - - - - - - 6,375 Classified 2,222 738 - - - - 12 - 2,972 Total $ 61,513 $ 25,277 $ 7,432 $ 28,753 $ 10,351 $ 3,810 $ 3,434 $ 83 $ 140,653 Commercial real estate, other Pass $ 90,358 $ 17,919 $ 36,777 $ 23,775 $ 16,990 $ 5,583 $ 1,703 $ - $ 193,105 Classified 690 - - - - - - - 690 Total $ 91,048 $ 17,919 $ 36,777 $ 23,775 $ 16,990 $ 5,583 $ 1,703 $ - $ 193,795 Commercial and industrial Pass $ 6,437 $ 2,070 $ 11,849 $ 5,528 $ 5,903 $ 8,407 $ 11,644 $ - $ 51,838 Classified - - - 6 - - - - 6 Total $ 6,437 $ 2,070 $ 11,849 $ 5,534 $ 5,903 $ 8,407 $ 11,644 $ - $ 51,844 Public sector and IDA Pass $ 19,309 $ 218 $ 25,232 $ 5,922 $ 6,490 $ - $ - $ - $ 57,171 Credit cards Pass $ - $ - $ - $ - $ - $ - $ 4,698 $ - $ 4,698 Automobile Pass $ 36 $ 243 $ 727 $ 1,640 $ 4,474 $ 5,832 $ - $ - $ 12,952 Special mention - - - - 4 - - - 4 Classified - - - - 28 11 - - 39 Total $ 36 $ 243 $ 727 $ 1,640 $ 4,506 $ 5,843 $ - $ - $ 12,995 Other Consumer Pass $ 184 $ 401 $ 874 $ 2,274 $ 4,804 $ 15,846 $ 760 $ - $ 25,143 Special mention - - 1 - - 9 - - 10 Classified - - - 2 14 5 - - 21 Total $ 184 $ 401 $ 875 $ 2,276 $ 4,818 $ 15,860 $ 760 $ - $ 25,174 Total Loans Pass $ 284,932 $ 89,889 $ 177,149 $ 173,539 $ 100,644 $ 87,868 $ 58,499 $ 4,087 $ 976,607 Special mention 6,742 - 1 138 4 9 - - 6,894 Classified 4,093 738 - 186 42 16 37 - 5,112 Total $ 295,767 $ 90,627 $ 177,150 $ 173,863 $ 100,690 $ 87,893 $ 58,536 $ 4,087 $ 988,613 19 Table of Contents Gross Charge Offs by Origination Year for the Twelve Monts Ended December 31, 2024 Revolving Loans Converted Prior 2020 2021 2022 2023 2024 Revolving to Term Total Commercial and industrial $ 125 $ - $ - $ - $ - $ 22 $ 19 $ - $ 166 Credit cards - - - - - - 53 - 53 Automobile - - 6 14 16 11 - - 47 Other Consumer - 4 15 19 94 121 - - 253 Total YTD gross charge-offs $ 125 $ 4 $ 21 $ 33 $ 110 $ 154 $ 72 $ - $ 519 Loan Modifications to Borrowers Experiencing Financial Difficulty On the date a loan is modified, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan is risk rated special mention or classified, as determined appropriate. If the loan exceeds $ 400 , if it is placed in nonaccrual, or if foreclosure is probable, the loan is individually evaluated for the ACLL. During the three and six months ended June 30, 2025, no loans were modified for borrowers experiencing financial difficulty. Two loans were modified for borrowers experiencing financial difficulty during the first three months of 2024. One of these loans was modified a second time during the three month period ended June 30, 2024. The following table presents information as of June 30, 2024 about loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2024. June 30, 2024 Amortized Cost Basis % of Class Type of Modification Financial Effect Commercial Real Estate Commercial real estate owner-occupied $ 6,396 5.57 % Interest only payments 6 months of interest only payments, re-amortization of the balance to contractual maturity Commercial Non real estate Commercial and industrial $ 7 0.01 % Term extension Renewal of single-payment note for an additional 3 months The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty. As of June 30, 2024, the loans were in current status and individually evaluated. There were no modified loans to borrowers experiencing financial difficulty that had a payment default during the three or six months ended June 30, 2025 and 2024 and that were modified in the twelve months prior. Default occurs when a payment is 90 days past due, the loan is fully or partially charged off or the Company forecloses on the collateral. Consumer Real Estate Loans In Process of Foreclosure As of June 30, 2025 , the Company had no loans in process of foreclosure. As of December 31, 2024 , three consumer real estate loans totaling $ 37 were in process of foreclosure. ACL for Unfunded Commitments The following tables present the balance and activity in the ACL for unfunded commitments for the six months ended June 30, 2025 and 2024: Allowance for Credit Losses on Unfunded Commitments Balance, December 31, 2024 $ 251 Recovery of credit losses ( 10 ) Balance, June 30, 2025 $ 241 Balance, December 31, 2023 $ 259 Recovery of credit losses ( 15 ) FCB acquisition 7 Balance, June 30, 2024 $ 251 20 Table of Contents Note 4: Securities The amortized cost and estimated fair value of securities available for sale along with gross unrealized gains and losses as of the dates indicated are summarized as follows: June 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government agencies and corporations $ 333,254 $ - $ 29,833 $ 303,421 States and political subdivisions 177,782 - 29,546 148,236 Mortgage-backed securities 136,704 26 4,192 132,538 Corporate debt securities 6,509 - 683 5,826 Total securities available for sale $ 654,249 $ 26 $ 64,254 $ 590,021 December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government agencies and corporations $ 351,136 $ - $ 40,012 $ 311,124 States and political subdivisions 178,106 - 32,372 145,734 Mortgage-backed securities 143,747 24 5,473 138,298 Corporate debt securities 6,507 - 764 5,743 U.S. treasury 1,000 - 1 999 Total securities available for sale $ 680,496 $ 24 $ 78,622 $ 601,898 The following tables present information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous loss position, as of the dates indicated. Less Than 12 Months 12 Months or More June 30, 2025 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. government agencies and corporations $ - $ - $ 303,421 $ 29,833 State and political subdivisions - - 148,236 29,546 Mortgage-backed securities 7,838 19 104,397 4,173 Corporate debt securities - - 5,826 683 Total temporarily impaired securities $ 7,838 $ 19 $ 561,880 $ 64,235 Less Than 12 Months 12 Months or More December 31, 2024 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. government agencies and corporations $ - $ - $ 311,124 $ 40,012 State and political subdivisions 885 118 144,849 32,254 Mortgage-backed securities 5,336 28 115,011 5,445 Corporate debt securities - - 5,743 764 U.S. treasury - - 999 1 Total temporarily impaired securities $ 6,221 $ 146 $ 577,726 $ 78,476 The Company evaluates securities available for sale that are in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. At June 30, 2025, the Company had 537 securities with a fair value of $ 569,718 in an unrealized loss position. The Company reviews securities in an unrealized loss position to evaluate credit risk. The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. No credit losses were found and no ACL on securities available for sale was recorded as of June 30, 2025 or December 31, 2024. The unrealized losses are attributed to noncredit-related factors, including changes in interest rates and other market conditions. The Company does not have the intent to sell any of these securities and believes that it is more likely 21 Table of Contents than not that the Company will not have to sell any such securities before a recovery of cost. The contractual terms of the investments do not permit the issuers to settle the securities at a price less than the cost basis of the investments. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. The amortized cost and fair value of securities available for sale at June 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities included in these totals are categorized by final maturity. June 30, 2025 Amortized Cost Fair Value Available for Sale: 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 securities available for sale $ 654,249 $ 590,021 Accrued interest receivable on securities, included in accrued interest receivable on the Consolidated Balance Sheets, totaled $ 3,031 at June 30, 2025 and $ 3,170 at December 31, 2024. The deferred tax asset for the net unrealized loss on securities available for sale was $ 13,488 as of June 30, 2025 and $ 16,505 as of December 31, 2024. The deferred tax asset is included in other assets on the Consolidated Balance Sheets. Realized Securities Gains and Losses There were no sales of securities during the six months ended June 30, 2025 and 2024. Restricted Stock. The Company held restricted stock of $ 1,848 as of June 30, 2025 and December 31, 2024, included in other assets on the Consolidated Balance Sheets. As a member of the Federal Reserve and the Federal Home Loan Bank of Atlanta (“FHLB”), NBB is required to maintain certain minimum investments in the common stock of those entities. Required levels of investment are based upon NBB’s capital and a percentage of qualifying assets. The Company purchases stock from or sells stock back to the correspondents based on their calculations. The stock is held by member institutions only and is not actively traded. Redemption of FHLB stock is subject to certain limitations and conditions. At its discretion, the FHLB may declare dividends on the stock. In addition to dividends, NBB also benefits from its membership with FHLB through eligibility to borrow from the FHLB, using as collateral NBB’s capital stock investment in the FHLB and qualifying NBB real estate mortgage loans totaling $ 502,760 at June 30, 2025. The Company’s management reviews for impairment based upon the ultimate recoverability of the cost basis of the FHLB stock, and at June 30, 2025 , did not determine any impairment. Note 5: Defined Benefit Plan The following table presents components of net periodic benefit cost (income) for the periods indicated: Net Periodic Benefit Income Three Months Ended June 30, 2025 2024 Service cost $ 248 $ 261 Interest cost 324 302 Expected return on plan assets ( 692 ) ( 608 ) Recognized net actuarial loss - 33 Net periodic benefit income $ ( 120 ) $ ( 12 ) 22 Table of Contents Net Periodic Benefit Income Six Months Ended June 30, 2025 2024 Service cost $ 496 $ 522 Interest cost 648 604 Expected return on plan assets ( 1,385 ) ( 1,216 ) Recognized net actuarial loss - 66 Net periodic benefit income $ ( 241 ) $ ( 24 ) The service cost component of net periodic benefit cost is included in salaries and employee benefits expense in the Consolidated Statements of Income. All other components are included in other operating expense in the Consolidated Statements of Income. Note 6: Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of the observable inputs and minimize the use of the unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are: Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 – Valuation is based on observable inputs including: • quoted prices in active markets for similar assets and liabilities, • quoted prices for identical or similar assets and liabilities in less active markets, • inputs other than quoted prices that are observable, and • model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 – Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. Fair value is best determined by quoted market prices. However, in cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, fair value estimates may not be realized in an immediate settlement of the instrument. Accounting guidance for fair value excludes certain financial instruments and all nonfinancial instruments from disclosure requirements. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the consolidated financial statements. Financial Instruments Measured at Fair Value on a Recurring Basis Securities Available for Sale Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). The following tables present the balances of financial assets measured at fair value on a recurring basis as of the dates indicated. Fair Value Measurement Using 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 $ - 23 Table of Contents Fair Value Measurement Using December 31, 2024 Balance Level 1 Level 2 Level 3 U.S. government agencies and corporations $ 311,124 $ - $ 311,124 $ - States and political subdivisions 145,734 - 145,734 - Mortgage-backed securities 138,298 - 138,298 - Corporate debt securities 5,743 - 5,743 - U.S. treasury 999 - 999 - Total securities available for sale $ 601,898 $ - $ 601,898 $ - The Company’s securities portfolio is valued using Level 2 inputs. The Company relies on an independent third party vendor to provide market valuations. The inputs used to determine value include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. The third party vendor also monitors market indicators, industry activity and economic events as part of the valuation process. Central to the final valuation is the assumption that the indicators used are representative of the fair value of securities held within the Company’s portfolio. Level 2 inputs are subject to a certain degree of uncertainty and changes in these assumptions or methodologies in the future, if any, may impact securities fair value, deferred tax assets or liabilities, or expense. Financial Instruments Measured at Fair Value on a Non-Recurring Basis Certain financial instruments are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the consolidated financial statements. Loans Held for Sale Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at June 30, 2025 or December 31, 2024. Collateral Dependent Loans Collateral dependent loans are measured on a non-recurring basis for the ACLL. If the fair value of the collateral is lower than the loan’s amortized cost basis, the shortfall is recognized in the ACLL. When repayment is expected from the operation of the collateral, fair value is estimated as the present value of expected cash flows from the operation of the collateral. When repayment is expected from the sale of the collateral, fair value is estimated using measurement techniques discussed below and discounted by the estimated cost to sell. The ACLL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. For loans secured by real estate, fair value of collateral is determined by the “as-is” value of appraisals or third party evaluations that are less than 24 months of age. Appraisals are prepared by independent, licensed appraisers. Appraisals are based upon observable market data analyzed through an income or sales valuation approach. Valuation falls within Level 2 categorization. The Company may further discount appraisals for marketing strategies, which results in Level 3 categorization. The value of business equipment is based upon an outside appraisal (Level 2) if deemed significant, or the net book value on the applicable business’ financial statements (Level 3) if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). As of June 30, 2025 , three commercial real estate loans totaling $ 8,906 were collateral dependent. Valuation was based upon outside appraisals (Level 2). None of the measurements resulted in a specific allocation. As of December 31, 2024, three commercial real estate loans totaling $ 9,259 were measured under the fair value of collateral method using third party appraisals (Level 2). None of the measurements resulted in a specific allocation. Fair Value Summary The following presents the recorded amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of the dates indicated. Fair values are estimated using the exit price notion. 24 Table of Contents Estimated Fair Value June 30, 2025 Carrying Amount Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 9,798 $ 9,798 $ - $ - Interest-bearing deposits 83,051 83,051 - - Securities available for sale 590,021 - 590,021 - Restricted stock, at cost 1,848 - 1,848 - Mortgage loans held for sale 1,072 - 1,072 - Loans, net 1,000,275 - - 953,810 Accrued interest receivable 6,413 - 6,413 - Bank-owned life insurance 47,958 - 47,958 - Financial liabilities: Deposits $ 1,627,675 $ - $ 1,299,117 $ 327,378 Accrued interest payable 1,522 - 1,522 - Estimated Fair Value December 31, 2024 Carrying Amount Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 13,564 $ 13,564 $ - $ - Interest-bearing deposits 94,254 94,254 - - Federal funds sold 299 299 - - Securities available for sale 601,898 - 601,898 - Restricted stock, at cost 1,848 - 1,848 - Mortgage loans held for sale 619 - 619 - Loans, net 977,688 - - 927,581 Accrued interest receivable 6,469 - 6,469 - Bank-owned life insurance 47,369 - 47,369 - Financial liabilities: Deposits $ 1,644,752 $ - $ 1,332,138 $ 312,811 Accrued interest payable 1,462 - 1,462 - Note 7: Components of Accumulated Other Comprehensive Loss The following tables provide information about components of accumulated other comprehensive loss as of the dates indicated: Net Unrealized Loss on Securities Adjustments Related to Pension Benefits Accumulated Other Comprehensive Loss Balance at March 31, 2024 $ ( 65,894 ) $ ( 2,310 ) $ ( 68,204 ) Unrealized holding loss on available for sale securities, net of tax of ($ 40 ) ( 150 ) - ( 150 ) Balance at June 30, 2024 $ ( 66,044 ) $ ( 2,310 ) $ ( 68,354 ) Balance at March 31, 2025 $ ( 54,503 ) $ 328 $ ( 54,175 ) Unrealized holding gain on available for sale securities, net of tax of $ 1,000 3,763 - 3,763 Balance at June 30, 2025 $ ( 50,740 ) $ 328 $ ( 50,412 ) 25 Table of Contents Net Unrealized Loss on Securities Adjustments Related to Pension Benefits Accumulated Other Comprehensive Loss Balance at December 31, 2023 $ ( 62,556 ) $ ( 2,310 ) $ ( 64,866 ) Unrealized holding loss on available for sale securities, net of tax of ($ 927 ) ( 3,488 ) - ( 3,488 ) Balance at June 30, 2024 $ ( 66,044 ) $ ( 2,310 ) $ ( 68,354 ) Balance at December 31, 2024 $ ( 62,093 ) $ 328 $ ( 61,765 ) Unrealized holding gain on available for sale securities, net of tax of $ 3,017 11,353 - 11,353 Balance at June 30, 2025 $ ( 50,740 ) $ 328 $ ( 50,412 ) Note 8: Revenue Recognition Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams such as service charges on deposit accounts, other service charges and fees, credit and debit card fees, trust income, and annuity and insurance commissions are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as financial guarantees, derivatives, and certain credit card fees are outside the scope of the guidance. Noninterest revenue streams within the scope of Topic 606 are discussed below. Service Charges on Deposit Accounts Service charges on deposit accounts consist of monthly service fees, overdraft and nonsufficient funds fees, ATM fees, wire transfer fees, and other deposit account related fees. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. ATM fees are generated when a Company cardholder uses a non-Company ATM. Wire transfer fees, overdraft and nonsufficient funds fees and other deposit account related fees are transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Other Service Charges and Fees Other service charges include safe deposit box rental fees, check ordering charges, ATM fees to holders of cards issued by other banks and other service charges. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Check ordering charges, ATM fees to holders of cards issued by other banks and other service charges are transaction based and therefore, the Company’s performance obligation is satisfied and related revenue recognized at a point in time. Credit and Debit Card Fees Credit and debit card fees are primarily comprised of interchange fee income and merchant services income. Interchange fees are earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa and MasterCard. Merchant services income mainly represents commission fees based upon merchant processing volume. The Company’s performance obligation for interchange fee income and merchant services income are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. In compliance with Topic 606, credit and debit card fee income is presented net of associated expense. Trust Income Trust income is primarily comprised of fees earned from the management and administration of trusts and estates and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Estate 26 Table of Contents management fees are based upon the size of the estate. A partial fee is recognized half-way through the estate administration and the remainder of the fee is recognized when remaining assets are distributed and the estate is closed. Insurance and Investment Insurance income primarily consists of commissions received on insurance product sales. The Company acts as an intermediary between the Company’s customer and the insurance carrier. The Company’s performance obligation is generally satisfied upon the issuance of the insurance policy. Shortly after the insurance policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. Investment income consists of recurring revenue streams such as commissions from sales of mutual funds, annuities and other investments. Commissions from the sale of mutual funds, annuities and other investments are recognized on trade date, which is when the Company has satisfied its performance obligation. The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value. Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined. The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods indicated. Three Months Ended June 30, Noninterest Income 2025 2024 In-scope of Topic 606: Service charges on deposit accounts $ 735 $ 678 Other service charges and fees 72 87 Credit and debit card fees, net 366 423 Trust income 578 513 Insurance and Investment (1) 170 126 Noninterest Income (in-scope of Topic 606) $ 1,921 $ 1,827 Noninterest Income (out-of-scope of Topic 606) 358 440 Total noninterest income $ 2,279 $ 2,267 Six Months Ended June 30, Noninterest Income 2025 2024 In-scope of Topic 606: Service charges on deposit accounts $ 1,433 $ 1,311 Other service charges and fees 156 169 Credit and debit card fees, net 783 797 Trust income 1,157 1,016 Insurance and Investment (1) 524 432 Noninterest Income (in-scope of Topic 606) $ 4,053 $ 3,725 Noninterest Income (out-of-scope of Topic 606) 786 757 Total noninterest income $ 4,839 $ 4,482 (1) Included within other income in the Consolidated Statements of Income 27 Table of Contents Note 9: Leases The Company’s leases are recorded under ASC Topic 842, “Leases”. The Company categorizes leases as short-term, operating or finance leases. Leases with terms of 12 months or less are designated as short-term and are not capitalized. Operating and finance leases are capitalized as right-of-use assets and lease liabilities. Right-of-use assets, included in other assets, represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor. Lease liabilities, included in other liabilities, represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. The Company does not separate non-lease components from lease components within a single contract. Counterparties for the Company’s lease contracts are external to the Company and not related parties. On June 1, 2024, the Company’s acquisition of FCB added two long-term branch leases. At the Acquisition Date, the leases were remeasured using the Company’s incremental borrowing rate and remaining lease terms, resulting in an increase of $ 548 to the right of use asset and the lease liability. Lease payments Short-term lease payments are recognized as lease expense on a straight-line basis over the lease term, or for variable lease payments, in the period in which the obligation was incurred. Operating and finance lease payments may be fixed for the term of the lease or variable. If the escalation factor for a variable lease payment is known, such as a specified percentage increase per year or a stated increase at a specified time, the variable payment is included in the cash flows used to determine the lease liability. If the variable payment is based upon an unknown escalator, such as the consumer price index at a future date, the increase is not included in the cash flows used to determine the lease liability. Options to Extend, Residual Value Guarantees, Restrictions and Covenants Certain of the Company’s operating leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations. The following tables present information about leases as of the dates and for the periods indicated: June 30, December 31, 2025 2024 Lease liability $ 1,676 $ 1,523 Right-of-use asset $ 1,471 $ 1,305 Weighted average remaining lease term (in years) 4.57 4.76 Weighted average discount rate 3.91 % 3.87 % For the Three Months Ended June 30, Lease Expense 2025 2024 Operating lease expense $ 104 $ 99 Short-term lease expense - 6 Total lease expense $ 104 $ 105 Cash paid for amounts included in lease liabilities $ 112 $ 104 Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period $ 354 $ 548 For the Six Months Ended June 30, Lease Expense 2025 2024 Operating lease expense $ 210 $ 188 Short-term lease expense - 11 Total lease expense $ 210 $ 199 Cash paid for amounts included in lease liabilities $ 224 $ 199 Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period $ 354 $ 548 28 Table of Contents The following table presents a maturity schedule of undiscounted cash flows that contribute to the lease liability: Undiscounted Cash Flow for the Period As of June 30, 2025 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 The Company’s 2023 Stock Incentive Plan (“the Plan”) provides for the grant of various forms of stock-based compensation awards that may be settled in, or based upon the value of, the Company’s common stock. The maximum number of shares available for issuance under the Plan is 120,000 shares. The restricted stock has voting rights and rights to dividends, which are paid upon vest date. For further information on the Plan, please refer to the Company’s 2024 Form 10-K. Restricted Stock Awards Under the Plan, restricted stock awards (“RSAs”) were granted to non-employee directors as part of the semi-annual retainer and restricted stock units ("RSUs") were granted to certain executives. The RSAs and RSUs were valued at the closing stock price on the grant date and expensed over a one-year vesting period. Stock based compensation expense charged against income was $ 51 and $ 94 for the three and six months ended June 30, 2025 and $ 33 and $ 65 for the three and six months ended June 30, 2024. As of June 30, 2025 , expense of $ 93 related to the nonvested RSAs and RSUs is expected to be recognized over the coming 12 months. A summary of changes in the Company’s nonvested RSAs under the Plan for the six months ended June 30, 2025 follows: 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 The factors used in the computation of net income (loss) per common share for the periods indicated are presented below: For the Three Months Ended June 30, 2025 2024 Net Income (Numerator) Common Shares Weighted Average Outstanding (Denominator) Per Share Net Loss (Numerator) Common Shares Weighted Average Outstanding (Denominator) Per Share Basic net income (loss) per common share $ 2,289 6,358,917 $ 0.36 $ ( 307 ) 6,028,220 $ ( 0.05 ) Dilutive shares (1) 2,665 – Diluted net income (loss) per common share $ 2,289 6,361,582 $ 0.36 $ ( 307 ) 6,028,220 $ ( 0.05 ) 29 Table of Contents For the Six Months Ended June 30, 2025 2024 Net Income (Numerator) Common Shares Weighted Average Outstanding (Denominator) Per Share Net Income (Numerator) Common Shares Weighted Average Outstanding (Denominator) Per Share Basic net income per common share $ 5,525 6,358,665 $ 0.87 $ 1,867 5,958,953 $ 0.31 Dilutive shares (1) 2,325 2,084 Diluted net income per common share $ 5,525 6,360,990 $ 0.87 $ 1,867 5,961,037 $ 0.31 (1) Dilutive shares are associated with RSAs. RSAs are disregarded in the computation of diluted net income per share if they are determined to be anti-dilutive. There were no anti-dilutive RSAs for the three and six months ended June 30, 2025 and the six months ended June 30, 2024 . RSAs were anti-dilutive for the three months ended June 30, 2024. Note 12 – Goodwill and Other Intangibles Core deposit intangible amortization expense was $ 95 and $ 192 for the three and six months ended June 30, 2025 . Core deposit intangible amortization expense was $ 35 for the three and six months ended June 30, 2024. The following table provides information on the significant components of goodwill and other acquired intangible assets during the six months ended June 30, 2025. Beginning Balance Additions Measurement Period Adjustment Accumulated Amortization Ending Balance Goodwill $ 10,718 $ - $ - $ - $ 10,718 Core deposit intangible $ 1,863 $ - $ - $ ( 192 ) $ 1,671 As of June 30, 2025, estimated future remaining amortization of the core deposit intangible within the years ending December 31, is as follows: Amortization Expense 2025 $ 181 2026 331 2027 290 2028 248 2029 207 2030 165 Thereafter 249 Total amortizing core deposit intangible $ 1,671 30 Table of Contents