NATIONAL BANKSHARES INC 10-Q

10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 ☐ 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 54-1375874 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 101 Hubbard Street Blacksburg , Virginia 24062-9002 (Address of principal executive offices) (Zip Code) ( 540 ) 951-6300 (Registrant’s telephone number, including area code) (Not applicable) (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $1.25 per share NKSH Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Outstanding shares of common stock at November 13, 2025 6,366,001 Table of Contents NATIONAL BANKSHARES, INC. Form 10-Q Index Part I – Financial Information Page Item 1 Financial Statements 3 Consolidated Balance Sheets, September 30, 2025 (Unaudited) and December 31, 2024 3 Consolidated Statements of Income for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 4 Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 5 Consolidated Statements of Income for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 6 Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 7 Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2025 and 2024 (Unaudited) 8 Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 8 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 9 Notes to Consolidated Financial Statements (Unaudited) 11 Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 3 Quantitative and Qualitative Disclosures About Market Risk 45 Item 4 Controls and Procedures 45 Part II – Other Information Item 1 Legal Proceedings 45 Item 1A Risk Factors 45 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 45 Item 3 Defaults Upon Senior Securities 46 Item 4 Mine Safety Disclosures 46 Item 5 Other Information 47 Item 6 Exhibits 47 Signatures 48 2 Table of Contents Pa rt I - FINANCIAL INFORMATION Item 1. Financial Statements National Bankshares, Inc. Consol idated Balance Sheets (Unaudited) September 30, December 31, (in thousands, except share and per share data) 2025 2024 Assets Cash and due from banks $ 9,192 $ 13,564 Interest-bearing deposits 33,113 94,254 Federal funds sold - 299 Total cash and cash equivalents 42,305 108,117 Securities available for sale, at fair value 630,483 601,898 Mortgage loans held for sale 535 619 Loans: Real estate construction loans 46,381 50,798 Consumer real estate loans 324,597 307,855 Commercial real estate loans 490,968 478,078 Commercial non real estate loans 53,532 51,844 Public sector and IDA loans 54,332 57,171 Consumer non real estate loans 47,135 42,867 Total loans 1,016,945 988,613 Less: deferred fees and costs ( 543 ) ( 663 ) Loans, net of deferred fees and costs 1,016,402 987,950 Less: allowance for credit losses ( 10,579 ) ( 10,262 ) Loans, net 1,005,823 977,688 Premises and equipment, net 19,812 18,131 Accrued interest receivable 6,677 6,469 Goodwill 10,718 10,718 Core deposit intangible, net 1,579 1,863 Bank-owned life insurance ("BOLI") 48,262 47,369 Other assets 36,213 38,764 Total assets $ 1,802,407 $ 1,811,636 Liabilities and Stockholders' Equity Noninterest-bearing demand deposits $ 312,578 $ 290,088 Interest-bearing demand deposits 793,552 864,753 Savings deposits 140,635 143,109 Time deposits 315,139 346,802 Total deposits 1,561,904 1,644,752 Borrowings 50,000 - Accrued interest payable 1,616 1,462 Other liabilities 9,667 9,013 Total liabilities $ 1,623,187 $ 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 September 30, 2025 and 6,363,371 (including 4,961 unvested) shares as of December 31, 2024 21,974 21,831 Retained earnings 201,643 196,343 Accumulated other comprehensive loss, net ( 44,397 ) ( 61,765 ) Total stockholders' equity 179,220 156,409 Total liabilities and stockholders' equity $ 1,802,407 $ 1,811,636 See accompanying notes to consolidated financial statements. 3 Table of Contents National Bankshares, Inc. Consolidated Statements of Income (Unaudited) Three Months Ended September 30, (in thousands, except share and per share data) 2025 2024 Interest Income Interest and fees on loans $ 14,232 $ 13,174 Interest on federal funds sold - 13 Interest on interest-bearing deposits 740 954 Interest on securities – taxable 3,704 4,177 Interest on securities – nontaxable 334 333 Total interest income 19,010 18,651 Interest Expense Interest on time deposits 2,907 3,668 Interest on other deposits 4,362 5,550 Interest on borrowings 67 - Total interest expense 7,336 9,218 Net interest income 11,674 9,433 Provision for (recovery of) credit losses 306 ( 5 ) Net interest income after provision for (recovery of) credit losses 11,368 9,438 Noninterest Income Service charges on deposit accounts 681 708 Other service charges and fees 72 117 Credit and debit card fees, net 492 344 Trust income 700 580 BOLI income 304 295 Gain on sale of mortgage loans held for sale 92 50 Other income 196 194 Total noninterest income 2,537 2,288 Noninterest Expense Salaries and employee benefits 5,114 4,953 Occupancy, furniture and fixtures 770 715 Data processing 848 963 FDIC assessment 210 211 Intangible asset amortization 92 102 Franchise taxes 350 373 Professional services 361 254 Merger-related expense - 150 Core system conversion expense 50 - Other operating expenses 729 778 Total noninterest expense 8,524 8,499 Income before income tax expense 5,381 3,227 Income tax expense 961 550 Net Income $ 4,420 $ 2,677 Basic net income per common share $ 0.70 $ 0.42 Diluted net income per common share $ 0.69 $ 0.42 Weighted average number of common shares outstanding, basic 6,360,973 6,356,594 Weighted average number of common shares outstanding, diluted 6,363,351 6,358,352 See accompanying notes to consolidated financial statements. 4 Table of Contents National Bankshares, Inc. Consolidated Statements of Comprehensive Income Three Months Ended September 30, 2025 and 2024 (Unaudited) Three months ended September 30, (in thousands) 2025 2024 Net Income $ 4,420 $ 2,677 Other Comprehensive Income, Net of Tax Unrealized holding gain on available for sale securities net of tax of $ 1,599 and $ 4,284 for the periods ended September 30, 2025 and 2024, respectively 6,015 16,115 Other comprehensive income, net of tax 6,015 16,115 Total Comprehensive Income $ 10,435 $ 18,792 See accompanying notes to consolidated financial statements. 5 Table of Contents National Bankshares, Inc. Consolidated Statements of Income (Unaudited) For the Nine Months Ended September 30, (in thousands, except share and per share data) 2025 2024 Interest Income Interest and fees on loans $ 40,686 $ 34,763 Interest on federal funds sold 5 23 Interest on interest-bearing deposits 2,757 3,312 Interest on securities – taxable 11,289 12,644 Interest on securities – nontaxable 1,007 1,010 Total interest income 55,744 51,752 Interest Expense Interest on time deposits 9,276 9,490 Interest on other deposits 13,486 15,920 Interest on borrowings 67 2 Total interest expense 22,829 25,412 Net interest income 32,915 26,340 Provision for credit losses 618 1,287 Net interest income after provision for credit losses 32,297 25,053 Noninterest Income Service charges on deposit accounts 2,114 2,019 Other service charges and fees 228 286 Credit and debit card fees, net 1,275 1,141 Trust income 1,857 1,596 BOLI income 893 822 Gain on sale of mortgage loans held for sale 171 132 Other income 838 774 Total noninterest income 7,376 6,770 Noninterest Expense Salaries and employee benefits 15,505 14,106 Occupancy, furniture and fixtures 2,240 1,975 Data processing 2,532 2,529 FDIC assessment 627 590 Intangible asset amortization 284 137 Franchise taxes 1,081 1,081 Professional services 1,169 766 Merger-related expense - 2,891 Core system conversion expense 2,073 173 Other operating expenses 2,228 2,140 Total noninterest expense 27,739 26,388 Income before income tax expense 11,934 5,435 Income tax expense 1,989 891 Net Income $ 9,945 $ 4,544 Basic net income per common share $ 1.56 $ 0.75 Diluted net income per common share $ 1.56 $ 0.75 Weighted average number of common shares outstanding, basic 6,359,443 6,092,468 Weighted average number of common shares outstanding, diluted 6,361,786 6,094,442 Dividends declared per common share $ 0.73 $ 0.73 See accompanying notes to consolidated financial statements. 6 Table of Contents National Bankshares, Inc. Consolidate d Statements of Comprehensive Income Nine Months Ended September 30, 2025 and 2024 (Unaudited) For the Nine Months Ended September 30, (in thousands) 2025 2024 Net Income $ 9,945 $ 4,544 Other Comprehensive Income, Net of Tax Unrealized holding gain on available for sale securities net of tax of $ 4,616 and $ 3,357 for the periods ended September 30, 2025 and 2024, respectively 17,368 12,627 Other comprehensive income, net of tax 17,368 12,627 Total Comprehensive Income $ 27,313 $ 17,171 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 September 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 June 30, 2024 $ 21,768 $ 195,548 $ ( 68,354 ) $ 148,962 Net income – 2,677 – 2,677 Other comprehensive income, net of tax of $ 4,284 – – 16,115 16,115 Stock based compensation 28 – – 28 Balances at September 30, 2024 $ 21,796 $ 198,225 $ ( 52,239 ) $ 167,782 Balances at June 30, 2025 $ 21,925 $ 197,223 $ ( 50,412 ) $ 168,736 Net income – 4,420 – 4,420 Other comprehensive income, net of tax of $ 1,599 – – 6,015 6,015 Stock based compensation 49 – – 49 Balances at September 30, 2025 $ 21,974 $ 201,643 $ ( 44,397 ) $ 179,220 Nine Months Ended September 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 – 4,544 – 4,544 Acquisition of Frontier Community Bank 14,299 – – 14,299 Cash dividends of $ 0.73 per share – ( 4,303 ) – ( 4,303 ) Other comprehensive income, net of tax of $ 3,357 – – 12,627 12,627 Stock based compensation 93 – – 93 Balances at September 30, 2024 $ 21,796 $ 198,225 $ ( 52,239 ) $ 167,782 Balances at December 31, 2024 $ 21,831 $ 196,343 $ ( 61,765 ) $ 156,409 Net income – 9,945 – 9,945 Cash dividends of $ 0.73 per share – ( 4,645 ) – ( 4,645 ) Other comprehensive income, net of tax of $ 4,616 – – 17,368 17,368 Stock based compensation 143 – – 143 Balances at September 30, 2025 $ 21,974 $ 201,643 $ ( 44,397 ) $ 179,220 See accompanying notes to consolidated financial statements. 8 Table of Contents National Bankshares, Inc. Consolidat ed Statements of Cash Flows Nine Months Ended September 30, 2025 and 2024 (Unaudited) For the Nine Months Ended September 30, (in thousands) 2025 2024 Cash Flows from Operating Activities Net income $ 9,945 $ 4,544 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 618 1,287 Depreciation of premises and equipment 789 660 Amortization of premiums and accretion of discounts on securities, net 741 778 Amortization of core deposit intangible 284 137 Accretion of fair value of acquired loans ( 1,324 ) ( 480 ) Amortization of fair value of acquired time deposits and leases 115 187 Origination of mortgage loans held for sale ( 11,001 ) ( 8,708 ) Proceeds from sale of mortgage loans held for sale 11,256 8,789 Gain on sale of mortgage loans held for sale ( 171 ) ( 132 ) Increase in cash value of bank-owned life insurance ( 893 ) ( 822 ) Gain on disposal of premises and equipment, net ( 2 ) - Equity based compensation expense 143 93 Net change in: Accrued interest receivable ( 208 ) 2 Other assets 76 ( 4,007 ) Accrued interest payable 154 523 Other liabilities 226 1,169 Net cash provided by operating activities 10,748 4,020 Cash Flows from Investing Activities Proceeds from repayments of mortgage-backed securities 11,274 9,831 Proceeds from calls, sales and maturities of securities available for sale 31,000 11,024 Purchases of available for sale securities ( 49,616 ) - Net change in restricted stock ( 1,900 ) 168 Purchase of loan participations ( 20,095 ) ( 13,894 ) Collection of loan participations 6,243 5,901 Loan originations and principal collections, net ( 13,682 ) ( 18,207 ) Recoveries on loans charged off 142 158 Purchases of premises and equipment ( 2,306 ) ( 2,302 ) Proceeds from sale of premises and equipment 2 46 Cash acquired in the acquisition, net of cash paid - 6,885 Net cash used in investing activities ( 38,938 ) ( 390 ) Cash Flows from Financing Activities Net change in time deposits ( 31,792 ) 18,798 Net change in other deposits ( 51,185 ) ( 49,728 ) Cash dividends paid ( 4,645 ) ( 4,303 ) Net change in borrowings 50,000 ( 5,230 ) Net cash used in financing activities ( 37,622 ) ( 40,463 ) Net change in cash and cash equivalents ( 65,812 ) ( 36,833 ) Cash and cash equivalents at beginning of period 108,117 86,603 Cash and cash equivalents at end of period $ 42,305 $ 49,770 9 Table of Contents For the Nine Months Ended September 30, (in thousands) 2025 2024 Supplemental Disclosures of Cash Flow Information Cash payments for: Interest on deposits and borrowings $ 22,546 $ 24,754 Income taxes 1,169 715 Supplemental Disclosure of Noncash Activities Loans charged against the allowance for credit losses $ 406 $ 411 Unrealized holding gain on securities available for sale 21,984 15,984 Lease liabilities arising from obtaining right-of-use assets during the period 440 548 See accompanying notes to consolidated financial statements. 10 Table of Contents National Bankshares, Inc. Notes t o Consolidated Financial Statements September 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 nine months ended September 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 regarding 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 $ 6,239 as of September 30, 2025 and $ 7,564 as of December 31, 2024. Originated loans as of September 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. September 30, December 31, 2025 2024 Real estate construction $ 46,381 $ 50,798 Consumer real estate 324,597 307,855 Commercial real estate 490,968 478,078 Commercial non real estate 53,532 51,844 Public sector and IDA 54,332 57,171 Consumer non real estate 47,135 42,867 Gross loans $ 1,016,945 $ 988,613 Less deferred fees and costs ( 543 ) ( 663 ) Loans, net of deferred fees and costs $ 1,016,402 $ 987,950 Allowance for credit losses on loans ( 10,579 ) ( 10,262 ) Total loans, net $ 1,005,823 $ 977,688 Accrued interest receivable of $ 3,357 at September 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. September 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 $ 17,527 $ - $ - $ - $ 17,527 $ - Construction, other 28,818 36 - - 28,854 - Consumer Real Estate Equity line 26,922 - - - 26,922 - Residential closed-end first liens 194,837 909 80 - 195,826 80 Residential closed-end junior liens 10,476 7 - - 10,483 - Investor-owned residential real estate 91,138 228 - - 91,366 - Commercial Real Estate Multifamily residential real estate 162,129 356 194 - 162,679 194 Commercial real estate owner-occupied 132,066 - - 2,027 134,093 194 Commercial real estate, other 193,656 540 - - 194,196 - Commercial Non Real Estate Commercial and industrial 53,420 112 - - 53,532 - Public Sector and IDA States and political subdivisions 54,332 - - - 54,332 - Consumer Non Real Estate Credit cards 4,687 4 5 - 4,696 5 Automobile 12,168 142 - - 12,310 - Other consumer loans 29,678 447 4 - 30,129 4 Total $ 1,011,854 $ 2,781 $ 283 $ 2,027 $ 1,016,945 $ 477 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: September 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 $ 1,833 $ 194 $ 2,027 $ 2,013 $ 209 $ 2,222 Total $ 1,833 $ 194 $ 2,027 $ 2,013 $ 209 $ 2,222 No accrued interest receivable was reversed against interest income during the three and nine months ended September 30, 2025 or September 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 Nine Months Ended September 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 ) - - - ( 403 ) - ( 406 ) Recoveries - - 29 31 - 82 - 142 Provision for (recovery of) credit losses 77 ( 35 ) 32 74 ( 29 ) 465 ( 3 ) 581 Balance, September 30, 2025 $ 425 $ 3,888 $ 4,360 $ 760 $ 307 $ 792 $ 47 $ 10,579 15 Table of Contents Activity in the ACLL for the Nine Months Ended September 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 - - - ( 145 ) - ( 266 ) - ( 411 ) Recoveries - - 41 12 - 105 - 158 Provision for (recovery of) credit losses 43 697 589 106 5 139 ( 267 ) 1,312 Merger adjustment (1) 10 97 55 4 - 9 - 175 Balance, September 30, 2024 $ 461 $ 3,956 $ 4,261 $ 659 $ 338 $ 570 $ 83 $ 10,328 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 September 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 $ – $ 27 $ 63 $ – $ – $ – $ – $ 90 Collectively evaluated 425 3,861 4,297 760 307 792 47 10,489 Total $ 425 $ 3,888 $ 4,360 $ 760 $ 307 $ 792 $ 47 $ 10,579 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 September 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 $ – $ 473 $ 10,226 $ – $ – $ – $ 10,699 Collectively evaluated 46,381 324,124 480,742 53,532 54,332 47,135 1,006,246 Total $ 46,381 $ 324,597 $ 490,968 $ 53,532 $ 54,332 $ 47,135 $ 1,016,945 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 September 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: September 30, 2025 December 31, 2024 Balance Related Allowance Balance Related Allowance Commercial Real Estate Commercial real estate, owner occupied $ 8,114 $ - $ 8,387 $ - Commercial real estate, other 677 - 872 - Total Loans $ 8,791 $ - $ 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 September 30, 2025 and December 31, 2024, and gross charge-offs by year of origination for the nine months ended September 30, 2025 and the year ended December 31, 2024 . 17 Table of Contents Term Loans Amortized Cost Basis by Origination Year Revolving Loans Converted September 30, 2025 Prior 2021 2022 2023 2024 2025 Revolving to Term Total Construction, residential Pass $ - $ - $ - $ 265 $ 2,255 $ 2,901 $ 9,517 $ 2,589 $ 17,527 Construction, other Pass $ 4,044 $ 765 $ 1,247 $ 13,470 $ 1,545 $ 4,605 $ 3,128 $ 50 $ 28,854 Equity lines Pass $ - $ - $ - $ - $ - $ - $ 26,922 $ - $ 26,922 Residential closed-end first liens Pass $ 56,578 $ 32,623 $ 35,725 $ 27,675 $ 21,470 $ 20,063 $ 50 $ 1,369 $ 195,553 Special Mention - - 132 - - - - - 132 Classified 61 80 - - - - - - 141 Total $ 56,639 $ 32,703 $ 35,857 $ 27,675 $ 21,470 $ 20,063 $ 50 $ 1,369 $ 195,826 Residential closed-end junior liens Pass $ 1,527 $ 251 $ 1,853 $ 1,336 $ 3,134 $ 2,350 $ 32 $ - $ 10,483 Investor-owned residential real estate Pass $ 45,930 $ 15,716 $ 11,598 $ 3,179 $ 3,758 $ 8,652 $ 2,060 $ - $ 90,893 Classified 473 - - - - - - - 473 Total $ 46,403 $ 15,716 $ 11,598 $ 3,179 $ 3,758 $ 8,652 $ 2,060 $ - $ 91,366 Multifamily residential real estate Pass $ 40,649 $ 38,700 $ 40,107 $ 4,153 $ 13,084 $ 25,652 $ 140 $ - $ 162,485 Classified 194 - - - - - - - 194 Total $ 40,843 $ 38,700 $ 40,107 $ 4,153 $ 13,084 $ 25,652 $ 140 $ - $ 162,679 Commercial real estate, owner occupied Pass $ 70,784 $ 6,900 $ 25,008 $ 9,258 $ 5,538 $ 4,815 $ 2,597 $ - $ 124,900 Special mention 6,280 - - - - - - - 6,280 Classified 2,816 - - - - - 97 - 2,913 Total $ 79,880 $ 6,900 $ 25,008 $ 9,258 $ 5,538 $ 4,815 $ 2,694 $ - $ 134,093 Commercial real estate, other Pass $ 100,307 $ 34,898 $ 31,089 $ 16,701 $ 6,195 $ 2,300 $ 1,489 $ - $ 192,979 Classified 677 - 540 - - - - - 1,217 Total $ 100,984 $ 34,898 $ 31,629 $ 16,701 $ 6,195 $ 2,300 $ 1,489 $ - $ 194,196 Commercial and industrial Pass $ 7,257 $ 10,052 $ 2,846 $ 3,740 $ 10,196 $ 7,858 $ 11,386 $ 177 $ 53,512 Special Mention - - - - - - 20 - 20 Total $ 7,257 $ 10,052 $ 2,846 $ 3,740 $ 10,196 $ 7,858 $ 11,406 $ 177 $ 53,532 Public sector and IDA Pass $ 18,700 $ 23,451 $ 5,610 $ 6,522 $ 49 $ - $ - $ - $ 54,332 Credit cards Pass $ - $ - $ - $ - $ - $ - $ 4,696 $ - $ 4,696 Automobile Pass $ 94 $ 292 $ 856 $ 2,649 $ 3,931 $ 4,486 $ - $ - $ 12,308 Special Mention - - - 2 - - - - 2 Total $ 94 $ 292 $ 856 $ 2,651 $ 3,931 $ 4,486 $ - $ - $ 12,310 Other consumer Pass $ 398 $ 484 $ 1,165 $ 2,884 $ 6,987 $ 16,821 $ 1,358 $ - $ 30,097 Special Mention - - - - 6 3 - - 9 Classified - 12 - - 6 3 2 - 23 Total $ 398 $ 496 $ 1,165 $ 2,884 $ 6,999 $ 16,827 $ 1,360 $ - $ 30,129 Total Loans Pass $ 346,268 $ 164,132 $ 157,104 $ 91,832 $ 78,142 $ 100,503 $ 63,375 $ 4,185 $ 1,005,541 Special Mention 6,280 - 132 2 6 3 20 - 6,443 Classified 4,221 92 540 - 6 3 99 - 4,961 Total $ 356,769 $ 164,224 $ 157,776 $ 91,834 $ 78,154 $ 100,509 $ 63,494 $ 4,185 $ 1,016,945 Gross Charge Offs by Origination Year for the Nine Months Ended September 30, 2025 Revolving Loans Converted Prior 2021 2022 2023 2024 2025 Revolving to Term Total Residential closed-end first liens $ 3 $ - $ - $ - $ - $ - $ - $ - $ 3 Credit cards - - - - - - 42 - 42 Automobile - 4 13 38 23 - - - 78 Other consumer - - 20 19 70 174 - - 283 Total Gross Charge-Offs $ 3 $ 4 $ 33 $ 57 $ 93 $ 174 $ 42 $ - $ 406 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 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 nine months ended September 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. These loans were modified again during the three month period ended September 30, 2024. The following table presents information as of September 30, 2024 about loans modified for borrowers experiencing financial difficulty during the nine months ended September 30, 2024. September 30, 2024 Amortized Cost Basis % of Class Type of Modification Financial Effect Commercial Real Estate Commercial real estate owner-occupied $ 6,396 4.40 % Interest only payments 3 months of interest only payments, re-amortization of the balance to contractual maturity Commercial Non real estate Commercial and industrial $ 6 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 September 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 nine months ended September 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 September 30, 2025 , the Company had no consumer real estate 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 nine months ended September 30, 2025 and 2024: Allowance for Credit Losses on Unfunded Commitments Balance, December 31, 2024 $ 251 Provision for credit losses 37 Balance, September 30, 2025 $ 288 Balance, December 31, 2023 $ 259 Recovery of credit losses ( 25 ) FCB acquisition 7 Balance, September 30, 2024 $ 241 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: September 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government agencies and corporations $ 322,309 $ - $ 26,437 $ 295,872 States and political subdivisions 177,617 - 25,612 152,005 Mortgage-backed securities 181,664 32 4,033 177,663 Corporate debt securities 5,507 - 564 4,943 Total securities available for sale $ 687,097 $ 32 $ 56,646 $ 630,483 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 September 30, 2025 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. government agencies and corporations $ - $ - $ 295,872 $ 26,437 State and political subdivisions - - 151,620 25,612 Mortgage-backed securities 50,254 396 101,193 3,637 Corporate debt securities - - 4,943 564 Total temporarily impaired securities $ 50,254 $ 396 $ 553,628 $ 56,250 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 September 30, 2025, the Company had 534 securities with a fair value of $ 603,882 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 identified and no ACL on securities available for sale was recorded as of September 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 21 Table of Contents more likely 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 September 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. September 30, 2025 Amortized Cost Fair Value Available for Sale: Due in one year or less $ 21,930 $ 21,781 Due after one year through five years 224,100 213,221 Due after five years through ten years 223,667 196,423 Due after ten years 217,400 199,058 Total securities available for sale $ 687,097 $ 630,483 Accrued interest receivable on securities, included in accrued interest receivable on the Consolidated Balance Sheets, totaled $ 3,320 at September 30, 2025 and $ 3,170 at December 31, 2024. The deferred tax asset for the net unrealized loss on securities available for sale was $ 11,889 as of September 30, 2025 and $ 16,506 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 nine months ended September 30, 2025 and 2024. Restricted Stock. The Company held restricted stock of $ 3,748 as of September 30, 2025 and $ 1,848 as of 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 $ 515,009 at September 30, 2025. The Company’s management reviews for impairment based upon the ultimate recoverability of the cost basis of the FHLB stock, and at September 30, 2025 , did not determine any impairment. Note 5: Defined Benefit Plan The following table presents components of net periodic benefit income for the periods indicated: Net Periodic Benefit Income Three Months Ended September 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 Nine Months Ended September 30, 2025 2024 Service cost $ ( 743 ) $ ( 783 ) Interest cost ( 972 ) ( 906 ) Expected return on plan assets 2,077 1,824 Recognized net actuarial loss - ( 99 ) Net periodic benefit income $ 362 $ 36 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 September 30, 2025 Balance Level 1 Level 2 Level 3 U.S. government agencies and corporations $ 295,872 $ - $ 295,872 $ - States and political subdivisions 152,005 - 152,005 - Mortgage-backed securities 177,663 - 177,663 - Corporate debt securities 4,943 - 4,943 - Total securities available for sale $ 630,483 $ - $ 630,483 $ - 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 September 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 September 30, 2025 , three commercial real estate loans totaling $ 8,791 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 September 30, 2025 Carrying Amount Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 9,192 $ 9,192 $ - $ - Interest-bearing deposits 33,113 33,113 - - Securities available for sale 630,483 - 630,483 - Restricted stock, at cost 3,748 - 3,748 - Mortgage loans held for sale 535 - 535 - Loans, net 1,005,823 - - 969,575 Accrued interest receivable 6,677 - 6,677 - Bank-owned life insurance 48,262 - 48,262 - Financial liabilities: Deposits $ 1,561,904 $ - $ 1,246,765 $ 315,055 Accrued interest payable 1,616 - 1,616 - Borrowings 50,000 - 50,000 - 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 June 30, 2024 $ ( 66,044 ) $ ( 2,310 ) $ ( 68,354 ) Unrealized holding gain on available for sale securities, net of tax of $ 4,284 16,115 - 16,115 Balance at September 30, 2024 $ ( 49,929 ) $ ( 2,310 ) $ ( 52,239 ) Balance at June 30, 2025 $ ( 50,740 ) $ 328 $ ( 50,412 ) Unrealized holding gain on available for sale securities, net of tax of $ 1,599 6,015 - 6,015 Balance at September 30, 2025 $ ( 44,725 ) $ 328 $ ( 44,397 ) 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 gain on available for sale securities, net of tax of $ 3,357 12,627 - 12,627 Balance at September 30, 2024 $ ( 49,929 ) $ ( 2,310 ) $ ( 52,239 ) Balance at December 31, 2024 $ ( 62,093 ) $ 328 $ ( 61,765 ) Unrealized holding gain on available for sale securities, net of tax of $ 4,616 17,368 - 17,368 Balance at September 30, 2025 $ ( 44,725 ) $ 328 $ ( 44,397 ) 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 September 30, Noninterest Income 2025 2024 In-scope of Topic 606: Service charges on deposit accounts $ 681 $ 708 Other service charges and fees 72 117 Credit and debit card fees, net 492 344 Trust income 700 580 Insurance and Investment (1) 133 126 Noninterest Income (in-scope of Topic 606) $ 2,078 $ 1,875 Noninterest Income (out-of-scope of Topic 606) 459 413 Total noninterest income $ 2,537 $ 2,288 Nine Months Ended September 30, Noninterest Income 2025 2024 In-scope of Topic 606: Service charges on deposit accounts $ 2,114 $ 2,019 Other service charges and fees 228 286 Credit and debit card fees, net 1,275 1,141 Trust income 1,857 1,596 Insurance and Investment (1) 656 558 Noninterest Income (in-scope of Topic 606) $ 6,130 $ 5,600 Noninterest Income (out-of-scope of Topic 606) 1,246 1,170 Total noninterest income $ 7,376 $ 6,770 (1) Included within other income in the Consolidated Statements of Income 27 Table of Contents Note 9: 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: September 30, December 31, 2025 2024 Lease liability $ 1,662 $ 1,523 Right-of-use asset $ 1,461 $ 1,305 Weighted average remaining lease term (in years) 4.12 4.76 Weighted average discount rate 3.70 % 3.87 % For the Three Months Ended September 30, Lease Expense 2025 2024 Operating lease expense $ 105 $ 127 Short-term lease expense - 5 Total lease expense $ 105 $ 132 Cash paid for amounts included in lease liabilities $ 109 $ 131 Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period $ 86 $ – For the Nine Months Ended September 30, Lease Expense 2025 2024 Operating lease expense $ 315 $ 315 Short-term lease expense - 16 Total lease expense $ 315 $ 331 Cash paid for amounts included in lease liabilities $ 333 $ 330 Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period $ 440 $ 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 September 30, 2025 Twelve months ending September 30, 2026 $ 460 Twelve months ending September 30, 2027 412 Twelve months ending September 30, 2028 408 Twelve months ending September 30, 2029 256 Twelve months ending September 30, 2030 160 Thereafter 98 Total undiscounted cash flows $ 1,794 Less: discount ( 132 ) Lease liability $ 1,662 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 $ 49 and $ 143 for the three and nine months ended September 30, 2025 and $ 28 and $ 93 for the three and nine months ended September 30, 2024. As of September 30, 2025 , compensation expense of $ 105 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 nine months ended September 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 September 30, 2025 5,028 $ 29.18 Note 11: Net Income Per Common Share The factors used in the computation of net income per common share for the periods indicated are presented below: 29 Table of Contents For the Three Months Ended September 30, 2025 2024 Net Income (Numerator) Common Shares Weighted Average Outstanding (1) (Denominator) Per Share Net Income (Numerator) Common Shares Weighted Average Outstanding (1) (Denominator) Per Share Basic net income per common share $ 4,420 6,360,973 $ 0.70 $ 2,677 6,356,594 $ 0.42 Dilutive shares (1) 2,378 1,758 Diluted net income per common share $ 4,420 6,363,351 $ 0.69 $ 2,677 6,358,352 $ 0.42 For the Nine Months Ended September 30, 2025 2024 Net Income (Numerator) Common Shares Weighted Average Outstanding (1) (Denominator) Per Share Net Income (Numerator) Common Shares Weighted Average Outstanding (1) (Denominator) Per Share Basic net income per common share $ 9,945 6,359,443 $ 1.56 $ 4,544 6,092,468 $ 0.75 Dilutive shares (1) 2,343 1,974 Diluted net income per common share $ 9,945 6,361,786 $ 1.56 $ 4,544 6,094,442 $ 0.75 (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 nine months ended September 30, 2025 and September 30, 2024 . Note 12 – Goodwill and Other Intangibles Core deposit intangible amortization expense was $ 92 and $ 284 for the three and nine months ended September 30, 2025. Core deposit intangible amortization expense was $ 102 and $ 137 for the three and nine months ended September 30, 2024. The following table provides information on the significant components of goodwill and other acquired intangible assets during the nine months ended September 30, 2025: Beginning Balance Additions Measurement Period Adjustment Accumulated Amortization Ending Balance Goodwill $ 10,718 $ - $ - $ - $ 10,718 Core deposit intangible $ 1,863 $ - $ - $ ( 284 ) $ 1,579 As of September 30, 2025, estimated future remaining amortization of the core deposit intangible within the years ending December 31, is as follows: Amortization Expense 2025 $ 89 2026 331 2027 290 2028 248 2029 207 2030 165 Thereafter 249 Total amortizing core deposit intangible $ 1,579 30 Table of Contents Note 13 - Borrowings During the third quarter of 2025, the Company borrowed $ 40,000 from the Federal Home Loan Bank of Atlanta and $ 10,000 from the Federal Reserve Discount Window. The borrowings were part of a yield optimization strategy and the proceeds were used to purchase securities. The borrowings were structured to mirror expected cash flow from the securities portfolio through the end of 2026. All borrowings mature within the next 12 months and have a weighted average interest rate of 3.99 % . 31 Table of Contents Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations $ in thousands, except per share data The purpose of this discussion and analysis is to provide information about the financial condition and results of operations of the Company. Please refer to the financial statements and other information included in this report as well as the Company’s 2024 Form 10-K for an understanding of the following discussion and analysis. References in the following discussion and analysis to “we” or “us” refer to the Company unless the context indicates that the reference is to the Bank. Cautionary Statement Regarding Forward-Looking Statements We make forward-looking statements in this Form 10-Q that are subject to significant risks and uncertainties. These forward-looking statements include statements regarding our profitability, liquidity, allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals, and are based upon management’s views and assumptions as of the date of this report. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward-looking statements. These forward-looking statements are based upon or are affected by factors that could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, effects of or changes in: • inflation and changes in interest rates that may reduce our margins or reduce the fair value of financial instruments, • the ability to maintain adequate liquidity by retaining deposit customers and secondary funding sources, especially if the Company’s or banking industry’s reputation becomes damaged, • the adequacy of the level of the Company’s allowance for credit losses, the amount of credit loss provisions required in future periods, and the failure of assumptions underlying the allowance for credit losses, • general and local economic conditions, • monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury, the Office of the Comptroller of the Currency (“OCC”), the Federal Reserve, the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation (“FDIC”), and the impact of any policies or programs implemented pursuant to financial reform legislation, • unanticipated increases in the level of unemployment in the Company’s market, • the quality or composition of the loan and/or investment portfolios, • demand for loan products, • deposit flows, • competition, • demand for financial services in the Company’s market, • the real estate market in the Company’s market, • laws, regulations and policies impacting financial institutions, • technological risks and developments, and cyber-threats, attacks or events, • the Company’s technology initiatives, • geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, • the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events, • the Company's ability to identify, attract, and retain experienced management, relationship managers, and support personnel, particularly in a competitive labor environment, • performance by the Company’s counterparties or vendors, • applicable accounting principles, policies and guidelines, and • risks associated with mergers, acquisitions, and other expansion activities. These risks and uncertainties should be considered in evaluating the forward-looking statements contained in this report. We caution readers not to place undue reliance on those statements, which speak only as of the date of this report. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A of the Company's 2024 Form 10-K. 32 Table of Contents Overview NBI is a financial holding company that was organized in 1986 under the laws of Virginia and is registered under the Bank Holding Company Act of 1956. NBI common stock is listed on the Nasdaq Capital Market and is traded under the symbol “NKSH.” NBI has two wholly-owned subsidiaries; the National Bank of Blacksburg ("NBB") and National Bankshares Financial Services, Inc. ("NBFS"). NBB is a community bank and does business as National Bank from 28 office locations and one loan production office. NBB is the source of nearly all of the Company’s revenue. NBFS does business as National Bankshares Investment Services and National Bankshares Insurance Services. Income from NBFS is not significant at this time, nor is it expected to be so in the near future. Critical Accounting Policies The Company’s consolidated financial statements are prepared in accordance with GAAP. The financial information contained within our statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. Although the economics of the Company’s transactions may not change, the timing of events that would impact the transactions could change. Critical accounting policies are most important to the portrayal of the Company’s financial condition or results of operations and require management’s most difficult, subjective, and complex judgments about matters that are inherently uncertain. If conditions occur that differ from our assumptions, depending upon the severity of such differences, the Company’s financial condition or results of operations may be materially impacted. The Company has designated the following policies as critical: those governing the allowance for credit losses, goodwill, the pension plan, core deposit intangibles and loans acquired in a business combination. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. For information on the Company's critical accounting policies, please refer to the Company’s 2024 Form 10-K, Note 1: Summary of Significant Accounting Policies. Acquisition of Frontier Community Bank On June 1, 2024, the Company and the Bank acquired FCB, a Virginia chartered commercial bank headquartered in Waynesboro, Virginia. FCB’s balances and results of operations are included in the Company’s consolidated results beginning on June 1, 2024. Non-GAAP Financial Measures This report refers to certain financial measures that are computed under a basis other than GAAP (“non-GAAP”). The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP. Details on non-GAAP measures follow. Net Interest Margin The Company uses the net interest margin (non-GAAP) to measure profitability of interest generating activities, as a percentage of total interest-earning assets. The Company’s net interest margin is calculated on a fully taxable equivalent (“FTE”) basis. The portion of interest income that is nontaxable is grossed up to the tax equivalent by adding the tax benefit based on a tax rate of 21%. Annualized FTE net interest income is divided by total average earning assets to calculate the net interest margin. The following tables present the reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, for the periods indicated: Three Months Ended September 30, Net Interest Margin, FTE 2025 2024 Interest income (GAAP) $ 19,010 $ 18,651 Add: FTE adjustment 244 241 Interest income, FTE (non-GAAP) 19,254 18,892 Interest expense (GAAP) 7,336 9,218 Net interest income, FTE (non-GAAP) $ 11,918 $ 9,674 Average balance of interest-earning assets $ 1,731,992 $ 1,750,407 Net interest margin 2.73 % 2.20 % 33 Table of Contents Nine Months Ended September 30, Net Interest Margin, FTE 2025 2024 Interest income (GAAP) $ 55,744 $ 51,752 Add: FTE adjustment 726 729 Interest income, FTE (non-GAAP) 56,470 52,481 Interest expense (GAAP) 22,829 25,412 Net interest income, FTE (non-GAAP) $ 33,641 $ 27,069 Average balance of interest-earning assets $ 1,752,234 $ 1,691,110 Net interest margin (non-GAAP) 2.57 % 2.14 % Efficiency Ratio The efficiency ratio is computed by dividing noninterest expense by the sum of FTE net interest income and noninterest income, excluding certain items the Company’s management deems unusual or non-recurring. This is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. The components of the efficiency ratio calculation for the periods indicated are summarized in the following table. Three Months Ended September 30, Efficiency Ratio 2025 2024 Noninterest expense (GAAP) $ 8,524 $ 8,499 Less: merger-related expense - (150 ) Less: core system conversion expense (1) (50 ) - Adjusted noninterest expense (non-GAAP) $ 8,474 $ 8,349 Noninterest income (GAAP) $ 2,537 $ 2,288 Net interest income, FTE (non-GAAP) 11,918 9,674 Total income for efficiency ratio (non-GAAP) $ 14,455 $ 11,962 Efficiency ratio 58.62 % 69.80 % Nine Months Ended September 30, Efficiency Ratio 2025 2024 Noninterest expense (GAAP) $ 27,739 $ 26,388 Less: merger-related expense - (2,891 ) Less: core system conversion expense (1) (2,073 ) (173 ) Adjusted noninterest expense (non-GAAP) $ 25,666 $ 23,324 Noninterest income (GAAP) $ 7,376 $ 6,770 Net interest income, FTE (non-GAAP) 33,641 27,069 Total income for efficiency ratio (non-GAAP) $ 41,017 $ 33,839 Efficiency ratio (non-GAAP) 62.57 % 68.93 % (1) Core system conversion expense stems from a core system upgrade that will provide greater efficiency and product offerings. Adjusted Return on Average Assets and Adjusted Return on Average Equity The adjusted return on average assets and adjusted return on average equity are measures of profitability, calculated by annualizing net income and dividing by average year-to-date assets or equity, respectively. Significant income or expenses that are unusual or not expected to recur during the year are not annualized, in order to reduce distortion within the ratios. The tables below present the reconciliation of adjusted annualized net income, which is not a measurement under GAAP, for the periods indicated. 34 Table of Contents Three Months Ended September 30, Annualized Net Income for Ratio Calculation 2025 2024 Net income per GAAP $ 4,420 $ 2,677 Items not annualized: Merger-related expense net of tax of $6 for the period ended September 30, 2024 - 144 Core system conversion expense, net of tax of $11 for the period ended September 30, 2025 39 – Total non-annualized items 39 144 Adjusted net income $ 4,459 $ 2,821 Adjusted net income, annualized $ 17,691 $ 11,223 Total non-annualized items (39 ) (144 ) Annualized net income for ratio calculation (non-GAAP) $ 17,652 $ 11,079 Return on average assets (GAAP) 0.98 % 0.59 % Adjusted return on average assets (non-GAAP) 0.99 % 0.61 % Return on average equity (GAAP) 10.22 % 6.82 % Adjusted return on average equity (non-GAAP) 10.29 % 7.10 % Nine Months Ended September 30, Annualized Net Income for Ratio Calculation 2025 2024 Net income per GAAP $ 9,945 $ 4,544 Items not annualized: Partnership income net of tax of ($44) and ($35) for the periods ended September 30, 2025 and 2024, respectively (166 ) (134 ) ACL provision, net of tax of $271 for the period ended September 30, 2024 - 1,019 Merger-related expense net of tax of $417 for the period ended September 30, 2024 - 2,474 Core system conversion expense, net of tax of $435 and $36 for the periods ended September 30, 2025 and 2024, respectively 1,638 137 Total non-annualized items 1,472 3,496 Adjusted net income $ 11,417 $ 8,040 Adjusted net income, annualized $ 15,264 $ 10,740 Total non-annualized items (1,472 ) (3,496 ) Annualized net income for ratio calculation (non-GAAP) $ 13,792 $ 7,244 Return on average assets (GAAP) 0.74 % 0.35 % Adjusted return on average assets (non-GAAP) 0.76 % 0.42 % Return on average equity (GAAP) 7.98 % 4.23 % Adjusted return on average equity (non-GAAP) 8.28 % 5.05 % 35 Table of Contents Performance Summary Key to understanding the Company’s results of operations and financial position is the acquisition of FCB in 2024, the impact of the interest rate environment and the core system conversion completed during the second quarter of 2025 that will enhance efficiency, product offerings and future growth. The acquisition of FCB on June 1, 2024 expanded the Company's footprint into desirable markets and increased its growth potential. The acquisition added to the balance sheet $118,743 in loans, $129,717 in deposits and $14,299 in equity. The Company also recorded merger expenses detailed under Non-GAAP Financial Measures above. The Federal Reserve's interest rate cuts between September 2024 and September of 2025 eased deposit pricing pressure beginning in the fourth quarter of 2024. The interest rate environment continues at a level that allows adjustable rate loans to reprice higher than their previous rates. The Company completed the core system conversion of both the acquired bank and the legacy bank during the second quarter of 2025, with related expenses presented in core system conversion expense on the Consolidated Statements of Income. The following table presents the Company’s key performance indicators for the periods indicated: Three Months Ended September 30, 2025 2024 Net Income $ 4,420 $ 2,677 Return on average assets 0.98 % 0.59 % Adjusted return on average assets (1) 0.99 % 0.61 % Return on average equity 10.22 % 6.82 % Adjusted return on average equity (1) 10.29 % 7.10 % Basic net income per common share $ 0.70 $ 0.42 Diluted net income per common share $ 0.69 $ 0.42 Net interest margin (1) 2.73 % 2.20 % Efficiency ratio (1) 58.62 % 69.80 % Nine Months Ended September 30, Summary Key Performance Indicators 2025 2024 Net Income $ 9,945 $ 4,544 Return on average assets 0.74 % 0.35 % Adjusted return on average assets (1) 0.76 % 0.42 % Return on average equity 7.98 % 4.23 % Adjusted return on average equity (1) 8.28 % 5.05 % Basic net income per common share $ 1.56 $ 0.75 Diluted net income per common share $ 1.56 $ 0.75 Net interest margin (1) 2.57 % 2.14 % Efficiency ratio (1) 62.57 % 68.93 % (1) See “Non-GAAP Financial Measures” above. Net income for the three and nine months ended September 30, 2025 increased when compared with the comparable periods of 2024, due to net interest margin expansion and merger related expenses in 2024. The net interest margin as well as key noninterest income and expense items are discussed below. Net Interest Income The following tables present interest‑earning assets and interest‑bearing liabilities, the interest earned or paid, the average yield or rate on the daily average balance outstanding, net interest income and net interest margin for the periods indicated. 36 Table of Contents Three Months Ended September 30, 2025 2024 ($ in thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest-earning assets: Loans (1)(2)(3)(4)(5) $ 1,010,041 $ 14,356 5.64 % $ 994,744 $ 13,295 5.32 % Taxable securities (5) 588,212 3,704 2.50 % 622,284 4,177 2.67 % Nontaxable securities (1)(5) 62,730 454 2.87 % 63,197 453 2.85 % Federal funds sold - - - 918 13 5.63 % Interest-bearing deposits 71,009 740 4.13 % 69,264 954 5.48 % Total interest-earning assets $ 1,731,992 $ 19,254 4.41 % $ 1,750,407 $ 18,892 4.29 % Interest-bearing liabilities: Interest-bearing demand deposits $ 827,977 $ 4,307 2.06 % $ 852,126 $ 5,488 2.56 % Savings deposits 141,197 55 0.15 % 141,939 62 0.17 % Time deposits (6) 322,782 2,907 3.57 % 342,662 3,668 4.26 % Borrowings 6,630 67 4.01 % - - NM Total interest-bearing liabilities $ 1,298,586 $ 7,336 2.24 % $ 1,336,727 $ 9,218 2.74 % Net interest income and interest rate spread $ 11,918 2.17 % $ 9,674 1.55 % Net interest margin 2.73 % 2.20 % (1) Interest on nontaxable loans and securities is computed on a fully taxable equivalent basis using a Federal income tax rate of 21%. (2) Included in interest income are loan fees of $162 and $71 for the three months ended September 30, 2025 and 2024, respectively. Also included in interest income is accretion of discounts on acquired loans of $699 and $369 for the three months ended September 30, 2025 and 2024, respectively. (3) Nonaccrual loans are included in average balances for yield computations. (4) Includes loans held for sale. (5) Daily averages are shown at amortized cost. (6) Included in interest expense is amortization of premium on acquired time deposits of $27 and $135 for the three months ended September 30, 2025 and 2024, respectively. Nine Months Ended September 30, 2025 2024 ($ in thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest-earning assets: Loans (1)(2)(3)(4)(5) $ 1,004,552 $ 41,052 5.46 % $ 919,369 $ 35,129 5.10 % Taxable securities (5) 599,455 11,289 2.52 % 626,672 12,644 2.70 % Nontaxable securities (1)(5) 62,846 1,367 2.91 % 63,730 1,373 2.88 % Federal funds sold 152 5 4.40 % 702 23 4.38 % Interest-bearing deposits 85,229 2,757 4.32 % 80,637 3,312 5.49 % Total interest-earning assets $ 1,752,234 $ 56,470 4.31 % $ 1,691,110 $ 52,481 4.15 % Interest-bearing liabilities: Interest-bearing demand deposits $ 850,676 $ 13,330 2.10 % $ 839,211 $ 15,747 2.51 % Savings deposits 142,874 156 0.15 % 140,628 173 0.16 % Time deposits (6) 331,602 9,276 3.74 % 303,355 9,490 4.18 % Borrowings 2,234 67 4.01 % 76 2 3.52 % Total interest-bearing liabilities $ 1,327,386 $ 22,829 2.30 % $ 1,283,270 $ 25,412 2.65 % Net interest income and interest rate spread $ 33,641 2.01 % $ 27,069 1.50 % Net interest margin 2.57 % 2.14 % (1) Interest on nontaxable loans and securities is computed on a fully taxable equivalent basis using a Federal income tax rate of 21%. (2) Included in interest income are loan fees of $361 and $174 for the nine months ended September 30, 2025 and 2024, respectively. Also included in interest income is accretion of discounts on acquired loans of $1,324 and $480 for the nine months ended September 30, 2025 and 2024, respectively. (3) Nonaccrual loans are included in average balances for yield computations. 37 Table of Contents (4) Includes loans held for sale. (5) Daily averages are shown at amortized cost. (6) Included in interest expense is amortization of premium on acquired time deposits of $128 and $193 for the nine months ended September 30, 2025 and 2024, respectively. When the three and nine months ended September 30, 2025 and 2024 are compared, the yield on earning assets increased and the cost of interest bearing liabilities decreased, improving the net interest margin. The Federal Reserve's interest rate cuts between September 2024 and September 2025 immediately reduced expense for deposits with pricing based on the prime interest rate. Current interest rates are still at a level that will allow improved interest income as loans continue to reach repricing dates. During the third quarter of 2025, the Company leveraged $50,000 in borrowings with a weighted average rate of 3.99% to purchase securities of $49,855 with a weighted average yield of 4.67%. The borrowings were structured to mirror expected cash flow from the securities portfolio over the following year. The strategy is part of the Company's focus on optimizing the net interest margin and earnings, with expectations for a lower interest rate environment in the future. Noninterest Income Three Months Ended September 30, Change 2025 2024 Dollars Percent Service charges on deposits $ 681 $ 708 $ (27 ) (3.81 )% Other service charges and fees 72 117 (45 ) (38.46 )% Credit and debit card fees, net 492 344 148 43.02 % Trust income 700 580 120 20.69 % BOLI income 304 295 9 3.05 % Gain on sale of mortgage loans 92 50 42 84.00 % Other income 196 194 2 1.03 % Total noninterest income $ 2,537 $ 2,288 $ 249 10.88 % Nine Months Ended September 30, Change 2025 2024 Dollars Percent Service charges on deposits $ 2,114 $ 2,019 $ 95 4.71 % Other service charges and fees 228 286 (58 ) (20.28 )% Credit and debit card fees, net 1,275 1,141 134 11.74 % Trust income 1,857 1,596 261 16.35 % BOLI income 893 822 71 8.64 % Gain on sale of mortgage loans 171 132 39 29.55 % Other income 838 774 64 8.27 % Total noninterest income $ 7,376 $ 6,770 $ 606 8.95 % Service charges on deposit accounts increased when the nine months ended September 30, 2025 is compared with the comparable period of 2024, due to higher levels of deposits. Other service charges and fees decreased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024, primarily due to receipt of certain infrequent fee income in 2024. Credit and debit card fees, net, increased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024, due to receipt of an incentive payment and lower processing costs after the core system conversion. Trust income increased due to higher assets under management, when the three and nine months ended September 30, 2025 are compared with the comparable period of 2024. BOLI income increased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024. BOLI income includes the acquired FCB policies for the full nine months ended September 30, 2025, compared with four months for 2024. Gain on sale of mortgage loans improved when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024, due to increased volume. Other income includes revenue from investment and insurance sales, adjustments to partnership basis and other miscellaneous components. Insurance income and a vendor incentive payment account for the increase when the nine months ended September 30, 2025 is compared with the comparable period of 2024. 38 Table of Contents Noninterest Expense Three Months Ended September 30, Change 2025 2024 Dollars Percent Salaries and employee benefits $ 5,114 $ 4,953 $ 161 3.25 % Occupancy, furniture and fixtures 770 715 55 7.69 % Data processing 848 963 (115 ) (11.94 )% FDIC assessment 210 211 (1 ) (0.47 )% Intangible asset amortization 92 102 (10 ) (9.80 )% Franchise taxes 350 373 (23 ) (6.17 )% Professional services 361 254 107 42.13 % Merger-related expenses - 150 (150 ) NM Core system conversion expense 50 - 50 NM Other operating expenses 729 778 (49 ) (6.30 )% Total noninterest expense $ 8,524 $ 8,499 $ 25 0.29 % Nine Months Ended September 30, Change 2025 2024 Dollars Percent Salaries and employee benefits $ 15,505 $ 14,106 $ 1,399 9.92 % Occupancy, furniture and fixtures 2,240 1,975 265 13.42 % Data processing 2,532 2,529 3 0.12 % FDIC assessment 627 590 37 6.27 % Intangible asset amortization 284 137 147 107.30 % Franchise taxes 1,081 1,081 - 0.00 % Professional services 1,169 766 403 52.61 % Merger-related expenses - 2,891 (2,891 ) NM Core system conversion expense 2,073 173 1,900 1,098 % Other operating expenses 2,228 2,140 88 4.11 % Total noninterest expense $ 27,739 $ 26,388 $ 1,351 5.12 % Noninterest expense increased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024. Salaries and employee benefits, which include payroll taxes, health insurance, contributions to the employee stock ownership plan and employee 401(k), pension expense, incentives and salary continuation increased when the three month period ended September 30, 2025 is compared with the comparable period of 2024 due to normal merit increases. The increase in salaries and employee benefits when the nine month period ended September 30, 2025 is compared with the comparable period of 2024 reflects the addition of FCB employees. Occupancy, furniture and fixtures expense increased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024 due to additional assets acquired from FCB, higher maintenance costs, and the opening of the Roanoke branch. Data processing expense decreased when the three months ended September 30, 2025 are compared with the comparable period of 2024, reflecting savings from the core system conversion. FDIC assessment increased when the nine months ended September 30, 2025 are compared with the comparable periods of 2024 due to a larger assessment base. Professional services include legal, audit and consulting expenses, which increased when the three and nine months ended September 30, 2025 are compared with the comparable periods of 2024 due to higher legal and audit expense. Core system conversion expense primarily includes payments made to the former core system vendor to exit the contracts as well as other expenses associated with the core system conversion. Other operating expenses increased when the nine months ended September 30, 2025 are compared with the comparable period of 2024. The category of other operating expenses includes expense for marketing and business development, supplies, non-service pension cost and charitable donations, among others. Included in various categories of noninterest expense are expenses to manage cybersecurity risk. The cost of these measures was $114 for the three months ended September 30, 2025 and $92 for the three months ended September 30, 2024. For the nine months ended September 30, 2025, total cybersecurity expense was $255 compared to $276 for the nine months ended September 30, 2024. The Company places high priority on cybersecurity. The decrease in expense when the nine month period ended September 30, 2025 is compared with the comparable period of 2024 resulted from renegotiation of contracts and licensing. 39 Table of Contents Income Tax The Company’s income tax expense was $961 for the three months ended September 30, 2025 compared to an expense of $550 for the same period in 2024.The Company's income tax expense was $1,989 for the nine months ended September 30, 2025 and effective tax rate was 16.67%. For the nine months ended September 30, 2024, the Company’s income tax expense was $891 and effective tax rate was 16.39%. Asset Quality Key indicators of the Company’s asset quality are presented in the following table. September 30, December 31, 2025 2024 2024 Nonaccrual loans $ 2,027 $ 2,283 $ 2,222 Loans past due 90 days or more, and still accruing 283 71 548 ACLL to loans net of deferred fees and costs 1.04 % 1.03 % 1.04 % Net charge-off ratio (annualized) 0.04 % 0.04 % 0.03 % Ratio of nonperforming loans to loans, net of deferred fees and costs 0.20 % 0.23 % 0.22 % Ratio of ACLL to nonperforming loans 521.90 % 452.39 % 461.84 % For information on the Company’s policies on the ACLL, please refer to the Company’s 2024 Form 10-K, Note 1: Summary of Significant Accounting Policies. The Company’s risk analysis as of September 30, 2025 determined an ACLL of $10,579, or 1.04% of loans net of deferred fees and costs. This compares with an allowance of $10,262 as of December 31, 2024, or 1.04% of loans. To determine the appropriate level of the ACLL, the Company considers credit risk for individually evaluated loans and for groups of loans evaluated collectively. Individually Evaluated Loans As of September 30, 2025, individually evaluated loans were $10,699. Three individually evaluated loans were collateral dependent but were adequately collateralized and did not result in an individual allocation. The remaining individually evaluated loans were measured using the discounted cash flow method, resulting in an allocation of $90. As of December 31, 2024, individually evaluated loans were $10,521. Three individually evaluated loans were collateral dependent but were adequately collateralized and did not result in an individual allocation. The remaining individually evaluated loans were measured using the discounted cash flow method, resulting in an allocation of $80. Collectively Evaluated Loans Collectively evaluated loans totaled $1,006,246, with an ACLL of $10,489 as of September 30, 2025. As of December 31, 2024, collectively evaluated loans totaled $978,092, with an allowance of $10,182. Collectively evaluated loans are divided into classes based upon risk characteristics. Utilizing historical loss information and peer data, the Company calculates probability of default ("PD") and loss given default ("LGD") for each class, which is adjusted for a reasonable and supportable forecast. Cash flow projections based on each loan’s contractual terms are modified by the adjusted PD and LGD for its class. Loan classes are allocated additional loss estimates based upon the Company’s analysis of qualitative factors including economic measures, asset quality indicators, loan characteristics, and changes to internal Company policies and management. Reasonable and Supportable Forecast The Company applies national unemployment forecasts to project cash flows. The Company determined that 12 months represents a reasonable and supportable forecast period as of September 30, 2025, and set a period of 12 months to revert to historical losses on a straight-line basis. The forecast applied as of September 30, 2025 projects that unemployment will slightly increase over the next 12 months at a lower level than the forecast applied as of December 31, 2024. The lower unemployment forecast decreased the required level of the ACLL when September 30, 2025 is compared with December 31, 2024. Qualitative Factors: Economic The Company sources economic data pertinent to its market from the most recently available publications, including business and personal bankruptcy filings, the residential vacancy rate and the inventory of new and existing homes. Higher bankruptcy filings indicate heightened credit risk and increase the ACLL, while lower bankruptcy filings have a beneficial impact on credit risk. Compared with data available as of December 31, 2024, business and personal bankruptcies filings increased. Residential vacancy rates and housing inventory are used to measure the housing market. The housing market directly or indirectly affects all loan classes. Higher vacancy and inventory levels increase credit risk. The residential vacancy rate available as of September 40 Table of Contents 30, 2025 increased compared to the data incorporated into the December 31, 2024 calculation, resulting in a higher allocation. Housing inventory increased when September 30, 2025 is compared with December 31, 2024, resulting in a higher allocation. The Company tracks economic news and data from its market to determine whether additional indicators should be considered in the allowance for credit losses. As of September 30, 2025, management identified local unemployment data for consideration. Historically, local unemployment has been slightly lower than national unemployment, but correlated in movement. However, for the most recent period local unemployment rose higher than national unemployment. The Company added an allocation to account for the change. Qualitative Factors: Asset Quality Indicators Accruing past due loans are analyzed at the class level and compared with previous levels. Increases in past due loans indicate heightened credit risk. Accruing loans past due 30-89 days were 0.27% of total loans as of September 30, 2025, decreased from 0.30% as of December 31, 2024. Qualitative Factors: Other Considerations The Company considers other factors that impact credit risk, including the interest rate environment, the competitive, legal and regulatory environments, changes in lending policies and loan review, changes in lending management, and high risk loans. The interest rate environment impacts variable rate loans. The Company allocates additional reserve each time the Federal Reserve increases rates, under the expectation that higher payments may increase credit risk. After the rate increase has been in effect for one year, the allocation may be removed if management deems that the impact of the change has become integrated to the portfolio. As of September 30, 2025, no allocation was included for interest rate changes, unchanged from December 31, 2024. The competitive, legal and regulatory environments were evaluated for changes that would affect credit risk. Higher competition for loans is deemed to increase credit risk, while lower competition is deemed to decrease credit risk. Prior allocations for the competitive and regulatory environments were evaluated and management determined that a sufficient period of time had passed so as to conclude that the impact is now integrated to loss rates, reducing the allocation. The legal environment remains in a similar posture to December 31, 2024, and no allocation was provided. Lending policies, loan review procedures and management’s experience influence credit risk. Policies and procedures remain similar to those at December 31, 2024. The Company maintained an allocation to account for integration of FCB lenders. Levels of high risk loans are considered in the determination of the level of the ACLL. A decrease in the level of high risk loans within a class decreases the required allocation for the loan class, and an increase in the level of high risk loans within a class increases the required allocation for the loan class. Total high risk loans increased from the level at December 31, 2024. Unallocated Surplus The unallocated surplus as of September 30, 2025 was $47, or 0.45% in excess of the calculated requirement. The unallocated surplus at December 31, 2024 was $50, or 0.49% in excess of the calculated requirement. The surplus provides some mitigation of uncertainty about events that may exist at the reporting date but that are not known to the Company and may impact credit risk. Conclusion The calculation of the appropriate level for the ACLL incorporates analysis of multiple factors and requires management’s prudent and informed judgment. Based on analysis of historical indicators, asset quality and economic factors, management believes the level of the ACLL is reasonable for the credit risk in the loan portfolio as of September 30, 2025. ACL on Unfunded Commitments The ACL on unfunded commitments was $288, or 0.16 % of unfunded commitments as of September 30, 2025. The ACL on unfunded commitments was $251, or 0.14% as of December 31, 2024. Provision for (Recovery of) Credit Losses The provision for credit losses represents charges to earnings necessary to maintain an adequate allowance. The adequacy of the ACLL is reviewed quarterly and adjustments are made as determined necessary. The Company recorded a provision for credit losses on loans of $581 and a provision for credit losses on unfunded commitments of $36 for the nine months ended September 30, 2025, compared with a provision for credit losses on loans of $1,312 and a recovery of $25 for unfunded commitments for the nine months ended September 30, 2024. For the three month period ended September 30, 2025, the Company recorded a provision for credit losses on loans of $259 and a provision for credit losses on unfunded commitments of $47. For the three month period ended September 30, 2024, the Company recorded a provision for credit losses on loans of $5 and a recovery of credit losses on unfunded commitments of $10. Loan Modifications 41 Table of Contents In the ordinary course of business the Company modifies loan terms on a case-by-case basis for a variety of reasons. Modifications may include rate reductions, payment extensions of varying lengths of time, a change in amortization term or method or other arrangements. Modifications to consumer loans generally involve short-term payment extensions to accommodate specific, temporary circumstances. Modifications to commercial loans may include, but are not limited to, changes in interest rate, maturity, amortization and financial covenants. The Company reviews each modification to determine whether the borrower is experiencing financial difficulty, including indicators of default, bankruptcy, going concern, insufficient projected cash flows and inability to obtain financing from other sources. Please refer to Note 3: Loans and Allowance for Credit Losses in Part I, Item 1 of this report for more information on loans modified for borrowers experiencing financial difficulty. During the three and nine months ended September 30, 2025 and 2024, the Company modified loans in the normal course of business for borrowers who were not experiencing financial difficulty. During the three months ended September 30, 2025, the Company modified 46 loans totaling $13,884. During the nine months ended September 30, 2025, the Company modified 414 loans totaling $55,739. During the three and nine months ended September 30, 2024, the Company provided 205 modifications to loans totaling $42,969 and 637 modifications totaling $86,905, respectively. Key Assets and Liabilities NBI’s key assets and liabilities and their change from December 31, 2024 are shown in the following table. September 30, December 31, Change 2025 2024 Dollars Percent Interest-bearing deposits $ 33,113 $ 94,254 $ (61,141 ) (64.87 )% Securities available for sale, at fair value 630,483 601,898 28,585 4.75 % Loans, net 1,005,823 977,688 28,135 2.88 % Total assets 1,802,407 1,811,636 (9,229 ) (0.51 )% Deposits 1,561,904 1,644,752 (82,848 ) (5.04 )% Average Balances Year-to-date daily averages for the major balance sheet categories are as follows: September 30, December 31, Change 2025 2024 Dollars Percent Assets Interest-bearing deposits $ 85,229 $ 76,211 $ 9,018 11.83 % Securities available for sale, at fair value 593,896 610,298 (16,402 ) (2.69 )% Loans, net 993,824 928,293 65,531 7.06 % Total assets 1,807,982 1,744,440 63,542 3.64 % Liabilities and stockholders’ equity Noninterest-bearing demand deposits $ 302,373 $ 290,038 $ 12,335 4.25 % Interest-bearing demand deposits 850,676 838,526 12,150 1.45 % Savings deposits 142,874 141,148 1,726 1.22 % Time deposits 331,602 313,401 18,201 5.81 % Stockholders’ equity 166,579 147,474 19,105 12.95 % Higher customer deposits resulted in increased investment in interest bearing deposit assets. Changes in securities, loans, deposits and stockholders’ equity are discussed below. 42 Table of Contents Securities The Company's securities are designated as available for sale and as such, are reported at fair value. The following table presents information on securities available for sale as of the dates indicated: September 30, December 31, Change 2025 2024 Dollars Percent Amortized cost $ 687,097 $ 680,496 $ 6,601 0.97 % Unrealized loss, net (56,614 ) (78,598 ) 21,984 27.97 % Securities available for sale, at fair value $ 630,483 $ 601,898 $ 28,585 4.75 % The Company purchased bonds totalling $49,855 during the third quarter of of 2025 as part of a yield optimization strategy. The unrealized loss in the Company’s investment portfolio is due to interest rate risk. The fair value of bonds moves inversely to interest rate changes and expectations of interest rate changes. Most of the Company’s securities were purchased during periods prior to the Federal Reserve’s interest rate increases that began in March of 2022. The Company’s analysis of the securities portfolio determined no identifiable credit risk as of September 30, 2025 and no ACL has been recorded. Please refer to Note 1: General and Summary of Significant Accounting Policies of the Company's 2024 Form 10-K and Note 4: Securities in Part I, Item 1 of this report for additional information on the securities portfolio. Loans September 30, December 31, Change 2025 2024 Dollars Percent Real estate construction $ 46,381 $ 50,798 $ (4,417 ) (8.70 )% Consumer real estate 324,597 307,855 16,742 5.44 % Commercial real estate 490,968 478,078 12,890 2.70 % Commercial non real estate 53,532 51,844 1,688 3.26 % Public sector and IDA 54,332 57,171 (2,839 ) (4.97 )% Consumer non real estate 47,135 42,867 4,268 9.96 % Less: deferred fees and costs (543 ) (663 ) 120 (18.10 )% Loans, net of deferred fees and costs $ 1,016,402 $ 987,950 $ 28,452 2.88 % The increase from December 31, 2024 is the result of organic growth. The Company is positioned to make every loan that meets its underwriting standards. Deposits September 30, December 31, Change 2025 2024 Dollars Percent Noninterest-bearing demand deposits $ 312,578 $ 290,088 $ 22,490 7.75 % Interest-bearing demand deposits 793,552 864,753 (71,201 ) (8.23 )% Savings deposits 140,635 143,109 (2,474 ) (1.73 )% Time deposits 315,139 346,802 (31,663 ) (9.13 )% Total deposits $ 1,561,904 $ 1,644,752 $ (82,848 ) (5.04 )% The Company’s depositors within its market area are diverse, including individuals, businesses and municipalities. The Company does not have any brokered deposits. Depositors are insured up to the FDIC maximum of $250 thousand. Municipal deposits, which account for approximately 21% of the Company’s deposits, have additional security from bonds pledged as collateral, in accordance with state regulation. Of the Company’s non-municipal deposits, approximately 20% are uninsured. 43 Table of Contents Capital Resources September 30, December 31, Change 2025 2024 Dollars Percent Common stock and additional paid in capital $ 21,974 $ 21,831 $ 143 0.66 % Retained earnings 201,643 196,343 5,300 2.70 % Accumulated other comprehensive loss (44,397 ) (61,765 ) 17,368 28.12 % Total stockholders’ equity $ 179,220 $ 156,409 $ 22,811 14.58 % The increase in stockholders’ equity reflects an improvement in the unrealized losses on securities available for sale and net income during the period. The Company qualifies as a small bank holding company under the Federal Reserve’s Small Bank Holding Company Policy Statement, which exempts bank holding companies with less than $3 billion in assets from reporting consolidated regulatory capital ratios and from minimum regulatory capital requirements. NBB is subject to various capital requirements administered by banking agencies, including an additional capital conservation buffer in order to make capital distributions or discretionary bonus payments. Risk-based capital ratios are calculated in compliance with OCC rules based on the Basel III Capital Rules. Capital ratios for NBB are shown in the following tables: September 30, 2025 December 31, 2024 Regulatory Capital Minimum Ratios Regulatory Capital Minimum Ratios with Capital Conservation Buffer Common Equity Tier I Capital Ratio 16.55 % 15.28 % 4.50 % 7.00 % Tier I Capital Ratio 16.55 % 15.28 % 6.00 % 8.50 % Total Capital Ratio 17.45 % 16.14 % 8.00 % 10.50 % Leverage Ratio 10.92 % 10.25 % 4.00 % 4.00 % Liquidity Liquidity measures the Company’s ability to meet its financial commitments at a reasonable cost. Demands on the Company’s liquidity include funding additional loan demand and accepting withdrawals of existing deposits. The Company has diverse liquidity sources, including customer and purchased deposits, customer repayments of loan principal and interest, sales, calls and maturities of securities, Federal Reserve discount window borrowing, short-term borrowing, and FHLB advances. As of September 30, 2025, the Company had $260,395 of borrowing capacity from the FHLB and the Company had $188,090 of available capacity at the Federal Reserve Bank discount window. As of September 30, 2025, the Company had $40,000 in FHLB borrowings with terms of one year or less and $10 million in Federal Reserve Discount Window borrowings with a term of less than three months. The Company considers its security portfolio for typical liquidity needs, within accounting, legal and strategic parameters. Portions of the securities portfolio are pledged to meet state requirements for public funds deposits. Discount window borrowings also require pledged securities. Increased/decreased liquidity from public funds deposits or discount window borrowings results in increased/decreased liquidity from pledging requirements. The Company monitors public funds pledging requirements and unpledged available for sale securities accessible for liquidity needs. Regulatory capital levels determine the Company’s ability to use purchased deposits and the Federal Reserve Bank discount window. As of September 30, 2025, the Company is considered well capitalized and does not have any restrictions on purchased deposits or borrowing ability at the Federal Reserve Bank discount window. The Company monitors factors that may increase its liquidity needs. Some of these factors include deposit trends, large depositor activity, maturing deposit promotions, interest rate sensitivity, maturity and repricing timing gaps between assets and liabilities, the level of unfunded loan commitments and loan growth. As of September 30, 2025, the Company’s liquidity is sufficient to meet projected trends. To monitor and estimate liquidity levels, the Company performs stress testing under varying assumptions on credit sensitive liabilities and the sources and amounts of balance sheet and external liquidity available to replace outflows. The Company’s Contingency Funding Plan sets forth avenues for rectifying liquidity shortfalls. As of September 30, 2025, the analysis indicated adequate liquidity under the tested scenarios. The Company utilizes several other strategies to maintain sufficient liquidity. Loan and deposit growth are managed to keep the loan to deposit ratio within the Company’s internally-set target range. As of September 30, 2025, the loan to deposit ratio was 65.07%. 44 Table of Contents The investment strategy takes into consideration the term of the investment, and securities in the available for sale portfolio are laddered based upon projected funding needs. Off-Balance Sheet Arrangements In the normal course of business, NBB extends lines of credit and letters of credit to its customers. Depending on their needs, customers may draw upon lines of credit at any time in any amount up to a pre-approved limit. Financial letters of credit guarantee payments to facilitate customer purchases. Performance letters of credit guarantee payment if the customer fails to complete a specific obligation. While it would be possible for customers to fully draw on approved lines of credit and for beneficiaries to call all letters of credit, historically this has not occurred. In the event of a sudden and substantial draw on these lines, the Company would be able to access multiple options, including its lines of credit with correspondents, raising additional deposits, or selling securities available for sale or loans. The Company estimates an ACL on unfunded loan commitments under the current expected credit losses model. The Company sells mortgages on the secondary market. Our agreements with the purchasers provide for strict underwriting and documentation requirements. Violation of the representations and warranties of the agreement would entitle the purchaser to recourse provisions. The Company has determined that its risk in this area is not significant because of the low volume of secondary market mortgage loans and high underwriting standards. The Company estimates a potential loss reserve for recourse provisions that is not material as of September 30, 2025. To date, no recourse provisions have been invoked. If funds were needed, the Company would access the same sources as noted above for funding lines and letters of credit. There were no material changes in off-balance sheet arrangements during the three and nine months ended September 30, 2025. Contractual Obligations The Company had no finance lease or purchase obligations and no long-term debt at September 30, 2025. Item 3. Quantitative a nd Qualitative Disclosures About Market Risk Not applicable. Item 4. Controls an d Procedures The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2025 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Because of the inherent limitations in all control systems, the Company believes that no system of controls, no matter how well designed and operated, can provide absolute assurance that all control issues have been detected. Part I I - OTHER INFORMATION Item 1. Legal P roceedings There are no pending or threatened legal proceedings to which the Company or any of its subsidiaries is a party or to which the property of the Company or any of its subsidiaries is subject that, in the opinion of management, may materially impact the financial condition of the Company. Item 1A. Ris k Factors Please refer to the “Risk Factors” previously disclosed in Item 1A of the Company's 2024 Form 10-K and the factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” in Part I. Item 2 of this Form 10-Q. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. 45 Table of Contents Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. 46 Table of Contents Item 5. Other I nformation (a) None. (b) None. (c) During the fiscal quarter ended September 30, 2025 , none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K). Item 6. E xhibits Index of Exhibits Exhibit No. Description 2(i) Agreement and Plan of Merger, dated as of January 23, 2024, by and among National Bankshares, Inc., The National Bank of Blacksburg and Frontier Community Bank (incorporated herein by reference to Exhibit 2.1 of the Form 8-K filed on January 24, 2024) 3(i) Amended and Restated Articles of Incorporation of National Bankshares, Inc. (incorporated herein by reference to Exhibit 3.1 of the Form 8-K filed on March 16, 2006) 3(ii) Amended and Restated Bylaws of National Bankshares, Inc. (incorporated herein by reference to Exhibit 3.2 of the Form 8-K filed on July 10, 2024) 4 Specimen copy of certificate for National Bankshares, Inc. common stock (incorporated herein by reference to Exhibit 4(a) of the Annual Report on Form 10-K for fiscal year ended December 31, 1993) +31(i) Section 302 Certification of Chief Executive Officer Filed herewith +31(ii) Section 302 Certification of Chief Financial Officer Filed herewith +32(i) 18 U.S.C. Section 1350 Certification of Chief Executive Officer Filed herewith +32(ii) 18 U.S.C. Section 1350 Certification of Chief Financial Officer Filed herewith +101 The following materials from National Bankshares, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2025 are formatted in iXBRL (Inline Extensible Business Reporting Language), furnished herewith: (i) Consolidated Balance Sheets at September 30, 2025 and December 31, 2024; (ii) Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024; and (vi) Notes to Consolidated Financial Statements. Filed herewith 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) Filed herewith 47 Table of Contents Signa tures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL BANKSHARES, INC. Date: November 13, 2025 /s/ Lara Ramsey By: Lara Ramsey Chief Executive Officer (Principal Executive Officer) Date: November 13, 2025 /s/ Lora M. Jones By: Lora M. Jones Treasurer and Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) 48