What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-13 compared with 2025-08-13 · 127 added, 121 removed, 398 unchanged (38% of the section changed)

72 unchanged sentences

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 June 30,

Three Months Ended September 30,

Net Interest Margin, FTE

6 unchanged sentences

Net interest margin

Six Months Ended June 30,

Nine Months Ended September 30,

Net Interest Margin, FTE

10 unchanged sentences

The components of the efficiency ratio calculation for the periods indicated are summarized in the following table.

Three Months Ended June 30,

Three Months Ended September 30,

Efficiency Ratio

1 unchanged sentence

merger-related expense

conversion expense (1)

core system conversion expense (1)

Adjusted noninterest expense (non-GAAP)

3 unchanged sentences

Efficiency ratio

Six Months Ended June 30,

Nine Months Ended September 30,

Efficiency Ratio

1 unchanged sentence

merger-related expense

conversion expense (1)

core system conversion expense (1)

Adjusted noninterest expense (non-GAAP)

3 unchanged sentences

Efficiency ratio (non-GAAP)

(1) Conversion expense stems from a core system upgrade that will provide greater efficiency and product offerings.

(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

2 unchanged sentences

The tables below present the reconciliation of adjusted annualized net income, which is not a measurement under GAAP, for the periods indicated.

Three Months Ended June 30,

Annualized Net Income (Loss) for Ratio Calculation

Net income (loss) per GAAP

Three Months Ended September 30,

Annualized Net Income for Ratio Calculation

Net income per GAAP

Items not annualized:

Partnership income net of tax of $8 for the peiod ended June 30, 2025

ACL provision, net of tax of $271 for the period ended June 30, 2024

Merger-related expense net of tax of $411 for the period ended June 30, 2024

Conversion expense, net of tax of $415 and $36 for the periods ended June 30, 2025 and 2024, respectively

Merger-related expense net of tax of $6 for the period ended September 30, 2024

Core system conversion expense, net of tax of $11 for the period ended September 30, 2025

Total non-annualized items

3 unchanged sentences

Annualized net income for ratio calculation (non-GAAP)

Average assets

Return on average assets (GAAP)

Adjusted return on average assets (non-GAAP)

Average equity

Return on average equity (GAAP)

Adjusted return on average equity (non-GAAP)

Six Months Ended June 30,

Nine Months Ended September 30,

Annualized Net Income for Ratio Calculation

1 unchanged sentence

Items not annualized:

Partnership income net of tax of ($44) and ($35) for the periods ended June 30, 2025

and 2024, respectively

ACL provision, net of tax of $271 for the period ended June 30, 2024

Merger-related expense net of tax of $411 for the period ended June 30, 2024

Conversion expense, net of tax of $425 and $36 for the periods ended June 30, 2025

and 2024, respectively

Partnership income net of tax of ($44) and ($35) for the periods ended September 30, 2025 and 2024, respectively

ACL provision, net of tax of $271 for the period ended September 30, 2024

Merger-related expense net of tax of $417 for the period ended September 30, 2024

Core system conversion expense, net of tax of $435 and $36 for the periods ended September 30, 2025 and 2024, respectively

Total non-annualized items

3 unchanged sentences

Annualized net income for ratio calculation (non-GAAP)

Average assets

Return on average assets (GAAP)

Adjusted return on average assets (non-GAAP)

Average equity

Return on average equity (GAAP)

1 unchanged sentence

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 system conversion completed during the second quarter of 2025 that will enhance efficiency and product offerings.

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 above.

The Federal Reserve's 100 basis point interest rate cut between September and December of 2024 eased deposit pricing pressure beginning in the fourth quarter of 2024 and continued to positively influence results in 2025.

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 system conversion of both the acquired bank and the legacy bank during the second quarter of 2025, with related expenses presented in Conversion Expense on the Consolidated Statements of Income.

The system conversion positions the Company for further growth.

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 June 30,

Net Income (Loss)

Three Months Ended September 30,

Return on average assets

2 unchanged sentences

Adjusted return on average equity (1)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Basic net income per common share

Diluted net income per common share

Net interest margin (1)

Efficiency ratio (1)

Six Months Ended June 30,

Nine Months Ended September 30,

Summary Key Performance Indicators

8 unchanged sentences

(1) See “Non-GAAP Financial Measures” above.

Net income for the three and six months ended June 30, 2025 increased when compared with the comparable periods of 2024, due to net interest margin expansion and merger related expenses in 2024.

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.

1 unchanged sentence

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.

Three Months Ended June 30,

Three Months Ended September 30,

($ in thousands)

14 unchanged sentences

(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 $113 and $60 for the three months ended June 30, 2025 and 2024, respectively.

Also included in interest income is accretion of discounts on acquired loans of $363 and $111 for the three months ended June 30, 2025 and 2024, respectively.

(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.

1 unchanged sentence

(5) Daily averages are shown at amortized cost.

(6) Included in interest expense is amortization of premium on acquired time deposits of $43 and $57 for the three months ended June 30, 2025 and 2024, respectively.

Six Months Ended June 30,

(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,

($ in thousands)

14 unchanged sentences

(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 $199 and $115 for the six months ended June 30, 2025 and 2024, respectively.

Also included in interest income is accretion of discounts on acquired loans of $615 and $111 for the six months ended June 30, 2025 and 2024, respectively.

(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.

1 unchanged sentence

(5) Daily averages are shown at amortized cost.

(6) Included in interest expense is amortization of premium on acquired time deposits of $101 and $57 for the six months ended June 30, 2025 and 2024, respectively.

When the three and six month periods ended June 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 and December 2024 immediately reduced expense for deposits with pricing based on the prime interest rate.

(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 June 30,

Three Months Ended September 30,

Service charges on deposits

1 unchanged sentence

Credit and debit card fees, net

Gain on sale of mortgage loans held for sale

Gain on sale of mortgage loans

Total noninterest income

Six Months Ended June 30,

Nine Months Ended September 30,

Service charges on deposits

1 unchanged sentence

Credit and debit card fees, net

Gain on sale of mortgage loans held for sale

Gain on sale of mortgage loans

Total noninterest income

Service charges on deposit accounts increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024, due to higher levels of deposits.

Credit and debit card fees, net, decreased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024, due to higher processing fees.

Trust income increased due to higher assets under management, when the three and six months ended June 30, 2025 are compared with the comparable period of 2024.

BOLI income increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to income from policies acquired from FCB.

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 six months ended June 30, 2025 is compared with the comparable period of 2024.

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.

Noninterest Expense

Three Months Ended June 30,

Three Months Ended September 30,

Salaries and employee benefits

Occupancy, furniture and fixtures

Data processing and ATM

Data processing

FDIC assessment

3 unchanged sentences

Merger-related expenses

Conversion expenses

Core system conversion expense

Other operating expenses

Total noninterest expense

Six Months Ended June 30,

Nine Months Ended September 30,

Salaries and employee benefits

Occupancy, furniture and fixtures

Data processing and ATM

Data processing

FDIC assessment

3 unchanged sentences

Merger-related expenses

Conversion expenses

Core system conversion expense

Other operating expenses

Total noninterest expense

Noninterest expense increased when the three and six months ended June 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 and six months ended June 30, 2025 are compared with the comparable periods of 2024, reflecting the addition of FCB employees.

Occupancy, furniture and fixtures expense increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024 due to additional assets acquired from FCB and higher maintenance costs.

Data processing expense decreased when the three months ended June 30, 2025 are compared with the comparable period of 2024, reflecting savings from the system conversion.

Data processing expense increased when the six months ended June 30, 2025 is compared with the comparable period of 2024 due to the expense of maintaining the legacy system for FCB until system conversion in May 2025.

FDIC assessment increased when the three and six months ended June 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 six months ended June 30, 2025 are compared with the comparable periods of 2024 due to higher legal expense.

During 2024, the Company recorded expenses associated with its acquisition of FCB, including legal and consulting fees.

Conversion expense primarily includes payments made to the former core system vendor to exit the contracts as well as other expenses associated with the conversion.

Other operating expenses increased when the three and six months ended June 30, 2025 are compared with the comparable periods of 2024.

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 $100 for the three months ended June 30, 2025 and $94 for the three months ended June 30, 2024.

For the six months ended June 30, 2025, total cybersecurity expense was $141 compared to $184 for the six months ended June 30, 2024.

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 reflects renegotiation of contracts and licensing.

The Company’s income tax expense was $362 for the three months ended June 30, 2025 compared to an income tax benefit of $178 for the same period in 2024.The Company's income tax expense was $1,028 for the six months ended June 30, 2025 and effective tax rate was 15.69%.

For the six months ended June 30, 2024, the Company’s income tax expense was $341 and effective tax rate was 15.44%.

A large portion of merger related expense was not tax deductible, impacting the Company’s effective tax rate for 2024.

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.

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,

Nonaccrual loans

1 unchanged sentence

ACLL to loans net of deferred fees and costs

Net charge-off ratio

Net charge-off ratio (annualized)

Ratio of nonperforming loans to loans, net of

3 unchanged sentences

Summary of Significant Accounting Policies.

The Company’s risk analysis as of June 30, 2025 determined an ACLL of $10,422, or 1.03% of loans net of deferred fees and costs.

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.

1 unchanged sentence

Individually Evaluated Loans

As of June 30, 2025, individually evaluated loans were $10,849.

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.

4 unchanged sentences

Collectively Evaluated Loans

Collectively evaluated loans totaled $1,000,286, with an ACLL of $10,281 as of June 30, 2025.

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.

5 unchanged sentences

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 June 30, 2025, and set a period of 12 months to revert to historical losses on a straight-line basis.

The forecast applied as of June 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 June 30, 2025 is compared with December 31, 2024.

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:

1 unchanged sentence

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 decreased.

Residential vacancy rates and housing inventory impact the Company’s residential construction customers and the consumer real estate market.

Higher levels increase credit risk.

The residential vacancy rate available as of June 30, 2025 increased compared to the

data incorporated into the December 31, 2024 calculation, resulting in a higher allocation.

Housing inventory increased when June 30, 2025 is compared with December 31, 2024, resulting in a higher allocation.

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

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:

2 unchanged sentences

Increases in past due loans indicate heightened credit risk.

Accruing loans past due 30-89 days were 0.50% of total loans as of June 30, 2025, an increase from 0.30% as of December 31, 2024.

The increase is primarily due to certain loans awaiting renewal.

Management expects the renewals to be approved and removed them from the allocation population.

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:

4 unchanged sentences

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 June 30, 2025, no allocation was included for interest rate changes, unchanged from December 31, 2024.

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 increases credit risk, while lower competition decreases credit risk.

Competition remained at similar levels to those at December 31, 2024.

The legal and regulatory environments also remain in a similar posture to December 31, 2024.

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.

5 unchanged sentences

Unallocated Surplus

The unallocated surplus as of June 30, 2025 was $10, or 0.10% in excess of the calculated requirement.

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.

1 unchanged sentence

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 June 30, 2025.

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 $241, or 0.14 % of unfunded commitments as of June 30, 2025.

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.

2 unchanged sentences

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 $322 and a recovery of credit losses on unfunded commitments of $10 for the six months ended June 30, 2025, compared with a provision for credit losses on loans of $1,307 and a recovery of $15 for unfunded commitments for the six months ended June 30, 2024.

For the three month period ended June 30, 2025, the Company recorded a provision for credit losses on loans of $45 and a recovery of credit losses on unfunded commitments of $9.

For the three month period ended June 30, 2024, the Company recorded a provision for credit losses on loans of $1,302, which included $1,290 for loans acquired on June 1, 2024.

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

6 unchanged sentences

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 six months ended June 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 June 30, 2025, the Company modified 173 loans totaling $17,750.

During the six months ended June 30, 2025, the Company modified 368 loans totaling $41,855.

During the three and six months ended June 30, 2024, the Company provided 216 modifications to loans totaling $21,704 and 432 modifications totaling $43,936.

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,

Interest-bearing deposits

2 unchanged sentences

Year-to-date daily averages for the major balance sheet categories are as follows:

September 30,

Interest-bearing deposits

10 unchanged sentences

The following table presents information on securities available for sale as of the dates indicated:

September 30,

Amortized cost

1 unchanged sentence

Securities available for sale, at fair value

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.

1 unchanged sentence

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 June 30, 2025 and no ACL has been recorded.

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:

1 unchanged sentence

Securities in Part I, Item 1 of this report for additional information on the securities portfolio.

September 30,

Real estate construction

8 unchanged sentences

The Company is positioned to make every loan that meets its underwriting standards.

September 30,

Noninterest-bearing demand deposits

9 unchanged sentences

Capital Resources

September 30,

Common stock and additional paid in capital

7 unchanged sentences

Capital ratios for NBB are shown in the following tables:

June 30, 2025

September 30, 2025

December 31, 2024

8 unchanged sentences

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 June 30, 2025, the Company had $292,916 of borrowing capacity from the FHLB and the Company had $173,226 of available capacity at the Federal Reserve Bank discount window.

As of June 30, 2025, the Company did not have purchased deposits, discount window borrowings or short-term borrowings.

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.

4 unchanged sentences

Regulatory capital levels determine the Company’s ability to use purchased deposits and the Federal Reserve Bank discount window.

As of June 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.

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 June 30, 2025, the Company’s liquidity is sufficient to meet projected trends.

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 June 30, 2025, the analysis indicated adequate liquidity under the tested scenarios.

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 June 30, 2025, the loan to deposit ratio was 62.09%.

As of September 30, 2025, the loan to deposit ratio was 65.07%.

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.

8 unchanged sentences

The Company sells mortgages on the secondary market.

Our agreement with the purchaser provides for strict underwriting and documentation requirements.

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 June 30, 2025.

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 six months ended June 30, 2025.

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 June 30, 2025.

The Company had no finance lease or purchase obligations and no long-term debt at September 30, 2025.

Quantitative a nd Qualitative Disclosures About Market Risk

2 unchanged sentences

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 June 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 June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis