EDGAR 10-K Filing

Company CIK: 1163389
Filing Year: 2025
Filename: 1163389_10-K_2025_0001903596-25-000149.json

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ITEM 1. BUSINESS
Item 1. Business
General
New Peoples Bankshares, Inc. (New Peoples, the Company, we, us or our) is a Virginia financial holding company headquartered in Honaker, Virginia. Our business is conducted primarily through New Peoples Bank, Inc., a Virginia banking corporation (the “Bank”). The Bank has a division doing business as New Peoples Financial Services which offers investment services through its broker-dealer relationship with Osaic Institutions, Inc. NPB Insurance Services, Inc. (“NPB Insurance”) is a subsidiary of the Bank and generates revenue through the referral of insurance services.
The Bank, headquartered in Honaker, Virginia, offers a range of banking and related financial services focused primarily on serving individuals, small to medium size businesses, and the professional community. We strive to serve the banking needs of our customers while developing personal, hometown relationships with them. Our Board of Directors believes that marketing customized banking services enables us to establish a niche in the financial services marketplace where we do business.
We provide professionals and small to medium size businesses in our market area with responsive and technologically enabled banking services. These services include loans that are priced on a deposit relationship basis, easy access to our decision makers, and quick and innovative action necessary to meet a customer’s banking needs. Our capitalization and lending limit enable us to satisfy the credit needs of a large portion of the targeted market segment. When a customer needs a loan that exceeds our lending limit, we try to find other financial institutions to participate in the loan with us.
Our History
The Bank was incorporated under the laws of the Commonwealth of Virginia on December 9, 1997 and began operations on October 28, 1998. On September 27, 2001, the shareholders of the Bank approved a plan of reorganization under which they exchanged their shares of Bank common stock for shares of New Peoples common stock. On November 30, 2001, the reorganization was completed and the Bank became New Peoples’ wholly-owned subsidiary.
In June 2003, New Peoples formed two new wholly-owned subsidiaries, NPB Financial Services, Inc. (renamed NPB Insurance Services, Inc. in June 2012) and NPB Web Services, Inc., an inactive web design and hosting company.
The Bank, through its division New Peoples Financial Services, offers fixed and variable annuities, fee-based asset management and other investment products through a broker/dealer relationship with Osaic Institutions, Inc.
In July 2004, NPB Capital Trust I was formed by New Peoples to issue $11.3 million in trust preferred securities.
In September 2006, NPB Capital Trust 2 was formed by New Peoples to issue $5.2 million in trust preferred securities.
On June 7, 2017, NPB Insurance Services, Inc. purchased a 39% membership interest in Lonesome Pine Title Agency, LLC, which provides title insurance.
Branch Locations
As of March 24, 2025, we have 17 full-service branches located in four states: Virginia - Abingdon, Bluefield, Bristol, Castlewood, Clintwood, Gate City, Grundy, Haysi, Honaker, Lebanon, Pounding Mill, Tazewell and Wise; West Virginia - Princeton (2); North Carolina - Boone, and Tennessee - Kingsport.
Our Market Areas
Our primary market area consists of southwestern Virginia, southern West Virginia, northeastern Tennessee, and western North Carolina. Specifically, we operate in the southwestern Virginia counties of Russell, Scott, Washington, Tazewell, Buchanan, Dickenson, and Wise; in the southern West Virginia county of Mercer and the northeastern Tennessee county of Sullivan (collectively, the “Tri-State Area”). In North Carolina, our loan production office in the county of Watauga became a full-service branch in March 2024. The close proximity and mobile nature of individuals and businesses in adjoining counties and nearby cities in Virginia, West Virginia, Tennessee and North Carolina place these markets within our Bank’s targeted trade area, as well.
Accessibility to Interstates I-77, I-81, I-26, I-64, I40 and I-75, as well as major state and U.S. highways including US 19, US 23, US 58, US 460 and US 421, makes the area an ideal location for businesses to serve markets in the Mid-Atlantic, Southeast and Midwest. The area is strategically located midway between Atlanta-Pittsburgh, Charlotte-Cincinnati, and Richmond-Louisville, and is within a day’s drive of more than half of the U.S. population. A regional airport located in Bristol, Tennessee serves the area with commercial flights to and from major cities in the United States. Commercial rail service providers include CSX Transportation and Norfolk Southern Railways.
The Tri-State Area has a diversified economy supported by natural resources, which include coal, natural gas, limestone, and timber; agriculture; healthcare; education; technology; manufacturing and services industries. Predominantly, the market is comprised of locally owned and operated small businesses. Considerable investments in high-technology communications, high-speed broadband network and infrastructure have been made which has opened the area to large technology companies and future business development potential for new and existing businesses. Businesses are taking advantage of the low cost of doing business, training opportunities, available workforce and an exceptional quality of life experience for employers and employees alike.
Internet Site
Our internet banking site can be accessed at www.newpeoples.bank. The site includes a customer service area that contains branch and Automated Teller Machine (“ATM”) locations, product descriptions and current interest rates offered on deposit accounts. Customers with internet access can apply for credit cards, open deposit accounts online, access account balances, make transfers between accounts, enter stop payment orders, order checks, and use an optional bill paying service.
Available Information
We file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission (the SEC). The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers, like us, that file electronically with the SEC. Our SEC filings are filed electronically and are available to the public online at the SEC’s web site at www.sec.gov. We also provide a link to our filings on the SEC website, free of charge, through our internet website https://newpeoples.bank/about-us under "New Peoples Bankshares" “SEC Filings.” Information on the websites of the Company and the Bank is not a part of, and is not incorporated into, this report or any other filings the Company makes with the SEC.
Banking Services
General. We accept deposits, make consumer and commercial loans, issue drafts, and provide other services customarily offered by a commercial bank, such as business and personal checking and savings accounts, walk-up tellers, drive-in windows, and 24-hour ATMs. The Bank is a member of the Federal Reserve System and its deposits are insured under the Federal Deposit Insurance Act (the FDIA) to the maximum limit.
Loans. Generally, we offer a full range of short-, medium- and longer-term commercial, 1-4 family residential mortgages and personal loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate and improvements) and purchase of equipment and machinery. Consumer loans may include secured and unsecured loans for financing automobiles, home improvements, education, personal investments and other purposes.
Our lending activities are subject to a variety of lending limits imposed by state law. While differing limits may apply in certain circumstances based on the type of loan or the nature of the borrower (including the borrower’s relationship to the Bank), the Bank generally is subject to a loans-to-one-borrower limit of an amount equal to 15% of its capital and surplus plus the allowance for credit losses. The Bank voluntarily may choose to impose a policy limit on loans to a single borrower that is less than the legal lending limit.
We obtain short-, medium- and longer-term commercial and personal loans through direct solicitation of business owners and continued business from existing customers. Completed loan applications are reviewed by our loan officers. As part of the application process, information is obtained concerning the income, financial condition, employment and credit history of the applicant. If commercial real estate is involved, information is also obtained concerning cash flow after debt service. Loan quality is analyzed based on the Bank’s experience and its credit underwriting guidelines.
Commercial Loans. We make commercial loans to qualified businesses in our market area. Our commercial lending consists primarily of commercial and industrial loans to finance accounts receivable, inventory, property, plant and equipment. Commercial business loans generally have a higher degree of risk than residential mortgage loans but have commensurately higher yields. Residential mortgage loans are generally made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be easily ascertainable. In contrast, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as commercial real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself.
Further, the collateral for commercial business loans may depreciate over time and cannot be appraised with as much precision as residential real estate. To manage these risks, our underwriting guidelines generally require us to secure commercial loans with both the assets of the borrowing business and other additional collateral and guarantees that may be available. In addition, we actively monitor certain measures of the borrower, including advance rate, cash flow, collateral value and other appropriate credit factors.
Residential Mortgage Loans. Our residential mortgage loans consist of residential first and second mortgage loans, residential construction loans, home equity lines of credit and term loans secured by first and second mortgages on the residences of borrowers for home improvements, education and other personal expenditures. We make mortgage loans with a variety of terms, including fixed and floating or variable rates and a variety of maturities.
Under our underwriting guidelines, residential mortgage loans are generally made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be easily ascertainable. These loans are made consistent with our appraisal policies and real estate lending policies, which detail maximum loan-to-value ratios and maturities.
Construction Loans. Construction lending entails significant additional risks compared to residential mortgage lending. Construction loans often involve larger loan balances concentrated with single borrowers or groups of related borrowers. Construction loans also involve additional risks attributable to the fact that loan funds are advanced upon the security of property under construction, which is of uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate the total loan funds required to complete a project and related loan-to-value ratios accurately. To minimize the risks associated with construction lending, loan-to-value limitations for residential, multi-family and non-residential construction loans are in place. These are in addition to the usual credit analyses of borrowers. Management feels that the loan-to-value ratios help to minimize the risk of loss and to compensate for normal fluctuations in the real estate market. Maturities for construction loans generally range from 4 to 12 months for residential property and from 6 to 18 months for non-residential and multi-family properties.
Consumer Loans. Our consumer loans consist primarily of installment loans to individuals for personal, family and household purposes. The specific types of consumer loans that we make include home improvement loans, debt consolidation loans and general consumer lending. Consumer loans entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured, such as lines of credit, or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance due to the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. A borrower may also be able to assert against the Bank as an assignee any claims and defenses that it has against the seller of the underlying collateral.
Our underwriting policy for consumer loans seeks to limit risk and minimize losses, primarily through a careful analysis of the borrower’s creditworthiness. In evaluating consumer loans, we require our lending officers to review the borrower’s level and stability of income, past credit history and the impact of these factors on the ability of the borrower to repay the loan in a timely manner. In addition, we maintain an appropriate margin between the loan amount and collateral value.
Deposits. We offer a variety of deposit products for both individual and business customers. These include demand deposit, interest-bearing demand deposit, savings deposit, money market, health savings and individual retirement (IRA) deposit accounts. In addition, we offer certificates of deposit with terms ranging from 7 days to 60 months, including IRAs with terms ranging from 12 months to 60 months.
Investment Services. We offer a variety of investment services for both individual and business customers. These services include fixed income products, variable annuities, mutual funds, indexed certificates of deposit, individual retirement accounts, long term care insurance, employee group benefit plans, college savings plans, financial planning, managed money accounts, and estate planning. We offer these services through our broker-dealer relationship with Osaic Institutions, Inc.
Other Bank Services. Other bank services include safe deposit boxes, cashier’s checks, positive pay fraud detection for commercial customers, and certain cash management services, direct deposit of payroll and social security checks and automatic drafts for various accounts. We offer ATM and debit card services that can be used by our customers throughout our service area and other regions. We also offer consumer and commercial VISA credit card services. Electronic banking services include debit cards, internet banking, telephone banking, mobile banking, remote deposit capture, merchant transaction processing and wire transfers.
We do not presently anticipate obtaining trust powers, but we are able to provide similar services through our affiliation with Osaic Institutions, Inc. Additionally, we offer programs of differentiator presentations focusing on such issues as financial literacy and elder abuse. We believe that these types of programs assist our local communities and highlight the skills of our financial service providers.
Competition
The financial services business is highly competitive. We compete as a financial intermediary with other commercial banks, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds and other financial institutions operating in the southwestern Virginia, southern West Virginia, eastern Tennessee, and western North Carolina market areas and elsewhere, including online financial services providers. Our market area is a highly competitive banking market.
Competition in the market area for loans to small businesses and professionals, the Bank’s target market, is intense, and pricing is important. Many of our larger competitors have substantially greater resources and lending limits than we have. They offer certain services, such as extensive and established branch networks and trust services, that we do not provide or do not expect to provide in the near future. Moreover, larger institutions operating in the market area have access to borrowed funds at lower costs than are available to us. Deposit competition among institutions in our market area is strong, resulting in the possibility of our paying above-market rates to attract or retain deposits.
While pricing is important, our principal method of countering the competition is service. As a community banking organization, we strive to serve the banking needs of our customers while developing personal, hometown relationships with them. Additionally, we continue to add and enhance digital banking services. As a result, we provide a significant amount of service and a range of products through multiple channels at reasonable fees.
According to a market share report prepared by the Federal Deposit Insurance Corporation (the “FDIC”), as of June 30, 2024, the most recent date for which market share information is available, the Bank’s deposits as a percentage of total deposits in its major market areas were as follows:
County or City
% of Market
Dickenson County, VA
40.53%
Scott County, VA
33.94%
City of Bristol, VA
31.10%
Russell County, VA
21.95%
Buchanan County, VA
15.09%
Tazewell County, VA
10.15%
Wise County, VA
8.26%
Washington County, VA
7.21%
Mercer County, WV
6.67%
City of Kingsport, TN
1.56%
Town of Boone, NC
0.25%
Employees
As of December 31, 2024, we had 177 full-time equivalent employees. None of our employees are covered by a collective bargaining agreement, and we consider relations with employees to be excellent.
Supervision and Regulation
General. As a financial holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as amended (“BHCA”), and the examination and reporting requirements of the Board of Governors of the Federal Reserve System (the Federal Reserve). We are also subject to the provisions of the Code of Virginia governing bank holding companies. As a state-chartered commercial bank, the Bank is subject to regulation, supervision and examination by the Virginia State Corporation Commission’s Bureau of Financial Institutions (“BFI”). As a member of the Federal Reserve System, the Bank is also subject to regulation, supervision and examination by the Federal Reserve. Other federal and state laws, including various consumer protection and compliance laws, also govern the activities of the Bank.
The following paragraphs summarize the most significant federal and state laws applicable to New Peoples and its subsidiaries. To the extent that statutory or regulatory provisions are described, the description is qualified in its entirety by reference to that particular statutory or regulatory provision.
The Bank Holding Company Act. Under the BHCA, the Federal Reserve examines New Peoples periodically. New Peoples is also required to file periodic reports and provide any additional information that the Federal Reserve may require. Activities at the bank holding company level are generally limited to:
• banking, managing or controlling banks;
• furnishing services to or performing services for its subsidiaries; and
• engaging in other activities that the Federal Reserve has determined by regulation or order to be so closely related to banking as to be a proper incident to these activities.
Thus, the activities we can engage in are restricted as a matter of law.
With some limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before:
• acquiring substantially all the assets of any bank;
• acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares); or
• merging or consolidating with another bank holding company.
As a result, our ability to engage in certain strategic activities is conditioned on regulatory approval.
In addition, and subject to some exceptions, the BHCA and the Change in Bank Control Act require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company as defined in the statutes and regulations. These requirements make it more difficult for control of our company to change or for us to acquire substantial investments.
Financial Holding Company. As of March 4, 2016, the Company elected to become qualified as a financial holding company (FHC). The Gramm-Leach-Bliley Act (GLBA) created this category of bank holding companies. FHC’s may directly or indirectly through subsidiaries engage in financial activities and activities “incidental” or “complementary” to financial activities. Generally, an FHC need not give prior notice of such activities but must notify the Federal Reserve within 30 days after an event.
The BHCA provides a long list of “financial” activities that may be engaged in by FHCs such as underwriting, brokering or selling insurance; providing financial or investment advice or underwriting, dealing in or making a market in securities.
There are other potential “financial” activities in which the Federal Reserve is permitted to designate as permitted financial, or incidental to financial, activities.
We do not currently undertake activities specifically permitted to us as an FHC that are not otherwise permissible for bank holding companies not qualified as FHCs.
Bureau of Financial Institutions. As a bank holding company registered with the BFI, we must provide the BFI with information concerning our financial condition, operations and management, among other reports required by the BFI. New Peoples is also examined by the BFI in addition to its Federal Reserve examinations. Similar to the BHCA, the Code of Virginia requires that the BFI approve the acquisition of direct or indirect ownership or control of more than 5% of the voting shares of any Virginia bank or bank holding company.
Payment of Dividends. New Peoples is a separate legal entity that derives the majority of its revenues from the earnings of, and dividends paid to it by, its subsidiaries. The Bank is subject to laws and regulations that limit the amount of dividends it can pay. In addition, both New Peoples and the Bank are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or above regulatory minimums. Banking regulators have indicated that banking organizations should generally pay dividends only if the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition. The FDIC has the general authority to limit the dividends paid by FDIC insured banks if the FDIC deems the payment to be an unsafe and unsound practice. The FDIC has indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsound and unsafe banking practice.
Capital Adequacy. The federal banking regulators have issued substantially similar capital requirements applicable to all banks and bank holding companies. In addition, those regulators may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.
The Company meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement and does not report consolidated regulatory capital. With respect to the Bank, the “prompt corrective action” regulations pursuant to Section 38 of the FDIA are set forth in the following table:
Total Risk
Tier 1 Risk
CET1 Risk
Based Capital
Based Capital
Based Capital
Leverage
Ratio
Ratio
Ratio
Ratio
Well Capitalized ≥ 10.00%
≥ 8.00%
≥ 6.50%
≥ 5.00%
Adequately Capitalized ≥ 8.00%
≥ 6.00%
≥ 4.50%
≥ 4.00%
Undercapitalized < 8.00%
< 6.00%
< 4.50%
< 4.00%
Significantly Undercapitalized < 6.00%
< 4.00%
< 3.00%
< 3.00%
Critically Undercapitalized Tangible equity to total assets ≤ 2.00%
The FDIA requires the federal banking regulators to take “prompt corrective action” if a depository institution does not meet minimum capital requirements as set forth above. Generally, a receiver or conservator for a bank that is “critically undercapitalized” must be appointed within specific time frames. The regulations also provide that a capital restoration plan must be filed within 45 days of the date a bank is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company for a bank required to submit a capital restoration plan must guarantee the lesser of (i) an amount equal to 5% of the bank’s assets at the time it was notified or deemed to be undercapitalized by a regulator, or (ii) the amount necessary to restore the bank to adequately capitalized status. This guarantee remains in place until the bank is notified that it has maintained adequately capitalized status for specified time periods. Additional measures with respect to undercapitalized institutions include a prohibition on capital distributions, growth limits and restrictions on activities.
The Bank is also subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). The final rules established minimum capital ratios plus a “capital conservation buffer” designed to absorb losses during periods of economic stress. The final provisions for banks with $250.0 billion or less in total assets, such as the Bank, are set forth in the following table:
Minimum Leverage Ratio
4.00%
Minimum CET1 Risk Based Capital Ratio
4.50%
Capital Conservation Buffer (1)
2.50%
Minimum CET1 Risk Based Capital Ratio with Capital Conservation Buffer
7.00%
Minimum Tier 1 Risk Based Capital Ratio
6.00%
Minimum Tier 1 Risk Based Capital Ratio with Capital Conservation Buffer
8.50%
Minimum Total Risk Based Capital Ratio
8.00%
Minimum Total Risk Based Capital Ratio with Capital Conservation Buffer
10.50%
(1) The capital conservation buffer must be maintained in order for a banking organization to avoid being subject to limitations on capital distributions, including dividend payments, and discretionary bonus payments to executive officers.
The final rules include comprehensive guidance with respect to the measurement of risk-weighted assets. For residential mortgages, Basel III retains the risk-weights contained in the prior capital rules, which assign a risk-weight of 50% to most first-lien exposures and 100% to other residential mortgage exposures. The final rule increased the risk-weights associated with certain on-balance sheet assets, such as high volatility commercial real estate loans, and loans that are more than 90 days past due or in nonaccrual status. Capital requirements also increased for certain off-balance sheet exposures including, for example, loan commitments with an original maturity of one year or less.
Under the final rules, certain banking organizations, including the Company and the Bank, were permitted to make a one-time election to continue the prior treatment of excluding from regulatory capital most accumulated other comprehensive income (“AOCI”) components, including amounts relating to unrealized gains and losses on available-for-sale debt securities and amounts attributable to defined benefit post-retirement plans. Institutions that elected to exclude most AOCI components from regulatory capital under Basel III will be able to avoid volatility that would otherwise be caused by things such as the impact of fluctuations in interest rates on the fair value of available-for-sale debt securities. The Company and the Bank elected to exclude AOCI components from regulatory capital under Basel III.
Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits and certain other restrictions on its business. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository institutions that fail to meet applicable capital requirements as set forth above.
For further detail on capital and capital ratios, see discussion contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” sections “Capital Resources” and “Liquidity,” and in Item 8, “Financial Statements and Supplementary Data,” “Consolidated Financial Statements and Notes,” Note 22, “Capital.”
Other Safety and Soundness Regulations. There are a number of obligations and restrictions imposed on banks and financial or bank holding companies and their bank subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event that the depository institution is insolvent or is in danger of becoming insolvent. For example, the Federal Reserve requires a bank or financial or bank holding company to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so otherwise. These requirements can restrict the ability of bank holding companies to deploy their capital as they otherwise might.
Interstate Banking and Branching. Banks in Virginia may branch without geographic restriction. Current federal law authorizes interstate acquisitions of banks and bank holding companies without geographic limitation. Bank holding companies may acquire banks in any state without regard to state law except for state laws requiring a minimum time a bank must be in existence to be acquired. The Code of Virginia generally permits out of state bank holding companies or banks to acquire Virginia banks or bank holding companies subject to regulatory approval. These laws have the effect of increasing competition in banking markets.
Monetary Policy. The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve. The Federal Reserve’s monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of unsettled conditions in the national and international political environment, economy and money markets, as well as governmental fiscal and monetary policies, their impact on interest rates, deposit levels, loan demand or the business and earnings of the Bank is unpredictable.
Transactions with Affiliates. Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. These provisions restrict the amount of, and provide conditions with respect to, loans, investments, transfers of assets and other transactions between New Peoples and the Bank.
Loans to Insiders. The Bank is subject to rules on the amount, terms and risks associated with loans to executive officers, directors, principal shareholders and their related interests.
Community Reinvestment Act. Under the Community Reinvestment Act, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practices. The Community Reinvestment Act emphasizes the delivery of bank products and services through branch locations in a bank’s market areas and requires banks to keep data reflecting their efforts to assist in its community’s credit needs. Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are assigned ratings in this regard. Banking regulators consider a depository institution’s Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries. A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the GLBA (see below) may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a “Satisfactory” rating in its latest Community Reinvestment Act examination. The Bank received a rating of “Satisfactory” at its last Community Reinvestment Act performance evaluation, as of August 1, 2022.
In October 2023, the federal bank regulatory agencies jointly issued a final rule intended to strengthen and modernize the Community Reinvestment Act regulatory framework. When implemented, the rule would, among other things, (i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions. Most of the final rule’s new requirements are applicable beginning January 1, 2026. The remaining new requirements, including data reporting requirements, are applicable on January 1, 2027. The final rule has been subject to an injunction since March 29, 2024, and the effective dates will be extended pending resolution of the lawsuit.
Gramm-Leach-Bliley Act of 1999. The GLBA covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. For example, the GLBA permits unrestricted affiliations between banks and securities firms. It also permits bank holding companies to elect to become FHCs, which can engage in a broad range of financial services as described above. In order to become an FHC, a bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed and have at least a satisfactory Community Reinvestment Act rating. On March 4, 2016, the Federal Reserve Bank of Richmond approved New Peoples’ election to become an FHC.
The GLBA also provides that the states continue to have the authority to regulate insurance activities, but prohibits the states, in most instances, from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations or cross-marketing activities.
Anti-Money Laundering Legislation. New Peoples is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. Among other things, these laws and regulations require New Peoples to take steps to prevent the use of New Peoples for facilitating the flow of illegal or illicit money, to report large currency transactions, and to file suspicious activity reports. The Company is also required to carry out a comprehensive anti-money laundering compliance program. Violations can result in substantial civil and criminal sanctions. In addition, provisions of the USA Patriot Act require the federal bank regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions.
Privacy and Fair Credit Reporting. Financial institutions, such as the Bank, are required to disclose their privacy policies to customers and consumers and require that such customers or consumers be given a choice (through an opt-out notice) to forbid the sharing of nonpublic personal information about them with nonaffiliated third persons. The Bank also requires business partners with whom it shares such information to assure the Bank that they have adequate security safeguards and to abide by the redisclosure and reuse provisions of applicable law. In addition to adopting federal requirements regarding privacy, individual states are authorized to enact more stringent laws relating to the use of customer information. The Virginia Consumer Data Protection Act, passed in 2021, became effective January 1, 2023. These privacy laws create compliance obligations and potential liability for the Bank.
Mortgage Banking Regulation. The Bank is subject to rules and regulations related to mortgage loans that, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers, in some cases restrict certain loan features and fix maximum interest rates and fees, require the disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered and require the maintenance and disclosure of information regarding the disposition of mortgage applications based on race, gender, geographical distribution and income level. The Bank is also subject to rules and regulations that require the collection and reporting of significant amounts of information with respect to mortgage loans and borrowers. The Bank’s mortgage origination activities are subject to the Federal Reserve’s Regulation Z, which implements the Truth in Lending Act. Certain provisions of Regulation Z require creditors to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms. To the extent that we make mortgage loans, we are required to comply with these rules, subject to available exceptions.
Sarbanes-Oxley Act. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) is intended to increase corporate responsibility, provide enhanced penalties for accounting and auditing improprieties by publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities law. The changes required by the Sarbanes-Oxley Act and its implementing regulations are intended to allow shareholders to monitor the performance of companies and their directors more easily and effectively.
The Sarbanes-Oxley Act generally applies to all domestic companies, such as New Peoples, that file periodic reports with the SEC under the Securities Exchange Act of 1934, as amended. The Sarbanes-Oxley Act includes significant additional disclosure requirements and expanded corporate governance rules and the SEC has adopted extensive additional disclosures, corporate governance provisions and other related rules pursuant to it. New Peoples has expended, and will continue to expend, considerable time and money in complying with the Sarbanes-Oxley Act.
Federal Deposit Insurance Corporation. The Bank’s deposits are insured by the Deposit Insurance Fund, as administered by the FDIC, to the maximum amount permitted by law, which is $250,000 per depositor. The FDIC uses a “financial ratios method” based on “CAMELS” composite ratings to determine deposit insurance assessment rates for small established institutions with less than $10 billion in assets, such as the Bank. The CAMELS rating system is a supervisory rating system designed to take into account and reflect all financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk (“CAMELS”). CAMELS composite ratings set a maximum assessment for banks rated CAMELS 1 and 2 and set minimum assessments for lower rated institutions. Effective for the first quarterly assessment period of 2023, the FDIC increased the deposit insurance assessment by 2 basis points for all insured institutions. In 2024 and 2023, the Company recorded expense of $386,000 and $360,000, respectively, for FDIC insurance premiums.
Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act was signed into law on July 21, 2010. Its wide-ranging provisions affect all federal financial regulatory agencies and nearly every aspect of the American financial services industry. Among the provisions of the Dodd-Frank Act that directly impacted the Company was the creation of an independent Consumer Financial Protection Bureau (CFPB), which has the ability to write rules for consumer protections governing all financial institutions. All consumer protection responsibility formerly handled by other banking regulators is consolidated in the CFPB. It also oversees the enforcement of all federal laws intended to ensure fair access to credit. Smaller financial institutions, such as the Company and the Bank, continued to be examined primarily by their primary regulators.
In February 2025, the Trump administration halted the CFPB’s operations, and its employees were instructed to cease all supervision and examination activity. As a result, the future of the CFPB and its impact on the Company’s business are uncertain.
The Dodd-Frank Act has had, and may in the future have, a material impact on New Peoples’ operations, particularly through increased compliance costs resulting from new and possible future consumer and fair lending regulations. Any future changes resulting from the Dodd-Frank Act may affect the profitability of business activities, require changes to certain business practices, impose more stringent regulatory requirements or otherwise adversely affect the business and financial condition of New Peoples and the Bank. These changes may also require New Peoples to invest significant management attention and resources to evaluate and make necessary changes to comply with new statutory and regulatory requirements.
The Economic Growth, Regulatory Reform and Consumer Protection Act of 2018 (EGRRCPA). The EGRRCPA, which became effective in May 2018, amended provisions of the Dodd-Frank Act and other statutes administered by banking regulators. Among these amendments are provisions exempting insured depository institutions (and their parent companies) with less than $10 billion in consolidated assets and meeting certain other asset and liabilities trading tests from the Volker Rule, which prohibits banks from conducting certain investment activities with their own accounts. The EGRRCPA increased the asset threshold from $1 billion to $3 billion for financial institutions to qualify for a less burdensome 18-month on-site examination schedule. The EGRRCPA made numerous other changes in regulatory requirements based on the size and complexity of financial institutions, particularly benefiting smaller institutions like the Company.
Cybersecurity. Federal regulators expect that financial institutions design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. Additionally, a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is expected to maintain appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or any of its critical service providers fall victim to this type of cyber-attack. If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.
Federal bank regulators issued a joint rule, effective in 2022, establishing computer-security incident notification requirements for banking organizations and their bank service providers. The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cyber incident has occurred. In addition, the final rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization customers for four or more hours. The rule defines computer-security incident as an occurrence that results in actual harm to the confidentiality, integrity, or availability of an information system or the information that the system processes, stores, or transmits. In July 2023, the SEC issued a final rule to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance, and incident reporting by public companies that are subject to the reporting requirements of the Exchange Act. Specifically, the final rule requires current reporting about material cybersecurity incidents, periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risk, management’s role in implementing cybersecurity policies and procedures, and the board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk. See Item 1C. Cybersecurity of this Form 10-K for a discussion of the Company’s cybersecurity risk management, strategy and governance.
Limitations on Incentive Compensation. The federal bank regulatory agencies have issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging excessive risk-taking. The Interagency Guidance on Sound Incentive Compensation Policies, which covers all employees that have the ability to materially affect the risk profile of financial institutions, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the financial institution’s board of directors.
The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of financial institutions, such as the Company and the Bank, that are not “large, complex banking organizations.” These reviews will be tailored to each financial institution based on the scope and complexity of the institution’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a financial institution if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the institution’s safety and soundness, and the financial institution is not taking prompt and effective measures to correct the deficiencies. As of December 31, 2024, the Company and the Bank have not been made aware of any instances of noncompliance with this guidance.
Other Laws. Banks and other depository institutions also are subject to other numerous consumer-oriented laws and regulations. These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Fair and Accurate Credit Transactions Act of 2003 and the Fair Housing Act, require compliance by depository institutions with various disclosure and consumer information handling requirements. These and other similar laws result in significant costs and create potential liability for financial institutions, including the imposition of regulatory penalties for inadequate compliance.
Future Regulatory Uncertainty. Because federal and state regulation of financial institutions changes regularly and is the subject of constant legislative debate, New Peoples cannot forecast how regulation of financial institutions may change in the future and impact its operations. New Peoples fully expects that the financial institution industry will remain heavily regulated notwithstanding the regulatory relief that has been recently adopted.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Not required.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
As of December 31, 2024, the Company's net investment in premises and equipment was $17.1 million. Our main office and operations center are in Honaker, Virginia, which includes a full-service branch, and a separate administration and operations center.
The Bank owns 13 of its 17 full-service branch offices, including its headquarters office. In addition to the headquarters in Honaker, Virginia we own or lease branch offices located in Virginia, West Virginia, North Carolina, and Tennessee, and a loan production office in Wytheville, Virginia which opened in February 2025. Additionally, the Bank owns an operations building housing its network and other support operations. The Bank owns one former branch office that was closed in 2022 and leases a former branch office that was closed in 2024 and now serves as an administrative office for the Bank. The Bank also owns undeveloped lots in Coeburn, Virginia, Mt. Carmel, TN and Princeton, WV (3). A leased full-service branch office in Boone, North Carolina opened in March 2024.
One closed and a now sold former branch in Big Stone Gap, Virginia continues to offer ATM services.
We continue to assess our branch network as we look to improve the efficiency of our branch operations while seeking to increase market share.
We believe that all of our properties are maintained in good operating condition and are suitable and adequate for our operational needs.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
In the normal course of operations, we may become a party to legal proceedings, as discussed in Note 21 Legal Contingencies to the consolidated financial statements contained in Item 8 of this form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a) Market Information
Computershare Investor Services is the stock transfer agent for New Peoples Bankshares, Inc. The common stock of New Peoples is quoted on the OTC Market’s Pink Open Market under the symbol “NWPP”. The volume of trading of shares of common stock is very limited. Trades in our common stock occur sporadically on a local basis and typically in small volumes. Over-the-Counter market quotations reflect inter-dealer prices without retail mark up, mark down or commissions and may not necessarily represent actual transactions.
The most recent sales price of which management is aware was $3.05 per share on March 13, 2025.
(b) Holders
On March 24, 2025, there were approximately 3,813 shareholders of record.
(c) Dividends
Any declaration of dividends in the future will depend on our earnings, capital requirements, growth strategies, and compliance with regulatory mandates, principally at the Bank level, since the Company’s primary source of income is dividends paid by the Bank. The Company paid a dividend of $0.07 per share in 2024. On February 24, 2025, the Company declared a dividend of $0.08 per share, payable March 31, 2025.
We are subject to certain dividend restrictions and capital requirements imposed by the Federal Reserve Bank as well as Virginia statutes and regulations. See Note 16, Dividend Limitations on Subsidiary Bank, and Note 22, Capital, to the consolidated financial statements contained in Item 8 of this Form 10-K.
(d) Stock Repurchases
The Company extended the stock repurchase program initiated in 2022 that authorizes the repurchase of up to 500,000 of the Company’s common shares through March 31, 2025. Repurchases may be made through open market purchases or in privately negotiated transactions. Shares repurchased will be returned to the status of authorized and unissued shares of common stock. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company.
Shares of the Company’s common stock were repurchased during the three months ended December 31, 2024, as detailed below. Under the terms of the stock repurchase program, the Company has the remaining authority to repurchase up to 214,638 shares of common stock. On February 24, 2025, the Board of Directors approved an extension of the repurchase program through March 31, 2026.
The following table provides information regarding repurchases of common stock for the three months ended December 31, 2024.
Period Beginning on First Day of Month Ended
Total Number of Shares Purchased
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs
October 31, 2024
3,432
$
2.70
3,432
226,550
November 30, 2024
9,052
$
2.73
9,052
217,498
December 31, 2024
2,860
$
3.00
2,860
214,638
Total
15,344
$
2.77
15,344

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution About Forward Looking Statements
We make forward looking statements in this annual report on Form 10-K that are subject to risks and uncertainties. These forward-looking statements include statements regarding expectations, intentions, projections and beliefs concerning our profitability, liquidity, and allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. 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 on various factors and were derived using numerous assumptions as of the date of this Form 10-K and are subject to significant risks.
The following important factors, among others, that may cause actual results to differ from that expressed in such forward-looking statements include:
the success or failure of our efforts to implement our business plan;
any required increase in our regulatory capital ratios;
satisfying other regulatory requirements that may arise from examinations, changes in the law and other similar factors;
deterioration of asset quality;
changes in the level of our nonperforming assets and charge-offs;
fluctuations of real estate values in our markets;
our ability to attract and retain talent;
demographical changes in our markets which negatively impact the local economy;
the uncertain outcome of current or future legislation or regulations or policies of state and federal regulators;
the successful management of interest rate risk;
the successful management of liquidity;
changes in general economic and business conditions in our market area and the United States in general;
credit risks inherent in making loans such as changes in a borrower’s ability to repay and our management of such risks;
competition with other banks and financial institutions, and companies outside of the banking industry, including online lenders and those companies that have substantially greater access to capital and other resources;
demand, development and acceptance of new products and services we have offered or may offer;
deposit flows and competition for deposits;
the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rate, market and monetary fluctuations;
the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues and other catastrophic events;
geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
technology utilized by us, including the successful core operating system conversion in 2025;
our ability to successfully manage cybersecurity, including generative artificial intelligence risks;
our ability to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic funds transfer fraud;
our reliance on third-party vendors and correspondent banks;
changes in generally accepted accounting principles;
changes in governmental regulations, tax rates and similar matters; and,
other risks, which may be described, from time to time, in our filings with the SEC.
Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
General
The following commentary discusses major components of our business and presents an overview of our consolidated financial position as of December 31, 2024 and 2023, as well as results of operations for the years ended December 31, 2024 and 2023. This discussion should be reviewed in conjunction with the consolidated financial statements and accompanying notes and other statistical information presented elsewhere in this Form 10-K.
New Peoples generates a significant amount of its income from the net interest income earned by the Bank. Net interest income is the difference between interest income and interest expense. Interest income depends on the volume of interest-earning assets outstanding during the period and the interest rates earned thereon. The Bank's interest expense is a function of the average amount of interest-bearing deposits and borrowed money outstanding during the period and the interest rates paid thereon. The quality of the assets further influences the amount of interest income lost on nonaccruing loans and the amount of provision expense added to the allowance for credit losses. The Bank also generates noninterest income from service charges and fees on deposit accounts, debit and credit card interchange income, and commissions on insurance and investment products sold.
Critical Accounting Policies
Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. Our most critical accounting estimates relate to our allowance for credit losses.
The allowance for credit losses reflects the estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated, and additional provisions could be required. For further discussion of the estimates used in determining the allowance for credit losses, we refer you to the section on “Allowance for Credit Losses” in this discussion.
For further discussion of our other critical accounting policies, see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements, contained in Item 8 of this Form 10-K.
Overview
For the year ended December 31, 2024, net income was $8.2 million, or basic and diluted net income per share of $0.35, compared to a net income of $7.2 million, or basic and diluted net income per share of $0.30, for the year ended December 31, 2023, an increase of $1.0 million, or 14.20%. Retained earnings increased $6.5 million, or 45.26%, to $21.0 million as of December 31, 2024 from $14.5 million as of December 31, 2023.
Results for the year ended December 31, 2024 were impacted by several non-recurring events. On December 31, 2024 the Bank provided notice of termination of the contract with our core systems provider. We plan to complete the conversion to a new core systems provider in the fourth quarter of 2025. As a result of the termination notice, we recorded termination charges and certain conversion costs estimated to be $850,000. During the fourth quarter of 2024, we had two transactions in our bank owned life insurance portfolio (“BOLI”) that disposed of the entire portfolio. One policy was cancelled and redeemed, resulting in a loss of $49,000; and a benefit claim was filed on the second policy resulting in a gain of $1.6 million. After consideration of the tax impact, these non-recurring items increased earnings by $756,000 or $0.03 per basic and diluted share. In 2023, other noninterest income included $257,000 in insurance proceeds recovery related to costs incurred during the cybersecurity incident in 2022. The following non-GAAP table summarizes the impact of these nonrecurring events:
(Dollars in thousands)
Amount
Per Share
Amount
Per Share
As reported
Net income (GAAP) $ 8,204
$
0.35
$ 7,184
$
0.30
Adjust for nonrecurring items:
-
BOLI benefit
(1,565)
-
Insurance proceeds
-
(257)
BOLI redemption
-
Core system conversion
Total nonrecurring items
(666)
(257)
Applicable tax effect
(90)
Nonrecurring items net of tax
(756)
(203)
As adjusted for nonrecurring items (non-GAAP) $ 7,448
$
0.32
$ 6,981
$
0.29
Adjusted net income and net income per share are non-GAAP financial measures that management uses to supplement the evaluation of the Company’s operating results and believes is beneficial to the users of its financial statements in evaluating the Company’s current operating results in relation to past periods.
As discussed in “Net Interest Income and Net Interest Margin”, net interest income for the year ended December 31, 2024 was $28.5 million compared to $28.0 million for the year ended December 31, 2023. The increase was primarily due to a $59.6 million increase in average earning assets. Average interest-bearing liabilities increased $65.3 million to $549.5 million during the comparative twelve-month periods.
For the year ended December 31, 2024, noninterest income was $11.3 million, an increase of $1.3 million from the $9.9 million in 2023. Excluding non-recurring items, noninterest income was unchanged at $9.7 million for 2024 and 2023, due to nonrecurring income of $1.6 million and $257,000 recorded in 2024 and 2023, respectively
For the year ended December 31, 2024, noninterest expense was $28.8 million, an increase of $800,000 from $28.0 million in 2023. Excluding non-recurring items, noninterest expense decreased $90,000 to $27.9 million compared to $28.0 million for the year ended December 31, 2023.
Total assets as of December 31, 2024 were $854.9 million, an increase of $28.6 million, or 3.46%, from $826.3 million as of December 31, 2023. Gross loans increased $19.4 million, or 3.04%, during 2024 due to continuing loan demand. Investment securities increased $6.2 million during 2024 primarily due to securities purchases executed throughout the year. All of the Company's investments are designated as available-for-sale.
Deposits totaled $750.0 million as of December 31, 2024 compared to $716.5 million as of December 31, 2023. The increase of $33.5 million, or 4.68%, was due to efforts to attract and retain deposits, specifically time deposits through targeted promotional rates and terms and money market accounts through more aggressive pricing of rates, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $16.4 million during the year ended December 31, 2024.
New Peoples Bank remains well-capitalized. The leverage ratio is 10.70% as of December 31, 2024, compared to 11.11% as of December 31, 2023.
The Company’s key performance indicators are as follows:
Year ended December 31,
Return on average assets 0.96 % 0.91 %
Return on average shareholders’ equity 12.28 % 12.00 %
Average shareholders’ equity to average assets ratio 7.81 % 7.55 %
Net Interest Income and Net Interest Margin
The Company’s primary source of income is net interest income, which increased $502,000, or 1.79%, in 2024 compared to 2023 due primarily to an increase in average earning assets which increased $59.6 million or 7.8% in 2024. Loans and interest bearing deposits in other banks were the principal drivers of this growth increasing $32.3 million and $29.7 million, respectively. Combined with the increase in the volume of earning assets, the yield on these assets increased 55 basis points (bps; 1 basis point is equal to 1/100th of 1 percent) to 5.42%. The yield on loans increased 61 bps to 5.96%. The increase in interest income was partially offset by the cost of interest-bearing liabilities which increased 105 bps to 2.93% during the year ended December 31, 2024 compared to 1.88% during the year ended December 31, 2023. Time deposits were the primary contributor to the increase in interest expense due to an increase of 137 bps in the cost of time deposits to 3.94% and a $50.6 million increase in the average balance due to a strategy to attract and retain time deposits. Additionally, the cost of borrowed funds decreased 64 bps to 5.79%, as the cost of other borrowings increased 44 bps to 4.04% while trust preferred securities costs rose 7 bps to 7.72%. Aside from the rate increases in borrowed funds, the total average balance increased $9.8 million due primarily to the Bank Term Funding Program borrowing taken in December 2023 and repaid during the fourth quarter of 2024. These rate and volume activities combined to result in an increase in net interest income of $502,000, while the net interest margin decreased to 3.47% for the year ended December 31, 2024, from 3.67% for 2023.
The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated.
Net Interest Margin Analysis
Average Balances, Income and Expense, and Yields and Yields and Rates
Average
Income/
Yields/
Average
Income/
Yields/
(Dollars are in thousands)
Balance
Expense
Rates
Balance
Expense
Rates
ASSETS
Loans (1) (2) $ 641,022 $ 38,208
5.96% $ 608,705 $ 32,552
5.35%
Federal funds sold
5.18%
4.99%
Interest bearing deposits in other banks
74,524
3,875
5.20%
44,864
2,239
4.99%
Taxable investment securities
107,278
2,544
2.37%
109,303
2,322
2.12%
Total earning assets
822,939
44,633
5.42%
763,319
37,135
4.87%
Less: Allowance for credit losses
(7,628)
(6,937)
Non-earning assets
40,103
36,574
Total assets $ 855,414
$ 792,956
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand deposits $ 72,936 $
0.83% $ 74,939 $
0.61%
Savings and money market deposits
171,311
2,833
1.65%
164,429
1,442
0.88%
Time deposits
271,835
10,707
3.94%
221,275
5,681
2.57%
Total interest-bearing deposits
516,082
14,145
2.74%
460,643
7,582
1.65%
Other borrowings
17,486
4.04%
7,124
3.60%
Trust preferred securities
15,904
1,248
7.72%
16,426
1,274
7.65%
Total borrowed funds
33,390
1,967
5.79%
23,550
1,534
6.43%
Total interest-bearing liabilities
549,472
16,112
2.93%
484,193
9,116
1.88%
Non-interest-bearing deposits
229,717
240,121
Other liabilities
9,431
8,781
Total liabilities
788,620
733,095
Shareholders’ equity
66,794
59,861
Total liabilities and shareholders’ equity $ 855,414
$ 792,956
Net interest income
$ 28,521
$ 28,019
Net interest margin 3.47%
3.67%
Net interest spread 2.49%
2.99%
(1) Nonaccrual loans and loans held for sale have been included in average loan balances.
(2) Tax exempt income is not significant and has been treated as fully taxable.
Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. The following tables set forth the amounts of the total changes in interest income and interest expense which can be attributed to rates, volume and a combination of rates and volume, for the periods indicated.
Volume and Rate Analysis
Increase (decrease)
	 Year 2024 Compared to 2023
(Dollars in thousands)
Volume Effect
Rate Effect
Rate and Volume Effect
Change in Interest Income/ Expense
Interest income:
Loans $ 1,728
$ 3,730
$
$ 5,656
Federal funds sold
(16)
(1)
(16)
Interest bearing deposits in other banks
1,480
1,636
Taxable investment securities
(43)
(5)
Total earning assets
3,149
4,095
7,498
Interest expense:
Interest-bearing demand deposits
(12)
(5)
Savings and money market deposits
1,277
1,391
Time deposits
1,298
3,035
5,026
Other borrowings
Trust preferred securities
(40)
(26)
Total interest-bearing liabilities
1,679
4,518
6,996
Change in net interest income $ 1,470 $ (423) $ (545) $
Volume and Rate Analysis
Increase (decrease)
	 Year 2023 Compared to 2022
(Dollars in thousands)
Volume Effect
Rate Effect
Rate and Volume Effect
Change in Interest Income/ Expense
Interest income:
Loans $ $ 3,876 $ $ 4,813
Federal funds sold
Interest bearing deposits in other banks
(627)
2,307
(955)
Taxable investment securities
(72)
(10)
Total earning assets
6,467
(848)
5,745
Interest expense:
Interest-bearing demand deposits
-
Savings and money market deposits
(36)
1,416
(198)
1,182
Time deposits
3,310
4,164
Other borrowings
(326)
(157)
(241)
Trust preferred securities
(3)
(2)
Total interest-bearing liabilities
(97)
5,878
6,011
Change in net interest income $ $ $ (1,078) $ (266)
The increases in interest income and interest expense during 2024 were driven by a combination of increased interest rates and increased volumes of interest earning assets and liabilities. Overall, our net interest margin decreased 20 bps to 3.47% in 2024 compared to 3.67% in 2023.
The increase in interest income is attributed to an increase in the average balance and yield on earning assets. Average earning assets increased $59.6 million. Specifically average loans increased $32.3 million or 5.31%, and average interest-bearing deposits in other banks increased $29.7 million, or 66.1%. In addition, the yield on average earning assets improved 55 bps to 5.42% for the year ended December 31, 2024 compared to 4.87% for the year ended December 31, 2023. Overall, loan interest income, including fees, increased $5.7 million during the year ended December 31, 2024 compared to December 31, 2023.
Interest expense increased $7.0 million, due primarily to an increase in the average balance and yield on interest bearing liabilities. Average time deposits and, money market and savings deposits increased $50.6 million and $6.9 million, respectively. These increases were largely due to aggressive pricing on these deposit products as the cost of interest-bearing deposits increased 109 bps to 2.74%. The increase in yield on interest bearing deposits was partially offset by a decrease in cost of borrowed funds which fell 64 bps to 5.79% due to principal payments made on trust preferred securities and the relatively lower cost for the Bank Term Funding Program borrowing that was outstanding throughout most of 2024.
Loans
Our primary source of income is interest earned on loans. Total gross loans increased $19.4 million during 2024, or 3.04%, to $657.5 million as of December 31, 2024 as compared to $638.1 million as of December 31, 2023. The primary drivers of this increase in total loans were increases in construction loans, commercial real estate loans and commercial loans which increased $7.3 million to $36.1 million, $3.5 million to $243.6 million and $7.4 million to $60.6 million, respectively. These increases resulted from small business development efforts throughout 2024 and a commercial loan promotion offered. In addition, consumer installment and all other loans increased $5.9 million due to private student loan originations of $1.8 million and the acquisition of $2.9 million in consumer loans. These increases offset reductions in residential and multi-family mortgage loans which decreased $3.4 million to $234.9 million and $2.2 million to $32.4 million during 2024. For more detail on loan balances, refer to Note 6 of the consolidated financial statements contained in Item 8 of this Form 10-K.
Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. Nonaccrual loans negatively affect interest income as these loans are nonearning assets. When doubt about the collectability of a loan exists, it is the Bank’s policy to stop accruing interest on that loan under the following circumstances: (a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when conditions indicate that payment of principal and interest can no longer be expected, or (c) when any such loan becomes delinquent for 90 days and is not both well secured and in the process of collection. All interest accrued but not collected on loans that are placed on nonaccrual is charged off and reversed against interest income in the current period. In the case of a nonaccrual loan that is well secured and in the process of collection, the interest accrued but not collected is not reversed. Interest received on these loans is accounted for on the cash basis or cost-recovery method until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments are made, and prospects for future contractual payments are reasonably assured. For more detail on nonaccrual loans, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
Individually evaluated loans increased during 2024 to $1.7 million as of December 31, 2024, from $1.1 million as of December 31, 2023. Interest income and cash receipts on individually evaluated loans are handled differently depending on whether or not the loan is on nonaccrual status. If the individually evaluated loan is not on nonaccrual status, the interest income on the loan is computed using the effective interest method. For more detail on individually evaluated loan balances, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
The following table presents the dollar composition and percentage of our loan portfolio as of December 31:
Loan Composition
(Dollars in thousands)
$
%
$
%
Real estate secured:
Commercial $ 243,646
37.1% $ 240,187
37.6%
Construction and land development
36,112
5.5%
28,830
4.5%
Residential 1-4 family
234,860
35.7%
238,233
37.3%
Multifamily
32,379
4.9%
34,571
5.4%
Farmland
16,921
2.6%
16,401
2.6%
Total real estate loans
563,918
85.8%
558,222
87.4%
Commercial
60,587
9.2%
53,230
8.3%
Agriculture
4,025
0.6%
3,508
0.5%
Consumer installment loans and all other loans
29,006
4.4%
23,151
3.7%
Total loans
657,536
100.0%
638,111
100.0%
Less: allowance for credit losses
7,684
7,256
Total
$ 649,852
$ 630,855
Our loan maturities, and distribution between fixed and variable rate loans as of December 31, 2024 are shown in the following tables:
Maturities of Loans
(Dollars in thousands) One Year
or Less One to Five Years Five to Fifteen Years After Fifteen Years Total
Real estate secured:
Commercial $ 15,546 $ 42,364 $ 85,505 $ 100,231 $ 243,646
Construction and land development 7,760 3,920 11,587 12,845 36,112
Residential 1-4 family 9,097 13,086 72,704 139,973 234,860
Multifamily 3,862 11,731 16,294 32,379
Farmland 2,706 8,146 5,172 16,921
Total real estate loans 33,792 65,938 189,673 274,515 563,918
Commercial 18,108 30,129 10,763 1,587 60,587
Agriculture 1,656 1,451 4,025
Consumer installment loans and all other loans 5,225 17,957 5,791 29,006
Total $ 58,781 $ 115,475 $ 206,923 $ 276,357 $ 657,536
The following table presents the dollar amount of fixed rate and variable rate loans with maturities greater than one year as of December 31, 2024:
(Dollars in thousands) Fixed Rate Variable Rate
Real estate secured:
Commercial $ 74,005 $ 154,095
Construction and land development 8,582 19,770
Residential 1-4 family 76,654 149,109
Multifamily 10,576 21,311
Farmland 3,069 12,955
Total real estate loans 172,886 357,240
Commercial 36,375 6,104
Agriculture 2,142
Consumer installment loans and all other loans 22,582 1,199
Total $ 233,985 $ 364,770
Contractual maturities of loans do not reflect the actual term of our loan portfolio. The average life of mortgage loans is substantially less than the contractual life due to prepayments and enforcement of due on sale clauses. Scheduled principal amortization also reduces the average life of the loan portfolio. The average life of mortgage loans tends to increase when current market mortgage rates are substantially above rates on existing loans while the average life decreases when rates on existing loans are substantially above current market rates.
Some variable rate loans may not reprice, or fully reprice, at their next reset date due to instances where the reset rate may not be above the rate floor or may be more than the allowable rate increase under the terms of the loan. In these instances, it may take several reset periods before these loans are fully adjusted.
Allowance for Credit Losses
The Company maintains its allowance for credit losses based on the expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.
The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.
The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
The Company primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff, the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral values, concentrations of credit, and legal or regulatory requirements and competition.
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “classified” as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the discounted cash flow (“DCF”) method.
The allowance for credit losses increased to $7.7 million as of December 31, 2024 from $7.3 million as of December 31, 2023. The allowance for credit losses at the end of 2024 was approximately 1.17% of total loans as compared to 1.14% at the end of 2023. Provisions for credit losses for loans receivable of approximately $506,000 and $712,000 were recorded during the years ended December 31, 2024 and 2023, respectively. Loans charged off, net of recoveries, totaled approximately $78,000, or 0.01% of average loans, for the year ended December 31, 2024, compared to approximately $103,000, or 0.02% of average loans, in 2023. The allowance for credit losses represents an amount that, in the Company's judgment, will be adequate to absorb expected and estimable losses inherent in the loan portfolio. The judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time, changes in the nature and volume of the loan portfolio, current reasonable and supportable forecasts of economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.
Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. The amount of interest income that would have been recognized on these loans had they been accruing interest was approximately $49,000 and $61,000 in the years ended December 31, 2024 and 2023, respectively. There were no loans past due 90 days or greater and still accruing interest at either December 31, 2024 or 2023. There are no commitments to lend additional funds to non-performing borrowers.
A majority of our loans are collateralized by real estate located in our market area. It is our policy to sufficiently collateralize loans to help minimize exposure to losses in cases of default. Increasing real estate values in our area have reduced this exposure somewhat. However, while we consider our market area to be somewhat diverse, certain areas are more reliant upon agriculture, coal mining and natural gas. As a result, increased risk of loan impairments is possible due to the volatile nature of the coal mining and natural gas industries.
Commercial and commercial real estate loans are initially risk rated by the originating loan officer. If deterioration in the financial condition of the borrower and/or their capacity to repay the debt occurs, the loan may be downgraded by the loan officer or our watch list committee. Guidance for risk rate grading is established by the regulatory authorities who periodically review the Bank’s loan portfolio for compliance. Classifications used by the Bank are Pass, Special Mention, Substandard, Doubtful and Loss.
With regard to the Bank’s consumer and consumer real estate loan portfolio, we use the guidance found in the Uniform Retail Credit Classification and Account Management Policy which affects our estimate of the allowance for credit losses. Under this approach, a consumer or consumer real estate loan must initially have a credit risk grade of Pass or better. Subsequently, if the loan becomes contractually 90 days past due or the borrower files for bankruptcy protection, the loan is downgraded to Substandard and placed in nonaccrual status. If the loan is unsecured upon being deemed Substandard, the entire loan amount is charged-off.
For non-1-4 family residential loans that are 90 days or more past due or in bankruptcy, the collateral value less estimated liquidation costs are compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient, then no charge-off is necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged-off against the allowance for credit losses. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days past due, or at the time of foreclosure, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan balance to calculate any deficiency. Subsequently, any noted deficiency is then charged-off against the allowance for credit losses when the loan becomes contractually 180 days past due, or at the time of foreclosure. If the customer has filed bankruptcy, then within 60 days of the bankruptcy notice, any calculated deficiency is charged-off against the allowance for credit losses. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation ensues.
Annualized net charge-offs, as a percentage of average loans, was 0.01% during the year ended December 31, 2024, compared to 0.02% for the same period of 2023. The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known credit losses within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the year ended December 31, 2024, we made modest adjustments to our qualitative factors to consider risk factors associated with commercial real estate and residential mortgage loans and the impacts of the hurricane Helene. Those changes, along with the assessment of the historical and specific risks associated with the loan portfolio, resulted in a net provision for credit losses of $625,000, of which $506,000 was provided for the loan portfolio and $119,000 was provided to the allowance for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of December 31, 2024 and 2023:
Selected Credit Ratios
December 31,
(Dollars in thousands)
Allowance for credit losses $ 7,684 $ 7,256
Total loans
657,536
638,111
Allowance for credit losses to total loans
1.17%
1.14%
Nonaccrual loans $ 3,273 $ 3,534
Nonaccrual loans to total loans
0.50%
0.55%
Ratio of allowance for credit losses to nonaccrual loans
2.35X
2.05X
Charge-offs net of recoveries $ $
Average loans $ 641,022 $ 608,705
Net charge-offs to average loans
0.01%
0.02%
The following table shows the average balance, net charge-offs or recoveries and percentage of net charge-offs or recoveries by each major category of loans for the years ended December 31, 2024 and 2023:
Average Balance
Net Charge-offs (Recoveries)
Net Charge-offs (Recoveries) as % of Average Loan Type
Average Balance
Net Charge-offs (Recoveries)
Net Charge-offs (Recoveries) as % of Average Loan Type
Commercial $ 240,730 $
0.03%
$ 212,409 $ -
0.00%
Construction and land development
30,063
(44)
-0.15%
39,920
(35)
-0.09%
Residential 1-4 family
234,848
(25)
-0.01%
232,280
0.01%
Multifamily
33,782
0.28%
33,332
(111)
-0.33%
Farmland
16,557
(297)
-1.79%
17,253
-
0.00%
Total real estate loans
555,980
(197)
-0.04%
535,194
(132)
-0.02%
54,669
0.28%
48,586
0.05%
3,611
-
0.00%
3,596
1.50%
26,319
0.46%
20,748
0.75%
-
0.00%
-
0.00%
$ 641,022 $
0.01%
$ 608,705 $
0.02%
The following table shows the balance and percentage of our allowance for credit losses allocated to each major category of loans.
Allocation of the Allowance for Credit Losses
December 31, 2024
December 31, 2023
(Dollars in thousands)
Amount
% of ACL
% of Loans
Amount
% of ALLL
% of Loans
Real estate secured:
Commercial $ 2,565
33.4
37.1 $ 2,518
34.7
37.6
Construction and land development
4.2
5.5
4.1
4.5
Residential 1-4 family
2,923
38.0
35.7
2,666
36.7
37.3
Multifamily
5.0
4.9
7.0
5.4
Farmland
1.9
2.6
2.2
2.6
Total real estate loans
6,341
82.5
85.8
6,156
84.7
87.4
Commercial
9.8
9.2
9.3
8.3
Agriculture
0.5
0.6
0.5
0.5
Consumer and all other loans
7.2
4.4
5.5
3.8
Total $ 7,684
100.0
100.0 $ 7,256
100.0
100.0
We have allocated the allowance according to the amount deemed to be reasonably necessary to provide for the expected credit losses within each of the categories of loans. The allocation of the allowance as shown in the table above should not be interpreted as an indication that credit losses in future years will occur in the same proportions or that the allocation indicates future credit loss trends. Furthermore, the portion allocated to each loan category is not the total amount available for future losses that might occur within such categories since the total allowance is a general allowance applicable to the entire portfolio.
The allocation of the allowance for credit losses is based on our judgment of the relative risk associated with each type of loan. We have allocated 33.4% of the allowance to commercial real estate loans, which constituted 37.1% of our loan portfolio at December 31, 2024. This allocation decreased slightly compared to 34.7% in 2023, due primarily to the slight decrease in nonaccrual and past due loans for this segment of the loan portfolio. We have allocated 9.8% of the allowance to commercial loans, which constituted 9.2% of our loan portfolio at December 31, 2024. This allocation percentage increased compared to December 31, 2023, due to the increase in this component of the loan portfolio.
Both residential and commercial real estate loans are secured by real estate whose value tends to be easily ascertainable. These loans are made consistent with appraisal policies and real estate lending policies, which detail maximum loan-to-value ratios and maturities.
We allocated 4.2% of the allowance to real estate construction loans, which constituted 5.5% of our loan portfolio as of December 31, 2024. Construction loans are secured by real estate with values that are dependent upon market and economic conditions. Additionally, these credits are generally shorter-term projects of eighteen months or less.
These loans are made consistent with appraisal policies and real estate lending policies which detail maximum loan-to-value ratios and maturities.
We allocated 38.0% of the allowance to residential real estate loans, which constituted 35.7% of our loan portfolio as of December 31, 2024.
We allocated 7.2% of the allowance to consumer and all other loans, which constituted 4.4% of our loan portfolio as of December 31, 2024. Our allocation increased compared to the allocation as of December 31, 2023, due to the impact of activity on overdrawn deposit accounts.
Other Real Estate Owned
Other real estate owned decreased $70,000, or 44.59%, to approximately $87,000 as of December 31, 2024 from $157,000 as of December 31, 2023. During 2024, five properties were sold in the amount of $1.5 million and four properties were acquired in the amount of $1.3 million.
While the levels of problem credits and foreclosed properties have been reduced significantly over the past several years, we remain mindful of the impact on earnings and capital as we work to achieve our goal to reduce nonperforming assets. However, we may recognize some losses and reductions in the allowance for credit losses as we expedite the resolution of these problem assets.
Investment Securities
Total investment securities increased $6.2 million, or 6.88%, to $96.0 million as of December 31, 2024 from $89.8 million as of December 31, 2023. All securities are classified as available-for-sale for liquidity purposes. The increase in investment securities during 2024 was due to purchases of $23.3 million, which more than offset sales of $2.1 million, and maturities, payments and amortization of $14.6 million and a $419,000 increase in the unrealized loss on securities available-for-sale. During the third quarter of 2024, odd lot investment securities totaling $2.1 million were sold, and the proceeds were used to reinvest in other securities. These sales generated a net gain of $4,000.There were no sales of securities during 2023. During 2023, there were maturities, calls and paydowns of $9.4 million, and the Company purchased $0.5 million in investment securities. Investment securities with a carrying value of $35.2 million and $36.8 million as of December 31, 2024 and 2023, respectively, were pledged to secure public deposits and for other purposes required, or permitted, by law.
Our strategy is to invest excess funds in investment securities, which typically yield more interest income than other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond, but which still provide liquidity.
The fair value of our investment portfolio is substantially affected by changes in interest rates. Losses could be realized if liquidity and/or business strategy necessitate the sale of securities in a loss position, due to Federal Reserve actions, U.S. fiscal policies or other factors affecting market interest rates. As of December 31, 2024, we had a net unrealized loss in our investment portfolio totaling $15.2 million as compared to a $14.8 million loss as of December 31, 2023. As market interest rates increase, the level of unrealized losses could change substantially. However, these changes would have no impact on earnings or regulatory capital, unless the securities were sold at a loss. We believe that all unrealized losses resulted from temporary changes in interest rates and current market conditions and are not a result of credit deterioration. No allowance for credit losses on available-for-sale securities was recorded as of December 31, 2024 and 2023. We monitor our portfolio regularly and use it to maintain liquidity, manage interest rate risk and enhance earnings.
The fair value and weighted average yield of investment securities as of December 31, 2024 are shown in the following schedule by contractual maturity and do not reflect principal paydowns for amortizing securities. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Weighted average yields are calculated by dividing the contractual interest for each time period by the average amortized contractual cost.
Less than One Year
One to Five Years
Five to ten years
After ten years
Total
(Dollars in thousands)
Fair Value
Average Yield
Fair Value
Average Yield
Fair Value
Average Yield
Fair Value
Average Yield
Fair Value
Average Yield
U.S. Treasuries $ 2,685
1.55% $ 4,296
1.03% $
4.12% $ -
-% $ 7,961
1.57%
U.S. Government Agencies
1,230
3.15%
1,466
4.59%
3,660
3.54%
2,449
3.11%
8,805
3.10%
Taxable municipals
-
-%
2.44%
6,066
2.18%
11,728
2.56%
18,524
2.44%
Corporate bonds
-
-%
1,408
3.24%
2.88%
-
-%
2,253
3.10%
Mortgage backed securities
-
-%
2,860
3.84%
9,231
3.54%
46,350
2.21%
58,441
2.50%
$ 3,915
2.05% $ 10,760
2.57% $ 20,782
3.10% $ 60,527
2.31% $ 95,984
2.48%
Bank Owned Life Insurance
As of December 31, 2024 and 2023, the Bank had an aggregate total cash surrender value of $0 and $4.6 million, respectively, on life insurance policies covering former key officers. During 2024, one policy was surrendered at market value resulting in a loss of $49,000. In December 2024, a death benefit receivable of $5.4 million was recorded, resulting in an income accrual of $1.6 million.
Excluding the loss on surrender and the income accrued on the death benefit, the Company recognized income of approximately $73,000 and $40,000 during the years ended December 31, 2024 and 2023.
Deposits
Total deposits were $750.0 million as of December 31, 2024, an increase of $33.5 million, or 4.68%, from $716.5 million as of December 31, 2023, due to efforts to attract and retain deposits, specifically time deposits, combined with more aggressive pricing on money market accounts and cyclical fund inflows. Most of the increase was driven by money market deposits which increased $30.2 million, or 55.9%, to $84.1 million, and time deposits, which increased $16.4 million, or 6.51%, to $268.7 million as of December 31, 2024 and 2023. These increases more than offset a reduction in noninterest bearing demand deposits of $8.9 million. The increases in time and money market deposits resulted from small business development efforts throughout 2024, revamping certain accounts to better suit customer needs and offering periodic rate promotions.
Information detailing average deposit balances and average rates paid on deposits is presented in the Net Interest Margin Analysis table contained in the “Net Interest Income and Net Interest Margin” section.
Core deposits are considered to include demand deposits and other types of transaction accounts, such as commercial relationships and savings and money market products. Noninterest bearing demand deposits decreased $8.9 million in 2024, while interest bearing demand deposits, savings and money market deposits increased $26.0 million. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.
Time deposits of $250,000 or more equaled approximately 6.84% of deposits at the end of 2024 and 7.36% of deposits at the end of 2023.
As of December 31, 2024 and 2023, uninsured deposits are estimated to be $91.9 million and $93.8 million, respectively. Estimated uninsured deposits represented 12.3% and 13.1% of total deposits as of December 31, 2024 and 2023, respectively. Included in estimated uninsured deposits are $22.9 million and $27.9 million of public funds, for such respective periods, considered secured via pledged securities or letters of credit we have with the Federal Home Loan Bank of Atlanta (the FHLB).
The following table shows maturities of all time deposits considered uninsured by the FDIC or otherwise.
Maturities of Time Deposits of Greater Than $250,000
(Dollars in thousands)
December 31, 2024
Three months or less $ 12,138
Over three months through six months
16,280
Over six months through twelve months
9,275
Over one year
10,846
Total $ 48,539
As of December 31, 2024 and 2023, $35.2 million and $36.8 million of securities, respectively, were pledged to collateralize public deposits, including time deposits, held in our Tennessee offices, and as collateral for credit facilities available through FRB. Additionally, we held letters of credit from the FHLB for $14.0 million and $12.0 million at December 31, 2024 and 2023, respectively, to secure public deposits, including time deposits, held in our Virginia offices.
We held $3.0 million in brokered deposits at December 31, 2024, and no brokered deposits as of December 31, 2023. While not a primary source of funding, brokered deposits provide a means to efficiently manage funding and liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the average rate paid on deposits is shown in the net interest margin analysis table in the “Net Interest Income and Net Interest Margin” section. Total Certificate of Deposit Registry Service (“CDARS”) time deposits were $7.0 million and $6.3 million at December 31, 2024 and 2023, respectively.
Noninterest Income
For the year ended December 31, 2024, noninterest income totaled $11.3 million. After excluding non-recurring items, as shown in the table below, which is a non-GAAP measure, noninterest income was $9.7 million for 2024 compared to $9.9 million for 2023. A $244,000, or 22.51%, increase in financial services revenue to $1.3 million from the $1.1 million recorded during 2023 offset modest decreases in service charges and card processing revenue of $48,000 and $28,000, respectively. In addition, noninterest income was impacted by the sales of bank properties in 2024 and 2023. During 2024, a former branch office and a lot were sold, along with the sale of furniture, resulting in a net gain of $23,000. During the same period of 2023, two former office facilities and a vehicle were sold resulting in a net gain of $130,000. In 2023, other noninterest income included $257,000 in insurance proceeds recovery related to costs incurred during the cybersecurity incident in 2022, that was not repeated in 2024. Excluding this item noninterest income for 2023 and the nonrecurring items in 2024, noninterest income would have been unchanged at $9.7 million.
Noninterest Expense
For the year ended December 31, 2024, noninterest expense totaled $28.8 million. After excluding non-recurring items, as shown in the table below, noninterest expense decreased $90,000 to $27.9 million compared to $28.0 million for the year ended December 31, 2023. The decrease was impacted by reductions in legal and professional fees, consulting, printing and supplies and loan expenses totaling $450,000. The expense reductions were partially offset by increases in advertising, ATM network and deposit insurance expenses, which combined for an increase of $111,000.
While we experienced no significant losses resulting from fraud in 2024, we experienced an increase in the volume and sophistication of fraudulent transaction attempts. These fraudulent transaction attempts ranged from unauthorized electronic transactions to check theft and forgery. We work continuously with customers to educate them on identifying potential fraud and the efforts they can take to reduce the risk of fraud. We expect increased fraudulent transaction attempts to continue for the foreseeable future.
Our efficiency ratio, a non-GAAP measure, is defined as noninterest expense divided by the sum of net interest income plus noninterest income and was 72.40% in 2024 compared to 73.71% in 2023. The performance improvement in this ratio is a result of the increase in net interest income, as discussed in the “Net Interest Income and Net Interest Margin” section earlier in this Item 7. After adjusting for non-recurring items, the efficiency ratio increases slightly to 73.01%, as shown in the table below. We continue to seek opportunities to operate more efficiently through the use of technology, improving processes, reducing nonperforming assets and increasing productivity.
(Dollars in thousands)
Net Interest Income
Noninterest Income
Total Income
Noninterest Expense
Efficiency Ratio
As reported (GAAP) $ 28,521
$
11,254
$
39,775
$
28,797
72.40%
Adjust for nonrecurring items:
BOLI benefit
-
(1,565)
(1,565)
-
BOLI redemption
-
-
-
(49)
Core system conversion
-
-
-
(850)
As adjusted for nonrecurring items (non-GAAP) $ 28,521
$ 9,689
$ 38,210
$ 27,898
73.01%
Income Taxes and Deferred Tax Assets
Income taxes were $2.1 million for the year ended December 31, 2024, compared to $2.1 million for the same period in 2023. The effective tax rates were 20.76%, and 23.01% for 2024 and 2023, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally due to the lessened impact of tax preference items, along with the effect of certain state income taxes. The lower effective tax rate in 2024 is the result of non-taxable income resulting from the BOLI insurance benefit accrual included in pre-tax earnings.
Deferred tax assets represent the future tax benefit of future deductible differences. If it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. The Company has evaluated positive and negative evidence to assess the realizability of its deferred taxes. Based on the evidence, including taxable income projections, the Company believes it is more likely than not that its deferred tax assets will be realizable. Accordingly, the Company did not include a valuation allowance against its deferred tax assets as of December 31, 2024 or 2023.
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a position will be sustained upon examination. If a tax position meets the more likely than not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being recognized. The Company classifies interest and penalties as a component of income tax expense.
Capital Resources
During the year ended December 31, 2024, total shareholders’ equity increased $5.9 million to $70.7 million due to the earnings of $8.2 million which was partially offset by a cash dividend payment of $1.7 million, the repurchase of common stock totaling $282,000 and the $331,000 increase in the net unrealized loss on available-for-sale investment securities, net of taxes.
As previously reported, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2025. During 2024, the Company repurchased 109,176 shares at an average price of $2.58 per share. Since commencement of the stock repurchase program, 285,362 shares have been repurchased at an average rate of $2.42.
The Company meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement and does not report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.
The Bank is characterized as "well capitalized" under the “prompt corrective action” regulations pursuant to Section 38 of the FDIA. The capital adequacy ratios for the Bank, including the minimum ratios to be considered “well capitalized,” are set forth in Note 22, Capital, to the consolidated financial statements in Item 8 of this Form 10-K.
The Bank is also subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act. The final rules require the Bank to comply with the following minimum capital ratios: (i) a Common Equity Tier 1 (“CET1”) ratio of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum CET1 ratio of 7%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a CET1 ratio above the minimum but below the conservation buffer face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. As of December 31, 2024, the Bank meets all capital adequacy requirements to which it is subject. Based upon projections, we believe our earnings will be sufficient to support the Bank’s planned asset growth.
The Company paid a cash dividend of $0.07 per share in 2024. On February 24, 2025, the Board of Directors declared a dividend of $0.08 per share, to be paid on March 31, 2025. Future payments of cash dividends will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the parent company.
Liquidity
We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale investments. Collectively, those balances were $128.5 million as of December 31, 2024, up from $118.0 million as of December 31, 2023. The increase is primarily due to deposit growth exceeding funding needs for loan growth. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs.
The Bank’s primary funding source is deposits from customers in the markets in which it provides banking services. As discussed previously, deposits increased during 2024 but competition for deposits remains intense from both bank and non-bank institutions. The Company expects that pressure on the rates paid on deposits will continue and that it may be required to pay higher rates than currently projected to retain existing customers and attract new deposit relationships to fund loans and other activities. As discussed below, the Company has other liquidity sources to manage its liquidity needs as they arise.
As of December 31, 2024, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $60.8 million, which is net of the $35.2 million of securities pledged as collateral. Generally, the investment portfolio serves as a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB). Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds. Total investment securities increased $6.2 million, or 6.88%, during 2024 from $89.8 million as of December 31, 2023 to $96.0 million as of December 31, 2024. The Bank also has additional borrowing capacity on lines for which investments are currently pledged.
Our loan to deposit ratio was 87.7% as of December 31, 2024 and 89.1% as of December 31, 2023.
Available third-party sources of liquidity remain intact as of December 31, 2024 which includes the following: our line of credit with the FHLB totaling $220.1 million subject to pledging requirements, the brokered certificates of deposit markets, internet certificates of deposit, and the discount window at the FRB. We also have $30.0 million in unsecured federal funds lines of credit available from three correspondent banks as of December 31, 2024.
We have used our line of credit with FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public funds and a $10.0 million fixed rate borrowing maturing in May of 2028. No draws on the letters of credit have been issued. These letters of credit are considered to be draws on our FHLB line of credit. An additional $196.1 million was available on December 31, 2024 on the $220.1 million line of credit, of which $110.6 million is secured by a blanket lien on our residential real estate loans. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.
We held $3.0 million in brokered deposits as of December 31, 2024. No brokered deposits were held as of December 31, 2023. As of December 31, 2024, we had $7.0 million in reciprocal CDARS time deposits, compared to $6.3 million as of December 31, 2023.
The Bank has access to additional liquidity through the FRB’s Discount Window for overnight funding needs. We have collateralized this line with investment securities. As part of the discount window capacity, the FRB offered borrowings through the Bank Term Funding Program, which was created to support businesses and consumers by making additional funds available to eligible depository institutions. We participated in this program in December 2023, through a $10 million borrowing for one year at a rate of 4.83%, which was repaid during the fourth quarter of 2024.
During the fourth quarter of 2024, we made a voluntary principal payment of $1.2 million on one of the outstanding trust preferred securities, originally issued in 2004. In January 2025, we made another voluntary principal payment of $3.0 million on the same trust preferred issue. We may consider making future principal payments based on our available liquidity and considering other funding opportunities that may be available.
With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. With the current economic uncertainty resulting from recovering from the lingering effects of the COVID-19 pandemic, inflation and the wars in Ukraine and Gaza, we continue monitoring our liquidity position, specifically cash on hand in order to meet customer demands. Additionally, our contingency funding plan is reviewed quarterly with our Asset Liability Committee.
Financial Instruments with Off-Balance-Sheet Risk
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary and discussion of the contract amount of the Bank’s exposure to off-balance-sheet risk as of December 31, 2024 and 2023 is presented in Note 20 to the consolidated financial statements in Item 8 of this Form 10-K. As of December 31, 2024 and 2023 the allowance for credit losses on unfunded commitments totaled $404,000 and $285,000, respectively.
Interest Sensitivity
As of December 31, 2024, we had a negative cumulative gap rate sensitivity ratio of 25.11% for the one-year re-pricing period, compared to 21.59% as of December 31, 2023. A negative cumulative gap generally indicates that net interest income would decline in a rising interest rate environment as liabilities re-price more quickly than assets. Conversely, net interest income would likely increase in periods during which interest rates are decreasing. The below table is based on contractual maturities and next repricing date and does not take into consideration prepayment speeds of investment securities and loans, nor does it consider decay rates for non-maturity deposits. When considering these prepayment speed and decay rate assumptions, along with our ability to control the repricing of a significant portion of the deposit portfolio, we are in a position to increase interest income in a rising interest rate environment; however, the ability to control the repricing of the deposit portfolio can be significantly impacted by competitive pressures, liquidity needs and access to and availability of other funding sources. With indications that the period of rate increases has tapered and consensus is that at least some modest rate decreases can be anticipated in the near- to mid-term, we are implementing strategies to moderate any potential adverse impact to our current interest rate risk profile, from what could be a period of flat to decreasing interest rates.
Interest Sensitivity Analysis
December 31, 2024
(Dollars in thousands)
- 90 Days
91-365 Days
- 3 Years
4-5 Years
6-10 Years
Over 10 Years
Total
Uses of funds:
Loans $ 119,642 $ 98,132 $ 227,380 $ 154,382 $ 48,693 $ 9,307 $ 657,536
Federal funds sold
-
-
-
-
-
Deposits with banks
54,300
-
-
-
-
54,300
Investments
3,903
9,583
22,214
16,742
33,394
25,318
111,154
Bank owned life insurance
-
-
-
-
-
-
-
Total earning assets $ 177,995 $ 107,715 $ 249,594 $ 171,124 $ 82,087 $ 34,625 $ 823,140
Sources of funds:
Int Bearing DDA
73,244
-
-
-
-
-
73,244
Savings & MMDA
183,061
-
-
-
-
-
183,061
Time Deposits
67,404
153,691
38,971
8,673
-
-
268,739
Trust Preferred Securities
14,986
-
-
-
-
-
14,986
Other Borrowings
-
-
-
10,000
-
-
10,000
Total interest bearing liabilities $ 338,695 $ 153,691 $ 38,971 $ 18,673 $ - $ - $ 550,030
Discrete Gap $ (160,700) $ (45,976) $ 210,623 $ 152,451 $ 82,087 $ 34,625 $ 273,110
Cumulative Gap $ (160,700) $ (206,676) $ 3,947 $ 156,398 $ 238,485 $ 273,110
Cumulative Gap as % of Total Earning Assets
-19.52%
-25.11%
0.48%
19.00%
28.97%
33.18%

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
FINANCIAL STATEMENTS
CONTENTS
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets December 31, 2024 and 2023
Consolidated Statements of Income - Years Ended December 31, 2024 and 2023
Consolidated Statements of Comprehensive Income (Loss) Years Ended December 31, 2024 and 2023
Consolidated Statements of Shareholders’ Equity - Years Ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows - Years Ended December 31, 2024 and 2023
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of New Peoples Bankshares, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of New Peoples Bankshares, Inc. and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows, for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses - Loans Collectively Evaluated for Credit Losses
Description of the Matter
As further described in Note 2 (Summary of Significant Accounting Policies) and Note 7 (Allowance for Credit Losses For Loans (“ACLL”) to the consolidated financial statements, the allowance for credit losses on loans (ACLL) is a valuation allowance that represents management’s best estimate of expected credit losses on loans measured at amortized cost considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms. Loans which share common risk characteristics are pooled and collectively evaluated
by the Company using historical data, as well as assessments of current conditions and reasonable and supportable forecasts of future conditions. The Company’s ACLL related to collectively evaluated loans represented $7.5 million of the total recorded ACLL of $7.7 million as of December 31, 2024. The collectively evaluated ACLL consists of quantitative and qualitative components.
The quantitative component consists of loss estimates derived from a discounted cash flow model using external observations of historical loan losses adjusted for estimated prepayments and forecasts of future conditions over a reasonable and supportable period. The estimate considers large amounts of data in tabulating default, loss given default, and prepayment speeds and requires complex calculations as well as management judgment in the selection of appropriate inputs.
In addition to the quantitative component, the collectively evaluated ACLL also includes a qualitative component which aggregates management’s assessment of available information relevant to assessing collectability that is not captured in the quantitative loss estimation process. Factors considered by management in developing its qualitative estimates include: changes in general market, economic and business conditions; lending policies and procedures; experience and ability of management and staff; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; loan review system; concentrations of credit; the value of underlying collateral in determining the recorded balance of the allowance for credit losses; and legal or regulatory requirements and competition. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
Management exercised significant judgment when estimating the ACLL on collectively evaluated loans. We identified the estimation of the collectively evaluated ACLL as a critical audit matter as auditing the collectively evaluated ACLL involved especially complex and subjective auditor judgment in evaluating management’s assessment of the inherently subjective estimates.
The primary audit procedures we performed to address this critical audit matter included:
· Substantively testing management’s process for measuring the collectively evaluated ACLL, including:
· Evaluating the conceptual soundness, assumptions, and key data inputs of the Company’s discounted cashflow methodology, including the identification of loan pools, the probability of default and loss given default rate inputs, and the prepayment/curtailment rate inputs for each pool.
· Evaluating the methodology and testing the accuracy of incorporating reasonable and supportable forecasts in the collectively evaluated ACLL estimate.
· Evaluating the completeness and accuracy of data inputs used as a basis for the qualitative factors.
· Evaluating the qualitative factors for directional consistency in comparison to prior periods and for reasonableness in comparison to underlying supporting data.
· Testing the mathematical accuracy of the ACLL for collectively evaluated loans including both the discounted cashflow and qualitative factor components of the calculations.
/s/ Yount, Hyde & Barbour, P.C.
We have served as the Company’s auditor since 2022.
Roanoke, Virginia
March 31, 2025
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2024 AND 2023
(in thousands except share data)
ASSETS
Cash and due from banks $ 13,218 $ 14,596
Interest-bearing deposits with banks 54,300 50,363
Federal funds sold
Total cash and cash equivalents 67,668 64,977
Investment securities available-for-sale, at fair value 95,984 89,805
Loans receivable 657,536 638,111
Allowance for credit losses (7,684 ) (7,256 )
Net loans 649,852 630,855
Bank premises and equipment, net 17,070 17,841
Other real estate owned
Accrued interest receivable 3,458 3,029
Deferred taxes, net 4,809 4,461
Bank owned life insurance - 4,589
Right-of-use assets - operating leases 3,413 3,852
Insurance benefit receivable 5,417 -
Other assets 7,167 6,747
Total assets $ 854,925 $ 826,313
LIABILITIES
Deposits
Noninterest bearing $ 224,938 $ 233,878
Interest-bearing 525,044 482,589
Total deposits 749,982 716,467
Borrowed funds 24,986 36,186
Lease liabilities - operating leases 3,413 3,852
Accrued interest payable 1,442 1,447
Accrued expenses and other liabilities 4,361 3,550
Total liabilities 784,184 761,502
Commitments and Contingent Liabilities (Notes 19 and 21) -
SHAREHOLDERS’ EQUITY
Common stock - $2.00 par value; 50,000,000 shares authorized; 23,636,724 and 23,745,900 shares issued and outstanding at December 31, 2024 and 2023, respectively 47,273 47,492
Additional paid-in capital 14,451 14,514
Retained earnings 21,001 14,458
Accumulated other comprehensive loss (11,984 ) (11,653 )
Total shareholders’ equity 70,741 64,811
Total liabilities and shareholders’ equity $ 854,925 $ 826,313
The accompanying notes are an integral part of these financial statements.
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(in thousands except share and per share data)
INTEREST AND DIVIDEND INCOME
Loans including fees $ 38,208 $ 32,552
Federal funds sold
Interest-earning deposits with banks 3,875 2,239
Investments 2,371 2,167
Dividends on equity securities (restricted)
Total interest and dividend income 44,633 37,135
INTEREST EXPENSE
Deposits 14,145 7,582
Borrowed funds 1,967 1,534
Total interest expense 16,112 9,116
NET INTEREST INCOME 28,521 28,019
PROVISION FOR CREDIT LOSSES
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 27,896 27,370
NONINTEREST INCOME
Service charges and fees 3,838 3,886
Card processing and interchange income 3,702 3,730
Insurance and investment fees 1,328 1,084
Other noninterest income 2,386 1,249
Total noninterest income 11,254 9,949
NONINTEREST EXPENSES
Salaries and employee benefits 14,508 14,256
Occupancy and equipment expenses 3,572 3,456
Data processing and telecommunications 2,540 2,481
Other operating expenses 8,177 7,795
Total noninterest expenses 28,797 27,988
INCOME BEFORE INCOME TAXES 10,353 9,331
INCOME TAX EXPENSE 2,149 2,147
NET INCOME $ 8,204 $ 7,184
Income Per Share
Basic and Diluted $ 0.35 $ 0.30
Average Weighted Shares of Common Stock
Basic and Diluted 23,682,407 23,804,427
The accompanying notes are an integral part of these financial statements.
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(Dollars in thousands)
NET INCOME $ 8,204 $ 7,184
Other comprehensive income (loss):
Investment securities activity:
Unrealized (losses) gains arising during the year
(415)
2,896
Reclassification adjustment for net gains included in net income
(4)
-
Other comprehensive (losses) income on investment securities
(419)
2,896
Related tax benefit (expense)
(608)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
(331)
2,288
TOTAL COMPREHENSIVE INCOME $ 7,873 $ 9,472
The accompanying notes are an integral part of these financial statements.
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(in thousands including share data, but excluding per share data)
Shares of Common Stock Common Stock Additional Paid-in- Capital Retained
Earnings
Accumulated Other
Comprehensive Income (Loss)
Total Shareholders’ Equity
Balance, December 31, 2022 23,848 $ 47,697 $ 14,546 $ 8,917 $ (13,941 ) $ 57,219
Adoption of ASU 2016-13 - - - (212 ) - (212 )
Net income - - - 7,184 - 7,184
Other comprehensive income, net of tax - - - - 2,288 2,288
Cash dividend declared ($0.06 per share) - - - (1,431 ) - (1,431 )
Repurchase of common stock (102 ) (205 ) (32 ) - - (237 )
Balance, December 31, 2023 23,746 $ 47,492 $ 14,514 $ 14,458 $ (11,653 ) $ 64,811
Net income - - - 8,204 - 8,204
Other comprehensive loss, net of tax - - - - (331 ) (331 )
Cash dividend declared ($0.07 per share) - - - (1,661 ) - (1,661 )
Repurchase of common stock (109 ) (219 ) (63 ) - - (282 )
Balance, December 31, 2024 23,637 $ 47,273 $ 14,451 $ 21,001 $ (11,984 ) $ 70,741
The accompanying notes are an integral part of these financial statements.
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(Dollars are in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,204 $ 7,184
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,572 1,614
Provision for credit losses
Net gain on sale of available-for-sale securities (4 ) -
Income on bank owned life insurance (73 ) (40 )
Gain on sale of mortgage loans (9 ) (4 )
Gain on sale or disposal of premises and equipment (21 ) (46 )
(Gain) loss on sale and writedowns of foreclosed real estate (74 )
Loss on settlement of bank owned life insurance -
Income on bank owned lifer insurance death benefit (1,565 ) -
Loans originated for sale (329 ) (81 )
Proceeds from sales of loans originated for sale
Net amortization/accretion of bond premiums/discounts
Deferred tax benefit (260 ) (390 )
Net change in:
Interest receivable (429 ) (474 )
Other assets (117 ) (667 )
Accrued interest payable (5 )
Accrued expenses and other liabilities (1,743 )
Net cash provided by operating activities 8,344 7,401
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (20,833 ) (53,725 )
Purchase of securities available-for-sale (23,336 ) (500 )
Proceeds from repayments and maturities of securities available-for-sale 14,419 9,369
Proceeds from sales of securities available-for-sale 2,134 -
Net purchase of equity securities (restricted) (38 ) (625 )
Payments for the purchase of premises, equipment and software (1,792 ) (1,475 )
Proceeds from sales of premises and equipment 1,186
Proceeds from sales of other real estate owned 1,474
Proceeds from settlement of bank owned life insurance -
Net cash used in investing activities (26,025 ) (45,892 )
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (10,000 ) 10,000
Net change in long-term debt (1,200 ) 9,690
Net change in noninterest bearing deposits (8,940 ) (16,046 )
Net change in interest bearing deposits 42,455 39,806
Dividends paid (1,661 ) (1,431 )
Repurchase of common stock (282 ) (237 )
Net cash provided by financing activities 20,372 41,782
Net increase in cash and cash equivalents 2,691 3,291
Cash and cash equivalents, beginning of the year 64,977 61,686
Cash and cash equivalents, end of the year $ 67,668 $ 64,977
Supplemental Disclosure of Cash Paid During the Year for:
Interest $ 16,117 $ 8,195
Taxes 2,200 3,705
Supplemental Disclosure of Non-Cash Transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities -
Transfer of loans to other real estate owned 1,330
Cash surrender value of bank owned life insurance transferred benefit receivable 3,852 -
Change in unrealized losses on securities available for sale (419 ) 2,896
The accompanying notes are an integral part of these financial statements.
NEW PEOPLES BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1	NATURE OF OPERATIONS
Nature of Operations - New Peoples Bankshares, Inc. (New Peoples) is a financial holding company whose principal activity is the ownership and management of a community bank, New Peoples Bank, Inc. (the Bank). New Peoples and the Bank are each organized and incorporated under the laws of the Commonwealth of Virginia. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwest Virginia, southern West Virginia, northeastern Tennessee and western North Carolina. These services include commercial and consumer loans along with traditional deposit products such as checking and savings accounts.
NOTE 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation - The consolidated financial statements include New Peoples, the Bank, NPB Insurance Services, Inc., and NPB Web Services, Inc. (Hereinafter, collectively referred to as the Company, we, us, or our). All significant intercompany balances and transactions have been eliminated. In accordance with Accounting Standards Codification (ASC) 942, Financial Services - Depository and Lending, NPB Capital Trust I and 2 are not included in the consolidated financial statements.
Segment Reporting - The Company's revenue is primarily derived from the business of banking. The Company's financial performance is monitored on a consolidated basis by the Chief Executive Officer, who is designated the chief operating decision maker (“CODM”), based upon information provided about the Company’s products and services offered. The segments are also distinguished by the level of information provided to the CODM, who uses such information to review the performance of various components of the business, which are then aggregated if operating performance of product and customers are similar. The CODM evaluates the financial performance of the Company’s business components such as revenue streams, significant expenses, and budget to actual results in assessing the Company’s segments and in determination of allocated resources. The presentation of financial performance to the CODM is consistent with amounts and financial statement lines items shown in the Company's consolidated balance sheets and consolidated statements of income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include salaries and employee benefits, occupancy expense, equipment expense, data processing fees and legal and professional expenses. All of the Company's financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by region and business-line, the Company's CODM evaluates financial performance on a Company-wide basis. The majority of the Company's revenue is from the business of banking and the Company's assigned regions have similar economic characteristics, products, services and customers. Accordingly, all of the Company's operations are considered by management to be aggregated in one reportable operating segment.
Accounting Standards Adopted in 2024 - In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06 “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by removing major separation models required under current generally accepted accounting principles of the United States (GAAP). Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase information transparency. ASU 2020-06 was effective for the Company on January 1, 2024. The adoption of this standard had no material impact on the consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 was effective for the Company on January 1, 2024. The adoption of this standard had no material impact on the consolidated financial statements.
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” These amendments require entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 was effective for the Company on January 1, 2024. The adoption of this standard had no material impact on the consolidated financial statements.
On December 31, 2024, the Company adopted ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” These amendments required that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, required other segment items by reportable segment to be disclosed and a description of their composition, and required disclosure of the title and position of the chief operating decision maker and an explanation of how they use the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments were applied retrospectively to all prior periods presented and did not have a material effect on the Company’s consolidated financial statements. Refer to Segment Reporting section above.
Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for credit losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.
Cash and Cash Equivalents - Cash and cash equivalents as used in the cash flow statements include cash and due from banks, interest-bearing deposits with banks, federal funds sold and investment securities when purchased within three months of maturity.
Investment Securities - Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the Company has the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized historical cost. Securities not intended to be held to maturity are classified as available-for-sale and carried at fair value. Securities available-for-sale are intended to be used as part of the Company’s asset and liability management strategy and may be sold in response to changes in interest rates, prepayment risk or other similar factors.
The amortization of premiums and accretion of discounts are recognized in interest income using the effective interest method over the period to maturity for discounts and the earlier of call date or maturity for premiums. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method. Realized gains (losses) on securities available-for-sale are included in noninterest income and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive loss. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to other comprehensive loss, net of tax, whereas realized gains and losses flow through the statements of income.
Allowance for Credit Losses - Available-for-Sale Securities - For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.
If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss).
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit losses expense. Losses are charged against the allowance for credit losses when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2024, there was no allowance for credit losses related to the available-for-sale portfolio.
Loans held for sale - Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance through earnings. Mortgage loans held for sale are generally sold with servicing released. Gains and losses on sales of mortgages are based on the difference between the selling price and the carrying value of the related loan sold.
Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $2.9 million as of December 31, 2024 and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.
The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.
All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.
Significant Group Concentrations of Credit Risk - The Company identifies a concentration as any obligation, direct or indirect, of the same or affiliated interests which represent 25% or more of the Company’s capital structure, or $17.7 million as of December 31, 2024. Most of the Company’s activities are with customers located within southwest Virginia, southern West Virginia, northeastern Tennessee region and western North Carolina. Certain concentrations may pose credit risk. The Company does not have any significant concentrations to any one industry or customer.
Allowance for Credit Losses - Loans - The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.
The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
The Company primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff; the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral value, concentrations of credit, and legal or regulatory requirements and competition.
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments and calculates the allowance for credit losses for each using a discounted cash flow methodology:
• Commercial Real Estate Loans. We originate loans to qualified businesses and individuals in our market area for the purchase, construction or refinancing of commercial real estate. These loans consist of owner occupied, non-owner occupied and multi-family transactions. Owner occupied real estate properties primarily include retail buildings, medical buildings and industrial/warehouse space. Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Non-owner occupied commercial real estate properties primarily include retail buildings, hotels, office/medical buildings and industrial/warehouse space. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and their ability to repay the loan. Non-owner occupied commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and their ability to repay the loan. Construction loans include not only construction of new structures, but also additions or alterations to existing structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions.
• Commercial Loans. We make commercial loans to qualified businesses in our market area. Our commercial lending consists primarily of commercial and industrial loans to finance accounts receivable, inventory, property, plant and equipment. Commercial business loans generally have a higher degree of risk than residential mortgage loans but have commensurately higher yields. Residential mortgage loans are generally made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be easily ascertainable. In contrast, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as commercial real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral for commercial business loans may depreciate over time and cannot be appraised with as much precision as residential real estate. To manage these risks, our underwriting guidelines generally require us to secure commercial loans with both the assets of the borrowing business and other additional collateral and guarantees that may be available. In addition, we actively monitor certain measures of the borrower, including advance rate, cash flow, collateral value and other appropriate credit factors.
• Residential Mortgage Loans. Our residential mortgage loans consist of residential first and second mortgage loans, residential construction loans, home equity lines of credit and term loans secured by first and second mortgages on the residences of borrowers for home improvements, education and other personal expenditures. We make mortgage loans with a variety of terms, including fixed and floating or variable rates and a variety of maturities. Under our underwriting guidelines, residential mortgage loans are generally made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be easily ascertainable. These loans are made consistent with our appraisal policies and real estate lending policies, which detail maximum loan-to-value ratios and maturities.
• Construction Loans. Construction lending entails significant additional risks compared to residential mortgage lending. Construction loans often involve larger loan balances concentrated with single borrowers or groups of related borrowers. Construction loans also involve additional risks attributable to the fact that loan funds are advanced upon the security of property under construction, which is of uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate the total loan funds required to complete a project and related loan-to-value ratios accurately. To minimize the risks associated with construction lending, loan-to-value limitations for residential, multi-family and non-residential construction loans are in place. These are in addition to the usual credit analyses of borrowers. Management feels that the loan-to-value ratios help to minimize the risk of loss and to compensate for normal fluctuations in the real estate market. Maturities for construction loans generally range from 4 to 12 months for residential property and from 6 to 18 months for non-residential and multi-family properties.
• Consumer Loans. Our consumer loans consist primarily of installment loans to individuals for personal, family and household purposes. The specific types of consumer loans that we make include home improvement loans, debt consolidation loans and general consumer lending. Consumer loans entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured, such as lines of credit, or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance due to the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. A borrower may also be able to assert against the Bank as an assignee any claims and defenses that it has against the seller of the underlying collateral.
Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “special mention” or “classified” (together known as “criticized”) as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the DCF method.
• The collateral method is applied to individually evaluated loans for which foreclosure is probable. The collateral method is also applied to individually evaluated loans when borrowers are experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral (“collateral dependent”). The allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, the allowance for credit losses is calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, the allowance for credit losses is calculated as the amount by which the loan’s amortized cost basis exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.
• The DCF method is applied to individually evaluated loans that do not meet the criteria for collateral method measurement. Cash flows are projected and discounted using the same method as for collectively evaluated loans, and the Company considers default and prepayment assumptions.
Allowance for Credit Losses - Unfunded Commitments - Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments, which is included in the provision for credit losses, in the Company’s consolidated statements of income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.
Bank Premises and Equipment - Land, buildings and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives:
Schedule of estimated useful lives
Type
Estimated useful life
Buildings
- 40 years
Paving and landscaping
years
Computer equipment and software
to 5 years
Vehicles
years
Furniture and other equipment
to 10 years
Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are recorded as a component of noninterest expense as incurred.
Other Real Estate Owned - Other real estate owned represents properties acquired through foreclosure or deeds taken in lieu of foreclosure and former branch sites that have been closed and for which there are no intentions to re-open or otherwise use the location and the time anticipated to dispose of the property is expected to not be short-term. At the time of acquisition, these properties are recorded at fair value less estimated costs to sell. Expenses incurred in connection with operating these properties and subsequent write-downs, if any, are charged to operations. Subsequent to foreclosure, management periodically considers the adequacy of the reserve for losses on the property. Gains and losses on the sales of these properties are credited or charged to income in the year of the sale.
Bank Owned Life Insurance (“BOLI”) - The Bank purchased life insurance policies on certain, now-former, key officers and employees. Changes in the cash surrender value are recorded in noninterest income.
Leases - A right-of-use asset and related lease liability is recognized for operating leases the Bank has entered into for certain office facilities. Most leases include one or more options to renew. The exercise of lease renewal options is typically at the sole discretion of management. If it is determined that it is reasonably certain that the Bank will exercise renewal options, the additional term is included in the calculation of the lease liability. As most of our leases do not provide an implicit rate, we use the fully collateralized Federal Home Loan Bank of Atlanta (FHLB) borrowing rate, commensurate with the lease terms at the lease commencement date, in determining the present value of the lease payments.
Income Taxes - Deferred tax assets or liabilities are computed based upon the difference between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The Company provides a valuation allowance on its net deferred tax assets where it is more likely than not such assets will not be realized. As of December 31, 2024 and 2023, the Company had no valuation allowance on its net deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. See Note 10, Income Taxes, for additional information. The Company records any penalties and interest attributed to uncertain tax positions as a component of income tax expenses.
Income Per Share - Basic income per share computations are based on the weighted average number of shares outstanding during each period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued.
Financial Instruments - Off-balance-sheet instruments - In the ordinary course of business, the Company has entered into commitments to extend credit. Such financial instruments are recorded in the financial statements when they are funded.
Financial Instruments - Fair Value - Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully discussed in Note 23. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risks, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or market conditions could significantly affect these estimates.
Comprehensive Income- GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The change in unrealized gains and losses on available-for-sale securities is the Company’s only component of other comprehensive income (loss).
Revenue from Contracts with Customers - The Company generally satisfies its performance obligations fully on its contracts with customers as services are rendered; and the transaction prices are typically fixed, charged either on a periodic basis or based on activity.
Advertising Cost - Advertising costs are expensed in the period incurred. Those costs, which are included in Advertising, sponsorships and donations in Note 25 totaled $240,000 and $206,000, for the years ended December 31, 2024 and 2023, respectively.
Reclassification - Certain reclassifications have been made to the prior years’ financial statements to place them on a comparable basis with the current year. Net income and shareholders’ equity previously reported were not affected by these reclassifications.
Subsequent Events - The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued. See Note 26 Subsequent Events for additional information.
NOTE 3	INCOME PER SHARE
Basic income per share computations are based on the weighted average number of shares outstanding during each year. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the years ended December 31, 2024 and 2023, there were no dilutive potential common shares.
Basic and diluted net income per common share calculations follows:
Schedule of basic and diluted net loss per common share calculations
(Amounts in thousands, except For the year ended
share and per share data) December 31,
Net income $ 8,204 $ 7,184
Weighted average shares outstanding 23,682,407 23,804,427
Weighted average dilutive shares outstanding 23,682,407 23,804,427
Basic and diluted income per share $ 0.35 $ 0.30
NOTE 4	DEPOSITS IN AND FEDERAL FUNDS SOLD TO BANKS
The Bank had federal funds sold and interest-bearing cash on deposit with the Federal Reserve Bank of Richmond (the Federal Reserve Bank) and other commercial banks amounting to $54.5 million and $50.4 million as of December 31, 2024 and 2023, respectively. Deposit amounts at other commercial banks may, at times, exceed federally insured limits.
The Bank has a total of $30.0 million in unsecured fed funds lines of credit facilities from three correspondent banks that were available as of December 31, 2024 and 2023, respectively. Of these total commitments, all were available as of December 31, 2024 and 2023. As a condition for $5.0 million of one of the unsecured fed funds lines of credit, the Bank maintains a minimum deposit balance of $250,000 with this correspondent bank. As of December 31, 2024 and 2023, the Bank was in compliance with this requirement.
NOTE 5	INVESTMENT SECURITIES
The amortized cost and estimated fair value of securities (all available-for-sale) as of December 31, 2024 and 2023 are as follows:
Schedule of securities amortized cost and estimated fair value
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
(Dollars are in thousands) Cost Gains Losses Value
December 31,
U.S. Treasuries $ 8,370 $ - $ 409 $ 7,961
U.S. Government Agencies 9,380 8,805
Taxable municipals 23,940 - 5,416 18,524
Corporate bonds 2,499 - 2,253
Mortgage backed securities 66,965 8,535 58,441
Total Securities available for sale $ 111,154 $ 22 $ 15,192 $ 95,984
December 31, 2023
U.S. Treasuries $ 11,643 $ - $ 658 $ 10,985
U.S. Government Agencies 9,412 8,811
Taxable municipals 22,973 - 5,114 17,859
Corporate bonds 3,002 2,688
Mortgage backed securities 57,526 - 8,064 49,462
Total Securities available for sale $ 104,556 $ 24 $ 14,775 $ 89,805
The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2024 and 2023.
Schedule of fair value and gross unrealized losses on investment securities
Less than 12 Months Months or More Total
(Dollars are in thousands)
Fair Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
December 31, 2024
U.S. Treasuries $ 980 $ 20 $ 6,981 $ 389 $ 7,961 $ 409
U.S. Government Agencies 2,221 6,026 8,247
Taxable municipals 1,559 16,965 5,204 18,524 5,416
Corporate bonds 1,755 2,254
Mortgage backed securities 14,982 42,018 8,224 57,000 8,535
Total $ 20,241 $ 582 $ 73,745 $ 14,610 $ 93,986 $ 15,192
December 31, 2023
U.S. Treasuries $ - $ - $ 10,985 $ 658 $ 10,985 $ 658
U.S. Government Agencies - 8,123 8,165
Taxable municipals 17,374 5,098 17,859 5,114
Corporate bonds - - 2,187 2,187
Mortgage backed securities - - 49,413 8,064 49,413 8,064
Total $ 527 $ 16 $ 88,082 $ 14,759 $ 88,609 $ 14,775
As of December 31, 2024, the available-for-sale portfolio included 195 investments for which the fair market value was less than amortized cost. As of December 31, 2023, the available-for-sale portfolio included 209 investments for which the fair market value was less than amortized cost. Management believes that all unrealized losses have resulted from temporary changes in the interest rates and current market conditions and are not a result of credit deterioration. Management does not plan to sell, and it is not likely that the Bank will be required to sell any of the securities referenced in the table above before recovery of their amortized cost. None of the individual securities are past due as to principal or interest payments and a number of these securities have explicit or implicit payment guarantees. The remaining securities have credit ratings at or above that necessary to be considered “bank qualified.”
Investment securities with a carrying value of $35.2 million and $36.8 million as of December 31, 2024 and 2023, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.
During the year ended December 31, 2024 securities with an amortized cost of $2.1 million were sold, realizing a net gain of $4,000. No securities were sold during the year ended December 31, 2023. The following table presents the gross proceeds, gross gains and gross losses, and the tax provision resulting from sales of securities.
Schedule of gross proceeds, gross gains and gross losses, and the tax provision
(Dollars are in thousands)
Proceeds $ 2,134 $ -
Gains -
Losses (39 ) -
Tax provision -
The amortized cost and fair value of investment securities as of December 31, 2024, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Also, actual maturities may differ from scheduled maturities on amortizing securities, such as mortgage-backed securities and collateralized mortgage obligations, because the underlying collateral on these types of securities may be repaid prior to the scheduled maturity date.
Schedule of amortized cost and fair value of investment securities contractual maturity
Weighted
(Dollars are in thousands) Amortized Fair Average
Securities Available for Sale Cost Value Yield
Due in one year or less $ 3,975 $ 3,915 2.05 %
Due after one year through five years 11,297 10,760 2.57 %
Due after five years through ten years 22,730 20,782 3.10 %
Due after ten years 73,152 60,527 2.31 %
Total $ 111,154 $ 95,984 2.48 %
The Bank, as a member of the Federal Reserve Bank and the FHLB, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities, which are included in other assets on the consolidated balance sheet, are restricted from trading and are recorded at a cost of $2.7 million and $2.7 million as of December 31, 2024 and 2023, respectively. The stock has no quoted market value and no ready market exists.
NOTE 6	LOANS
Loans receivable outstanding as of December 31, 2024 and 2023 are summarized as follows:
Schedule of loans receivable outstanding
December 31,
(Dollars are in thousands)
Real estate secured:
Commercial $ 243,646 $ 240,187
Construction and land development 36,112 28,830
Residential 1-4 family 234,860 238,233
Multifamily 32,379 34,571
Farmland 16,921 16,401
Total real estate loans 563,918 558,222
Commercial 60,587 53,230
Agriculture 4,025 3,508
Consumer installment loans and all other loans 29,006 23,151
Total loans $ 657,536 $ 638,111
Also included in total loans above are deferred loan fees of $2.0 million and $1.8 million, as of December 31, 2024 and 2023, respectively. Total deferred loan costs were $1.9 million and $2.0 million, as of December 31, 2024 and 2023, respectively. Income from net deferred fees and costs is recognized over the lives of the respective loans as a yield adjustment. If loans repay prior to scheduled maturities any unamortized fee or cost is recognized at that time.
Loans receivable on nonaccrual status as of December 31, 2024 and 2023 are summarized as follows:
Schedule of loans receivable nonaccrual status
December 31, 2024
December 31, 2023
With No Allowance
With an Allowance
Total
With No Allowance
With an Allowance
Total
(Dollars in thousands)
Real estate secured:
Commercial $ $ - $ $ $ $
Construction and land development
-
-
-
-
Residential 1-4 family
2,232
2,410
2,495
-
2,495
Multifamily
-
-
-
-
Total real estate loans
2,943
3,121
3,238
3,506
Commercial
-
-
-
-
Agriculture
-
-
-
-
Consumer installment loans and other loans
-
Total loans receivable on nonaccrual status $ 3,081 $ $ 3,273 $ 3,266 $ $ 3,534
Total interest income not recognized on nonaccrual loans for 2024 and 2023 was approximately $49,000 and $61,000, respectively.
The Company evaluates loans that do not share risk characteristics on an individual basis utilizing the collateral or discounted cash flow methods as described in Note 2 Summary of Significant Accounting Policies. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to those loans as December 31, 2024 and 2023:
Schedule of summary of impaired loans
December 31, 2024
December 31, 2023
Unpaid Principal Balance
Related Allowance
Unpaid Principal Balance
Related Allowance
(Dollars in thousands)
Real estate secured:
Commercial $
$ - $
$
Construction and land development
-
-
-
Residential 1-4 family
1,008
-
Total real estate loans
1,704
1,124
Consumer installment loans and other loans
-
-
Total
$ 1,717
$
$ 1,124
$
The following tables show an age analysis of past due loans receivable as of December 31, 2024 and 2023, segregated by class:
Schedule of analysis of past due loans receivable
As of December 31, 2024
(Dollars are in thousands)
Loans
30-59
Days
Past
Due Loans
60-89
Days
Past
Due Loans
90 or
More
Days
Past
Due Total
Past
Due
Loans Current
Loans Total
Loans
Real estate secured:
Commercial $ - $ 255 $ 156 $ 411 $ 243,235 $ 243,646
Construction and land
Development - 35,776 36,112
Residential 1-4 family 2,413 1,810 4,733 230,127 234,860
Multifamily - - - - 32,379 32,379
Farmland - - 16,714 16,921
Total real estate loans 2,623 2,398 5,687 558,231 563,918
Commercial - 60,344 60,587
Agriculture - - 3,988 4,025
Consumer installment
loans and all other loans 207 28,799 29,006
Total loans $ 2,915 $ 2,563 $ 696 $ 6,174 $ 651,362 $ 657,536
As of December 31, 2023
(Dollars are in thousands)
Loans
30-59
Days
Past
Due Loans
60-89
Days
Past
Due Loans
90 or
More
Days
Past
Due Total
Past
Due
Loans Current
Loans Total
Loans
Real estate secured:
Commercial $ 878 $ - $ 268 $ 1,146 $ 239,041 $ 240,187
Construction and land
development - 28,741 28,830
Residential 1-4 family 2,628 1,119 4,633 233,600 238,233
Multifamily - - 34,372 34,571
Farmland - - - - 16,401 16,401
Total real estate loans 3,591 1,123 1,353 6,067 552,155 558,222
Commercial - - 53,210 53,230
Agriculture - - 3,500 3,508
Consumer installment
loans and all other loans 152 22,999 23,151
Total loans $ 3,739 $ 1,154 $ 1,354 $ 6,247 $ 631,864 $ 638,111
As of December 31, 2024 and 2023, there were no loans over 90 days past due that were accruing.
The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:
Pass - Loans in this category are considered to have a low likelihood of loss based on analysis of relevant information about the ability of the borrowers to service their debt and other factors.
Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.
Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. There were no loans classified as doubtful at either December 31, 2024 or 2023.
The following table presents the credit risk grade of loans by origination year as of December 31, 2024 and 2023:
Schedule of credit risk grade of loans
As of December 31, 2024
(Dollars are in thousands)
Prior
Revolving
Total
Commercial real estate
Pass $ 20,653 $ 47,052 $ 43,553 $ 46,902 $ 27,155 $ 56,369 $ 1,541 $ 243,225
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
Total commercial real estate $ 20,653 $ 47,052 $ 43,808 $ 47,043 $ 27,155 $ 56,394 $ 1,541 $ 243,646
Current period gross charge-offs $ - $ - $ - $ (179) $ - $ - $ (1) $ (180)
Construction and Land Development
Pass $ 17,654 $ 5,078 $ 6,240 $ 3,019 $ 1,719 $ 2,089 $ - $ 35,799
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total construction and land development $ 17,955 $ 5,078 $ 6,240 $ 3,019 $ 1,719 $ 2,101 $ - $ 36,112
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Residential 1-4 family
Pass $ 19,094 $ 27,861 $ 29,510 $ 38,329 $ 11,265 $ 78,424 $ 26,933 $ 231,416
Special mention
-
-
-
-
-
-
Substandard
1,647
3,125
Total residential 1-4 family $ 19,198 $ 28,118 $ 29,552 $ 39,052 $ 11,503 $ 80,390 $ 27,047 $ 234,860
Current period gross charge-offs $ - $ (38) $ - $ - $ - $ (37) $ - $ (75)
Multifamily
Pass $ 1,564 $ 4,829 $ 10,313 $ 6,818 $ 2,505 $ 6,350 $ - $ 32,379
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total multifamily $ 1,564 $ 4,829 $ 10,313 $ 6,818 $ 2,505 $ 6,350 $ - $ 32,379
Current period gross charge-offs $ - $ (53) $ - $ - $ - $ (42) $ - $ (95)
Farmland
Pass $ 2,669 $ 1,333 $ 2,045 $ 2,812 $ $ 7,186 $ - $ 16,775
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total farmland $ 2,669 $ 1,333 $ 2,045 $ 2,812 $ $ 7,332 $ - $ 16,921
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Commercial
Pass $ 18,298 $ 13,490 $ 4,780 $ 2,305 $ $ 2,560 $ 18,284 $ 60,518
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
Total commercial $ 18,299 $ 13,490 $ 4,780 $ 2,336 $ $ 2,562 $ 18,319 $ 60,587
Current period gross charge-offs $ - $ (34) $ (55) $ - $ - $ - $ (73) $ (162)
Agriculture
Pass $ 1,333 $ $ $ $ $ $ 1,553 $ 4,009
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total agriculture $ 1,333 $ $ $ $ $ $ 1,553 $ 4,025
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Consumer and All Other
Pass $ 14,500 $ 7,982 $ 2,706 $ 1,276 $ $ $ 1,158 $ 28,926
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
Total consumer and all other $ 14,517 $ 8,004 $ 2,726 $ 1,295 $ $ $ 1,158 $ 29,006
Current period gross charge-offs $ (163) $ (62) $ (14) $ (7) $ (9) $ - $ (24) $ (279)
Total $ 96,188 $ 108,226 $ 99,803 $ 102,607 $ 44,874 $ 156,220 $ 49,618 $ 657,536
Total current period gross charge-offs $ (163) $ (187) $ (69) $ (186) $ (9) $ (79) $ (98) $ (791)
As of December 31, 2023
(Dollars are in thousands)
Prior
Revolving
Total
Commercial real estate
Pass $ 46,616 $ 49,061 $ 48,943 $ 28,651 $ 20,004 $ 43,524 $ $ 237,796
Special mention
-
-
1,171
-
-
1,577
Substandard
-
-
-
-
-
Total commercial real estate $ 46,616 $ 49,061 $ 50,114 $ 28,965 $ 20,433 $ 44,001 $ $ 240,187
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Construction and Land Development
Pass $ 12,043 $ 5,990 $ 4,738 $ 2,521 $ 1,799 $ 1,637 $ - $ 28,728
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total construction and land development $ 12,043 $ 5,990 $ 4,738 $ 2,521 $ 1,799 $ 1,739 $ - $ 28,830
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Residential 1-4 family
Pass $ 29,006 $ 33,986 $ 41,214 $ 13,566 $ 13,662 $ 80,087 $ 23,553 $ 235,074
Special mention
-
-
-
-
-
-
Substandard
-
-
2,662
2,900
Total residential 1-4 family $ 29,093 $ 33,986 $ 41,263 $ 13,566 $ 13,700 $ 83,008 $ 23,617 $ 238,233
Current period gross charge-offs $ - $ - $ (30) $ - $ - $ (21) $ - $ (51)
Multifamily
Pass $ 5,779 $ 11,483 $ 7,965 $ 2,626 $ 1,081 $ 5,438 $ - $ 34,372
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total multifamily $ 5,779 $ 11,483 $ 7,965 $ 2,626 $ 1,081 $ 5,637 $ - $ 34,571
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Farmland
Pass $ 1,807 $ 2,222 $ 3,414 $ $ 1,205 $ 6,793 $ - $ 16,217
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total farmland $ 1,807 $ 2,222 $ 3,414 $ $ 1,205 $ 6,977 $ - $ 16,401
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Commercial
Pass $ 19,306 $ 10,228 $ 5,638 $ 1,591 $ 2,167 $ 1,342 $ 12,777 $ 53,049
Special mention
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total commercial $ 19,384 $ 10,328 $ 5,638 $ 1,591 $ 2,167 $ 1,345 $ 12,777 $ 53,230
Current period gross charge-offs $ - $ (5) $ (14) $ - $ (26) $ - $ - $ (45)
Agriculture
Pass $ $ $ $ $ $ $ 1,217 $ 3,490
Special mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total agriculture $ $ $ $ $ $ $ 1,217 $ 3,508
Current period gross charge-offs $ - $ - $ - $ - $ - $ (59) $ - $ (59)
Consumer and All Other
Pass $ 12,352 $ 4,822 $ 2,408 $ $ $ $ 1,339 $ 23,140
Special mention
-
-
-
-
-
-
Substandard
-
-
Total consumer and all other $ 12,356 $ 4,823 $ 2,409 $ $ $ $ 1,339 $ 23,151
Current period gross charge-offs $ (198) $ (49) $ (13) $ - $ - $ (2) $ (59) $ (321)
Total $ 127,643 $ 118,411 $ 115,888 $ 51,039 $ 41,047 $ 144,136 $ 39,947 $ 638,111
Total current period gross charge-offs $ (198) $ (54) $ (57) $ - $ (26) $ (82) $ (59) $ (476)
NOTE 7	ALLOWANCE FOR CREDIT LOSSES FOR LOANS (“ACLL”)
In determining the amount of our allowance for credit losses, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future credit losses and we may experience significant increases to our provision.
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. Among other techniques, the Company uses a discounted cash flow methodology to determine the allowance for credit losses.
The following tables present a disaggregated analysis of activity in the allowance for credit losses for loans as of December 31, 2024 and 2023:
Schedule of allowance for credit losses for loans
Real estate secured
(Dollars are in thousands) Commercial Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Unallocated Total
Year ended December 30, 2024
Beginning balance $ 2,518 $ 300 $ 2,666 $ 509 $ 163 $ 673 $ 33 $ 394 $ - $ 7,256
Charge-offs (180 ) - (75 ) (95 ) - (162 ) - (279 ) - (791 )
Recoveries - - -
Provision for credit losses 2,639 2,898 (148 ) - 7,762
Ending balance $ 2,565 $ 322 $ 2,923 $ 382 $ 149 $ 751 $ 36 $ 556 $ - $ 7,684
Real estate secured
(Dollars are in thousands) Commercial Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Unallocated Total
Year ended December 31, 2023
Beginning balance $ 2,364 $ 345 $ 2,364 $ 262 $ 153 $ 381 $ 32 $ 386 $ 440 $ 6,727
Adjustment to allowance for adoption of ASU 2016-13 (299 ) 75 (5 ) (103 ) (440 ) (80 )
Charge-offs - - (51 ) - - (45 ) (59 ) (321 ) - (476 )
Recoveries - - -
Provision for credit losses (244 ) (65 ) -
Ending balance $ 2,518 $ 300 $ 2,666 $ 509 $ 163 $ 673 $ 33 $ 394 $ - $ 7,256
Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
NOTE 8	MODIFICATIONS MADE TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
On September 27, 2024, Hurricane Helene passed through western North Carolina, southwest Virginia and northeast Tennessee, causing flood and wind damage in its path. To assist borrowers impacted by this natural disaster, we offered short-term payment deferrals of 3 months. At December 31, 2024, 36 loans totaling $9.2 million are participating in this deferral program. One of these loans, a residential mortgage loan totaling $178,000, received an additional 3 month deferral, due to the extent of damage to the property. Additionally, there were no loans that had a payment default during the year that were modified in the previous 12 months.
NOTE 9	BANK PREMISES AND EQUIPMENT
Depreciation expense for the year ended December 31, 2024 and 2023 was $1.2 million and $1.2 million, respectively. Bank premises and equipment as of December 31, 2024 and 2023 are summarized as follows:
Schedule of bank premises and equipment
(Dollars are in thousands)
Land $ 6,441 $ 7,206
Buildings and improvements 14,664 15,329
Furniture and equipment 9,279 11,225
Construction in progress
-
Property plan equipment, gross
30,384
35,223
Less accumulated depreciation (13,314) (15,935)
Bank Premises and Equipment $ 17,070 $ 17,841
NOTE 10	INCOME TAXES
The Company files a consolidated federal income tax return. The following summarizes the provision for income taxes and the related deferred tax components for the years ended December 31, 2024 and 2023.
Income tax expense is summarized as follows for the years ended December 31, 2024 and 2023:
Schedule of pre-tax book income
(Dollars are in thousands)
Current income tax expense $ 2,054 $ 2,139
Deferred tax expense
Income tax expense $ 2,149 $ 2,147
The following table summarizes the differences between the actual income tax expense and the amounts computed using the federal statutory tax rate of 21% for years ended December 31, 2024 and 2023, respectively:
Schedule of reconciliation of income tax expense
(Dollars are in thousands)
Income tax expense at the applicable federal rate $ 2,637 $ 2,152
Permanent differences resulting from:
Prior year tax
-
Nondeductible expenses
Tax exempt interest income
(1)
(2)
Bank owned life insurance
(15)
(9)
Surrender of bank owned life insurance
-
Penalty on surrender of bank owned life insurance
-
Bank owned life insurance benefit
(329)
-
Other adjustments
(6)
Income tax expense $ 2,149 $ 2,147
The net deferred tax assets and liabilities resulting from temporary differences as of December 31, 2024 and 2023, are summarized as follows:
Schedule of net deferred tax assets and liabilities
(Dollars are in thousands)
Deferred tax assets
Allowance for credit losses $ 1,828 $ 1,696
Deferred compensation
Unrealized loss on securities available for sale
3,186 3,098
Other real estate owned
Self-insured health insurance
Lease liability
Other
Total assets, gross
6,450
6,372
Deferred tax liabilities
Depreciation
Prepaid expenses
Deferred loan costs
Right-of-use asset
Total liabilities, gross
1,615
1,911
Net deferred tax asset $ 4,835 $ 4,461
In accordance with applicable accounting guidance, the Company determined that it was not required to establish a valuation allowance for deferred tax assets as it is more likely than not that the deferred tax asset will be realized through future taxable income, future reversals of existing taxable temporary differences and tax strategies. The Company’s net deferred tax asset is recorded in the consolidated financial statements separately.
As of December 31, 2024 and 2023, the Company had no unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to increase significantly over the next twelve months. The company recognizes interest and penalties as a component of income tax expense.
The Company and Bank are subject to U. S. federal income tax, a capital-based franchise tax in the Commonwealth of Virginia; and income and excise taxes in West Virginia, Tennessee and North Carolina, respectively, based on earnings realized from business activities within each state. Years prior to 2021 are no longer subject to examination by taxing authorities.
NOTE 11	TIME DEPOSITS
The aggregate amount of time deposits that meet or exceed the Federal Deposit Insurance Corporation (“FDIC”) Insurance limit of $250,000 was $51.3 million and $52.8 million as of December 31, 2024 and 2023, respectively. Brokered time deposits totaled $3.0 million and $0 at December 31, 2024 and 2023, respectively. As of December 31, 2024, the scheduled maturities of time deposits are as follows (dollars are in thousands):
Schedule of maturities
$ 221,094
29,197
9,774
3,603
5,071
After five years
-
Total $ 268,739
NOTE 12	RELATED PARTY TRANSACTIONS
Officers, directors (and companies controlled by them), principal shareholders, and associates were customers of and had loan transactions with the Bank in the normal course of business. The following table summarizes these transactions, which were made on substantially the same terms as those prevailing for other customers and did not involve any abnormal risk.
Schedule of related party
For the year ended December 31,
(Dollars in thousands)
Beginning balance $ 2,610 $ 1,559
New loans and advances on lines 2,895 1,750
Effects of changes in composition of related parties - 1,557
Payments and other reductions (1,430 ) (2,256 )
Ending balance $ 4,075 $ 2,610
Total related party deposits held at the Bank were $17.9 million and $15.6 million as of December 31, 2024 and 2023, respectively.
NPB Insurance Services, Inc. holds a 39% membership interest in Lonesome Pine Title Agency, LLC, which provides title insurance.
NOTE 13	RETIREMENT AND OTHER BENEFIT PLANS
The Company has established a qualified defined contribution plan that covers all full-time employees. The Company matches employee contributions up to a maximum of 6% of their salary for 2024 and 2023, respectively. The Company contributed approximately $529,000 and $519,000 to the defined contribution plan during the years ended December 31, 2024 and 2023, respectively.
On February 27, 2023, the Board of Directors approved and adopted the New Peoples Bankshares, Inc. Long-Term Cash Incentive Plan (the “Plan”). The Plan provides for cash incentive awards to Plan participants based on the Company’s quarterly earnings per share of common stock over the period specified in the Plan. Certain members of management are eligible to participate in the Plan. Individual awards are settled solely in cash, determined by multiplying quarterly earnings per share by the number of notional shares covered by a Plan award. Awards for up to 500,000 notional shares of common stock of the Company, adjusted to 750,000 shares in December 2023, may be granted under the Plan. The Plan does not grant participants equity in the Company and does not create any shareholders’ rights. For each award, a participant receives an allocation equal to earnings per share, for each share covered by the award, on a quarterly basis. Awards become vested in 25% increments, on each of the first through fourth anniversaries of the date of grant, subject to a participant’s continuous employment with the Company through the applicable anniversary. Awards are settled on the earliest of a participant’s separation from service, a change in control, or the ten-year anniversary of the Plan’s effective date. Vested portions of an award are generally paid in three installments. As of December 31, 2024 and 2023, 605,000 and 500,000 notional shares, respectively, have been awarded, and for the years ended December 31, 2024 and 2023 expense totaling $160,000 and $55,000 was recorded.
The Bank maintains a salary continuation plan for key executives which was established in 2002 and was funded by single premium life insurance policies. Expenses related to the plan were approximately $24,000 and $26,000 for the years ended December 31, 2024 and 2023, respectively.
NOTE 14	OTHER REAL ESTATE OWNED
The following table summarizes the activity in other real estate owned for the years ended December 31, 2024 and 2023:
Schedule of activity in other real estate owned
(Dollars in thousands)
Balance, beginning of year $ 157 $ 261
Additions 1,330
Proceeds from sales (1,474 ) (132 )
Adjustment of carrying value (9 ) -
Gains (losses) from sales (96 )
Balance, end of year $ 87 $ 157
As of December 31, 2024, one loan secured by residential real estate totaling approximately $16,000 was in the process of foreclosure. As of December 31, 2023, four loans totaling approximately $401,000 were in the process of foreclosure, of which three loans totaling $117,000 were secured by residential real estate.
NOTE 15	BANK OWNED LIFE INSURANCE
As of December 31, 2024 and 2023, the Bank had an aggregate total cash surrender value of $0 and $4.6 million, respectively, on life insurance policies covering former key officers. During 2024 one policy was surrendered at market value resulting in a loss of $49,000. In December 2024, a death benefit receivable of $5.4 million was recorded, resulting in an income accrual of $1.6 million.
Excluding the loss on surrender and the accrual of income on the death benefit, the Company recognized income of approximately $73,000 and $40,000 during the years ended December 31, 2024 and 2023, respectively.
NOTE 16	DIVIDEND LIMITATIONS ON SUBSIDIARY BANK
A principal source of funds for the Company is dividends paid by the Bank. The Federal Reserve Act restricts the amount of dividends the Bank may pay. Approval by the Board of Governors of the Federal Reserve System is required if the dividends declared by a state member bank, in any year, exceed the sum of (1) net income of the current year and (2) income net of dividends for the preceding two years.
Virginia law restricts the amount of dividends a Virginia corporation may pay. Generally, a Virginia corporation may not authorize and make distributions if, after giving effect to the distribution, it would be unable to meet its debts as they become due in the usual course of business or if the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if it were dissolved at that time, to satisfy the preferential rights of shareholders whose rights are superior to the rights of those receiving the distribution. In addition, the payment of distributions to shareholders is subject to any prior rights of outstanding preferred stock.
NOTE 17	LEASING ACTIVITIES
As of December 31, 2024, the Bank leases four branch offices and a former branch office now used as administrative offices, and sublets a lot adjacent to another branch office. The lease agreements have maturity dates ranging from December 2028 to December 2041. It is assumed that there are currently no circumstances in which the leases would be terminated prior to expiration. The weighted average remaining life of the lease terms as of December 31, 2024 is 7.27 years.
The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded to the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted average discount rate for the leases as of December 31, 2024 was 3.36%.
The Company’s operating lease costs for the years ended December 31, 2024 and 2023, as a result of the transactions discussed above, were $558,000 and $465,000, respectively.
The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. As of December 31, 2024, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars are in thousands):
Schedule of future minimum rental commitments under the non-cancellable operating leases
$
Thereafter
1,243
Total lease payments
4,008
Less imputed interest
Total $ 3,413
NOTE 18	BORROWED FUNDS
The following table presents the breakdown of borrowed funds as of December 31, 2024 and 2023:
Schedule of breakdown of borrowed funds
Short-term Borrowings
Long-term Borrowings
FHLB Revolving Advances
Federal Funds Lines
FHLB Term Loans Short-Term
FRB Term Funding Program
FHLB Term Loans Long-Term
NPB Capital Trust I
NPB Capital Trust 2
Total
(a)
(b)
(a) (c)
(d)
(a) (e)
(Dollars in thousands)
Balance December 31, 2024 $ - $ - $ - $ - $ 10,000 $ 9,831 $ 5,155 $ 24,986
Highest balance at any month-end
-
-
-
10,000
10,000
11,031
5,155
Average weighted balance
-
-
-
7,486
10,000
10,749
5,155
33,390
Average interest rate:
Paid during the year
0.00%
5.61%
0.00%
4.83%
3.51%
8.15%
7.30%
5.88%
At year-end
0.00%
0.00%
0.00%
0.00%
3.51%
7.52%
6.69%
5.74%
Balance December 31, 2023 $ - $ - $ - $ 10,000 $ 10,000 $ 11,031 $ 5,155 $ 36,186
Highest balance at any month-end
-
-
-
10,000
10,000
11,341
5,155
Average weighted balance
-
-
6,630
11,271
5,155
23,550
Average interest rate:
Paid during the year
4.96%
6.00%
0.00%
4.83%
3.51%
8.04%
7.20%
6.51%
At year-end
0.00%
0.00%
0.00%
4.83%
3.51%
8.26%
7.43%
5.88%
(a) - The Bank has the ability to borrow up to an additional $86.6 million from FHLB under a line of credit which is secured by a blanket lien on residential real estate loans. With additional collateral, the Bank’s total credit availability would be $196.1 million. The Bank had no overnight borrowings subject to daily rate changes from the FHLB at December 31, 2024 or 2023.
We have used our line of credit with FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public funds deposited in the Bank. No draws on the letters of credit have been issued. The letters of credit are considered draws on our FHLB line of credit.
(b) - Federal funds lines consisted of $30.0 million in unsecured federal funds line of credit facilities with correspondent banks as of December 31, 2024 and 2023, respectively exclusive of any outstanding balance. The Company did not borrow from the lines other than to test the ability to access the lines.
(c) - As of December 31, 2024 and 2023, there were no short term FHLB advances outstanding.
(d) - A short-term, fixed rate borrowing under the FRB Bank Term Funding Program in the amount of $10.0 million at December 31, 2023, was prepaid without penalty during the fourth quarter of 2024.
(e) - As of December 31, 2024 and 2023, there was a fixed rate, FHLB advance in the amount of $10.0 million outstanding, which matures in 2028.
TPS I - On July 7, 2004, the Company completed the issuance of $11.3 million in floating rate trust preferred securities, maturing July 7, 2034, offered by its wholly owned subsidiary, NPB Capital Trust I (TPS I). The rate is determined quarterly and floats based on the 3-month Secured Overnight Financing Rate (SOFR) plus 260 basis points. During 2024, a principal reduction of $1.2 million was paid. On January 7, 2025, a principal reduction of $3.0 million was paid.
TPS 2 - On September 27, 2006, the Company completed the issuance of $5.2 million in floating rate trust preferred securities, maturing October 7, 2036, offered by its wholly owned subsidiary, NPB Capital Trust 2 (TPS 2). The rate is determined quarterly and floats based on the 3-month SOFR plus 177 basis points.
Under the terms of the subordinated debt transactions, the securities have 30-year maturities and are redeemable, in whole or in part, without penalty, at the option of the Company after five years from the issuance date, and on a quarterly basis thereafter.
Following are maturities of borrowed funds as of December 31, 2024 (dollars in thousands):
Schedule of maturities of borrowed funds
$ -
-
-
10,000
-
and thereafter
14,986
$
24,986
NOTE 19	FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the balance sheet.
Financial instruments whose contract amount represents credit risk as of December 31, 2024 and 2023 were as follows:
Schedule of financial instruments with credit risk
(Dollars in thousands)
Commitments to extend credit $ 108,316 $ 93,212
Standby letters of credit 2,617 3,968
Commitments to extend credit are agreements to lend to a customer at either a fixed or variable interest rate as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.
NOTE 20 CREDIT ALLOWANCE FOR UNFUNDED COMMITMENTS
The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The allowance for credit losses for off-balance-sheet credit exposures is adjusted through a provision for credit losses in the consolidated statements of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life, utilizing the same models and approaches for the Company's other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. As of December 31, 2024 the Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time, and those commitments are excluded from the credit losses estimate.
For the years end December 31, 2024 and 2023, the Company recorded a provision of $119,000 and a reversal of $63,000, respectively, to the liability for credit losses for unfunded commitments. As of December 31, 2024 and 2023, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities was $404,000 and $285,000, respectively.
NOTE 21	LEGAL CONTINGENCIES
In the course of operations, we may become a party to legal proceedings in the normal course of business. As of December 31, 2024, we do not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or any of its subsidiaries to which the property of the Company or any of its subsidiaries is subject, in the opinion of management, may materially impact the financial condition or liquidity of the Company.
NOTE 22	CAPITAL
Capital Requirements and Ratios
The Company meets eligibility criteria of a small bank holding company in accordance with the Board of Governors of the Federal Reserve System’s Small Bank Holding Company Policy Statement, and is no longer obligated to report consolidated regulatory capital.
The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets, Tier 1 capital to average assets, and Common Equity Tier 1 capital to risk-weighted assets. As of December 31, 2024, the Bank meets all capital adequacy requirements to which it is subject.
The Bank’s actual capital amounts and ratios are presented in the following table as of December 31, 2024 and 2023, respectively.
Schedule of capital requirement
Actual Minimum Capital Requirement Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands) Amount Ratio Amount Ratio
Amount Ratio
December 31, 2024:
Total Capital to Risk Weighted Assets $ 101,769
16.19% $ 50,300
8.00% $ 62,875
10.00%
Tier 1 Capital to Risk Weighted Assets
93,907
14.94% 37,725
6.00%
50,300
8.00%
Tier 1 Capital to Average Assets
93,907
10.70% 35,113
4.00%
43,892
5.00%
Common Equity Tier 1 Capital
to Risk Weighted Assets
93,907 14.94% 28,294 4.50%
40,869 6.50%
December 31, 2023:
Total Capital to Risk Weighted Assets $ 99,246 16.58% $47,873 8.00% $ 59,842 10.00%
Tier 1 Capital to Risk Weighted Assets
91,765 15.33% 35,905 6.00%
47,873 8.00%
Tier 1 Capital to Average Assets
91,765 11.11% 33,040 4.00%
41,300 5.00%
Common Equity Tier 1 Capital
to Risk Weighted Assets
91,765 15.33% 26,929 4.50%
38,897 6.50%
Accordingly, as of December 31, 2024 and 2023, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since such dates that management believes have changed the Bank’s category.
The Bank is also subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The final rules require the Bank to comply with the following minimum capital ratios: (i) a Common Equity Tier 1 capital to risk-weighted assets ratio of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum Common Equity Tier 1 capital to risk-weighted assets ratio of 7%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. The Bank’s capital conservation buffer was 8.19% at December 31, 2024. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a Common Equity Tier 1 capital to risk-weighted assets ratio above the minimum but below the conservation buffer face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. As of both December 31, 2024 and 2023, the Common Equity Tier 1 Capital to Risk-weighted Assets ratio, the Tier 1 Capital to Risk-weighted Assets ratio, the Total Capital to Risk-weighted Assets ratio, and the Tier 1 Capital to Average Assets ratio of the Bank, all exceeded the minimum requirements.
NOTE 23	FAIR VALUES
The Company established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by this hierarchy are:
Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed.
Level 3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy are as follows:
Investment Securities Available for Sale - Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s available for sale securities, totaling $96.0 million and $89.8 million as of December 31, 2024 and 2023, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.
Collateral Dependent Loans with an ACL - In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.
Other Real Estate Owned - Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned. These assets are carried at the lower of their carrying value or fair value. Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3. The aggregate carrying amounts of foreclosed assets were approximately $87,000 and $157,000 as of December 31, 2024 and 2023, respectively.
Assets and liabilities measured at fair value are as follows as of December 31, 2024:
Schedule of summary of assets and liabilities measured at fair value
(Dollars in thousands)
Quoted market price in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
(On a recurring basis)
Available for sale investments
U.S. Treasuries $ - $ 7,961
$ -
U.S. Government Agencies
-
8,805
-
Taxable municipals
-
18,524
-
Corporate bonds
-
2,253
-
Mortgage backed securities
-
58,441
-
(On a non-recurring basis)
Other real estate owned
-
-
Collateral dependent loans with ACL:
Consumer installment and all other loans
-
-
Total $ $ 95,984 $
Not included in the above table is a residential 1-4 family mortgage loan totaling $178,000 that has a specific allowance for credit loss allocation of 100% due to the destruction of the collateral.
Assets and liabilities measured at fair value are as follows as of December 31, 2023:
(Dollars are in thousands)
Quoted market price in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
(On a recurring basis)
Available for sale investments
U.S. Treasuries $ - $ 10,985 $ -
U.S. Government Agencies
-
8,811
-
Taxable municipals
-
17,859
-
Corporate bonds
-
2,688
-
Mortgage backed securities
-
49,462
-
(On a non-recurring basis)
Other real estate owned
-
-
Collateral dependent loans with ACL:
Commercial real estate
-
-
Total $ $ 89,805 $
For Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2024 and 2023, the significant unobservable inputs used in the fair value measurements were as follows:
Schedule of significant unobservable inputs In level 3 assets
(Dollars in thousands)
Fair Value at December 31,
Fair Value at
December 31,
Valuation Technique
Significant Unobservable Inputs
General Range of Significant Unobservable Input Values
Collateral dependent loans with ACL:
Commercial real estate $ - $
Appraised Value
Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell
- 18%
Consumer and all other $ $ -
Appraised Value
Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell
- 18%
Other Real Estate Owned $ $
Appraised Value/Comparable Sales/Other Estimates from Independent Sources
Discounts to reflect current market conditions and estimated costs to sell
- 18%
Fair Value of Financial Instruments
The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis are as follows:
Schedule of estimated fair value of financial instruments
Fair Value Measurements
(Dollars in thousands)
Carrying
Amount
Fair
Value
Quoted market price in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
December 31, 2024
Financial instruments - assets
Net loans $ 649,852 $ 633,023 $ - $ - $ 633,023
Financial instruments - liabilities
Time deposits
268,739
268,509
-
268,509
-
Borrowed funds
24,986
23,071
-
23,071
-
December 31, 2023
Financial instruments - assets
Net loans $ 630,855 $ 604,736 $ - $ - $ 604,736
Financial instruments - liabilities
Time deposits
252,316
249,941
-
249,941
-
Borrowed funds
36,186
34,046
-
34,046
-
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the estimates.
Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments.
The carrying value of cash and due from banks, federal funds sold, interest-bearing deposits with other banks, deposits with no stated maturities and accrued interest approximates fair value and is excluded from the table above.
The methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price may differ.
NOTE 24	REVENUE FROM CONTRACTS WITH CUSTOMERS
All of our revenue from contracts with customers as defined in ASC 606 is recognized within noninterest income. The following table presents Noninterest Income by revenue stream for the years ended December 31, 2024 and 2023.
Schedule of revenue from contracts with customers
(Dollars in thousands)
Service charges and fees $ 3,838
$ 3,886
Card processing and interchange income
3,702
3,730
Insurance and investment fees
1,328
1,084
Other noninterest income
2,386
1,249
Total noninterest income $ 11,254 $ 9,949
Certain revenues are earned from contracts with customers. These revenues are recognized when the promised services are rendered to the customer and reflect the entitled consideration received in exchange for those services.
Service charges and fees - Revenue is recognized on deposit services based on published fees for the services provided. These fees may be collected on a transaction basis, at the time the service is rendered or periodically based on the period over which the service is provided. Transaction-based fees include services such as stop payment requests, paper statement rendering and ATM usage fees. Periodic fees include such charges as monthly account maintenance fees. Overdraft fees are realized at the time the overdraft occurs.
Card processing and interchange fees - Card-related interchange revenue is primarily comprised of debit and credit card income. Debit and credit card income is earned when customers’ debit or credit cards are processed through a card payment network. Card-related interchange income is recognized at the time the customer transactions settle.
Insurance and investment fees - Insurance and investment fee income consists of commissions received on annuity and investment product sales through a third-party service provider. Performance is generally satisfied at the time an annuity policy is issued, or at the execution of an investment transaction.
NOTE 25	NONINTEREST EXPENSES
Other operating expenses, included as part of noninterest expenses, consisted of the following for the years ended December 31, 2024 and 2023:
Schedule of noninterest expenses
(Dollars in thousands)
Other operating expenses $ 3,605 $ 3,603
ATM network expense
1,540
1,489
Legal and professional fees
1,081
Core system termination costs
-
Loan related expenses
FDIC insurance premiums
Consulting fees
Advertising, sponsorships and donations
Printing and supplies
Other real estate owned expenses, net
(5)
Total
$
8,177 $
7,795
NOTE 26	SUBSEQUENT EVENTS
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were available to be issued and has identified the following as a non-recognized subsequent event.
On February 24, 2025, the Board of Directors declared a dividend of $0.08 per share payable March 31, 2025 to shareholders of record as of March 17, 2025.
On January 24, 2025, the Board of Directors authorized the continuation of the Company’s repurchase of up to 500,000 shares of its common stock through March 31, 2026. This is a continuation of the repurchase program originally announced April 28, 2022, which was set to expire March 31, 2025. To the date of this announced continuation, 286,792 shares have been repurchased at an average price of $2.42 per share, leaving 213,208 shares available for repurchase. Repurchases made through this program will be made through open market purchases or in privately negotiated transactions.
NOTE 27	RECENT ACCOUNTING DEVELOPMENTS
The following is a summary of recent authoritative announcements:
In December 2023, the FASB issued 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. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect these amendments to have a material effect on its consolidated financial statements.
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 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 these amendments to have a material effect on its consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 28	PARENT CORPORATION ONLY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2024 AND 2023
(Dollars in Thousands)
Schedule of parent corporation only condensed balance sheets
ASSETS
Due from banks $ 3,348 $
Investment in subsidiaries
81,923
80,112
Other assets
Total assets $ 86,017 $ 81,326
LIABILITIES
Accrued interest payable $ $
Accrued expenses and other liabilities
Trust preferred securities
14,986
16,186
Total liabilities
15,276
16,515
SHAREHOLDERS’ EQUITY
Common stock - $2.00 par value, 50,000,000 shares authorized;
23,636,724 and 23,745,900 shares issued and outstanding at December 31, 2024 and 2023, respectively
47,273
47,492
Additional paid capital
14,451
14,514
Retained earnings
21,001
14,458
Accumulated other comprehensive loss
(11,984)
(11,653)
Total shareholders’ equity
70,741
64,811
Total liabilities and shareholders’ equity $ 86,017 $ 81,326
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(Dollars in thousands)
Schedule of parent corporation only condensed statements of income
Income
Miscellaneous income $ $
Dividends from subsidiaries
7,144
2,600
Undistributed income of subsidiaries
2,142
5,677
Total income
9,323
8,315
Expenses
Trust preferred securities interest expense
1,248
1,274
Professional fees
Other operating expenses
Total expenses
1,406
1,422
Income before income taxes
7,917
6,893
Income tax benefit
(287)
(291)
Net income $ 8,204 $ 7,184
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(Dollars in thousands)
Schedule of parent corporation only condensed statements of cash flows
Cash flows from operating activities
Net income $ 8,204 $ 7,184
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries
(2,142)
(5,677)
Net decrease in other assets
Net (decrease) increase in accrued interest payable and other liabilities
(39)
Net cash provided by operating activities
6,064
1,884
Cash flows from financing activities:
Repayment of long-term debt
(1,200)
(310)
Repurchase of common stock
(282)
(237)
Cash dividends paid
(1,661)
(1,431)
Net cash used in financing activities
(3,143)
(1,978)
Net increase (decrease) in cash and cash equivalents
2,921
(94)
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year $ 3,348 $

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting of New Peoples Bankshares, Inc. New Peoples’ internal control system was designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting practices.
All internal control systems, no matter how well designed, have inherent limitations. Because of these inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of New Peoples’ internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control - Integrated Framework” issued in 2013. Based on this assessment, management concluded that the internal control over financial reporting was effective as of December 31, 2024.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures that is designed to ensure that material information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of December 31, 2024.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information contained under the captions “Election of Directors,” “Incumbent Directors Whose Terms Expire in 2026 and 2027,” “Executive Officers Who Are Not Directors,” “Corporate Governance” and “Delinquent Section 16(a) Reports” in the 2024 Proxy Statement that is required to be disclosed in this Item 10 is incorporated herein by reference.
The Company has adopted an insider trading policy that governs the purchase, sale, and/or other transactions of our securities by its directors, officers and employees. A copy of the Company’s insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition, with regard to the Company’s trading in its own securities, it is the Company’s policy to comply with the federal securities laws and the applicable exchange listing requirements.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information contained under the captions “Director Compensation” and “Executive Compensation and Related Party Transactions” in the 2025 Proxy Statement that is required to be disclosed in this Item 11 is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information contained under the captions “Security Ownership of Management” and “Security Ownership of Certain Beneficial Owners” in the 2025 Proxy Statement that is required to be disclosed in this Item 12 is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information contained under the caption “Executive Compensation and Related Party Transactions” and “Corporate Governance” in the 2025 Proxy Statement that is required to be disclosed in this Item 13 is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information contained under the caption “Audit Information” in the 2025 Proxy Statement that is required to be disclosed in this Item 14 is incorporated herein by reference.
The Independent Registered Public Accounting Firm for the financial statements as of December 31, 2024, and the year then ended was Yount, Hyde & Barbour, P.C., (U.S. PCAOB Auditor Firm I.D.: 613, located in Roanoke, Virginia)

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a)(1)	The response to this portion of Item 15 is included in Item 8 above.
(a)(2)	The response to this portion of Item 15 is included in Item 8 above.
(a)(3)	The following exhibits are filed as part of this Form 10-K:
Exhibit
Number
3.1 Amended Articles of Incorporation of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarterly period ended June 30, 2008 filed on August 11, 2008).
3.2 Bylaws of Registrant (incorporated by reference to Exhibit 3.2 to Form 8-K filed August 26, 2020).
4.1 Specimen Common Stock Certificate of New Peoples Bankshares, Inc. (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarterly period ended June 30, 2012 filed on August 14, 2012).
4.2 Description of New Peoples Bankshares, Inc.’s Securities.
10.1* Employment Agreement dated December 1, 2016 between New Peoples Bankshares, Inc., New Peoples Bank, Inc., and C. Todd Asbury (incorporated by reference to Exhibit 10.1 to Form 8-K filed December 2, 2016).
10.2* Employment Agreement dated May 14, 2019 between New Peoples Bank, Inc., and James W. Kiser (incorporated by reference to Exhibit 10.2 to Form 10-K filed March 31, 2023).
10.3* New Peoples Bankshares, Inc. Long-Term Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed March 2, 2023).
10.4*
Form of Award Agreement for New Peoples Bankshares, Inc. Long-Term Cash Incentive Plan (incorporated by reference to Exhibit 10.2 to Form 8-K filed March 2, 2023).
10.5* First Amendment dated as of August 7, 2023 to the Employment Agreement dated as of December 1, 2016 by and among New Peoples Bankshares, Inc., New Peoples Bank, Inc., and C. Todd Asbury (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarterly period ended September 30, 2023 filed November 14, 2023).
10.6* Employment Agreement dated October 27, 2023 between New Peoples Bank, Inc. and Bryan Booher (incorporated by reference to Form 8-K filed November 2, 2023).
10.7* New Peoples Bankshares, Inc. Long-Term Cash Incentive Plan Amendment (incorporated by reference to Form 8-K filed December 18, 2023)
Code of Ethics (incorporated by reference to Exhibit 14 to Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
New Peoples Bankshares, Inc. Insider Trading Policy
Subsidiaries of the Registrant.
Powers of Attorney (contained on signature page).
31.1 Certification by Chief Executive Officer pursuant to Rule 13a-14(a).
31.2 Certification by Chief Financial Officer pursuant to Rule 13a-14(a).
Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
The following materials for the Company’s 10-K Report for the year ended December 31, 2024, formatted in XBRL are being furnished, not filed. XBRL Taxonomy Extension Calculation Linkbase Document, XBRL Taxonomy Extension Definitions Linkbase Document, Taxonomy Extension Label Linkbase Document, XBRL Taxonomy Extension Label Linkbase Document.
Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101).
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* Denotes management contract.
(b) See Item 15(a)(3) above.
(c) See Items 15(a)(1) and (2) above.