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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

     ☒  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

    

     For the Fiscal Year Ended December 31, 2025

    

     ☐  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

    

For the transition period from ________ to ________.

Commission File Number: 0-15204

NATIONAL BANKSHARES, INC.

(Exact name of registrant as specified in its charter)


Virginia (State or other jurisdiction of incorporation or organization)	54-1375874 (I.R.S. Employer Identification No.)

101 Hubbard Street

Blacksburg, Virginia 24062-9002

(Address of principal executive offices) (Zip Code)

(540) 951-6300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.25 per share	NKSH	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such period that the registrant was required to submit files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting common stock of the registrant held by non-affiliates of the registrant on June 30, 2025 (the last business day of the most recently completed second fiscal quarter) was approximately $173,155,227. As of March 27, 2026, the registrant had 6,368,410 shares of voting common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following document is incorporated herein by reference into the Part of the Form 10-K indicated.


Document	Part of Form 10-K into which incorporated
National Bankshares, Inc. Proxy Statement for the 2026 Annual Meeting of Stockholders	Part III

Table of Contents

NATIONAL BANKSHARES, INC.

Form 10-K

Index


Part I		Page

Item 1.	Business	3

Item 1A.	Risk Factors	11

Item 1B.	Unresolved Staff Comments	18

Item 1C.	Cybersecurity	19

Item 2.	Properties	19

Item 3.	Legal Proceedings	20

Item 4.	Mine Safety Disclosures	20

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20

Item 6.	[Reserved]	20

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 8.	Financial Statements and Supplementary Data	37

Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	81

Item 9A.	Controls and Procedures	81

Item 9B.	Other Information	82

Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	82

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	82

Item 11.	Executive Compensation	82

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82

Item 13.	Certain Relationships and Related Transactions, and Director Independence	83

Item 14.	Principal Accountant Fees and Services	83

Part IV

Item 15.	Exhibits and Financial Statement Schedules	84

Item 16.	Form 10-K Summary	85

Signatures		86

Table of Contents

Part I

$ in thousands, except per share data.

Item 1. Business

History and Business

National Bankshares, Inc. (the “Company” or “NBI”) is a financial holding company that was organized in 1986 under the laws of Virginia and is registered under the Bank Holding Company Act of 1956, as amended ("BHCA"). National Bankshares, Inc. common stock is listed on the Nasdaq Capital Market and is traded under the symbol “NKSH.” It conducts most of its operations through its wholly-owned community bank subsidiary, The National Bank of Blacksburg (the “Bank” or “NBB”). It also owns National Bankshares Financial Services, Inc. (“NBFS”), which does business as National Bankshares Insurance Services and National Bankshares Investment Services. References in this report to “we,” “us,” or “our” refer to NBI unless the context indicates that the reference is to NBB.

The National Bank of Blacksburg

The National Bank of Blacksburg, which does business as National Bank, was originally chartered in 1891 as the Bank of Blacksburg. Its state charter was converted to a national charter in 1922 and it became The National Bank of Blacksburg. In 2004, NBB purchased Community National Bank of Pulaski, Virginia. In May 2006, Bank of Tazewell County, a Virginia bank which since 1996 was a wholly-owned subsidiary of NBI, was merged with and into NBB. On June 1, 2024, NBB purchased Frontier Community Bank ("FCB"), a Virginia bank.

NBB is a community-oriented financial institution headquartered in Blacksburg, Virginia. Through 28 banking locations across southwest, western and central Virginia, including a new branch opened in 2025 in Roanoke, Virginia, a recently upgraded Lynchburg, Virginia location and a loan production office in Charlottesville, Virginia, NBB offers a full range of retail and commercial banking services to individuals, businesses, non-profits and local governments. NBB offers telephone, mobile and internet banking and it operates 26 automated teller machines (“ATMs”) in its service area.

The Bank’s primary source of revenue stems from lending activities. The Bank focuses lending on small and mid-sized businesses and individuals. Loan types include commercial and agricultural, commercial real estate, construction for commercial and residential properties, residential real estate, home equity and various consumer loan products. The Bank believes its prudent lending policies align its underwriting and portfolio management with its risk tolerance and income strategies. Underwriting and documentation requirements are tailored to the unique characteristics and inherent risks of each loan category.

Deposit products offered by the Bank include interest-bearing and non-interest bearing demand deposit accounts, money market deposit accounts, savings accounts, certificates of deposit, health savings accounts and individual retirement accounts. Deposit accounts are offered to both individuals and commercial businesses. Business and consumer debit and credit cards are available. NBB offers other miscellaneous services normally provided by commercial banks, such as letters of credit, night depository, safe deposit boxes, utility payment services and automatic funds transfer. NBB conducts a general trust business that has wealth management, trust and estate services for individual and business customers.

As of December 31, 2025, NBB had total assets of $1,821,703 and total deposits of $1,646,795. NBB’s net income for 2025 was $16,858, which produced a return on average assets of 0.93% and a return on average equity of 10.93%. Refer to Note 11 of Notes to Consolidated Financial Statements for NBB’s risk-based capital ratios.

National Bankshares Financial Services, Inc.

In 2001, National Bankshares Financial Services, Inc. was formed in Virginia as a wholly-owned subsidiary of NBI. NBFS offers non-deposit investment products and insurance products for sale to the public. NBFS works cooperatively with Osaic, Inc. to provide investments and with Bearing Insurance Group, LLC for insurance products. NBFS does not significantly contribute to NBI’s net income.

Acquisition of Frontier Community Bank

On June 1, 2024 (the "acquisition date"), the Company completed its acquisition of FCB, a Virginia chartered commercial bank, in accordance with the definitive merger agreement, dated January 23, 2024, by and among the Company, the Bank, and FCB. For more information on the completed acquisition, see Note 22: Business Combination.

Table of Contents

Operating Revenue

The following table displays components that contributed 15% or more of the Company’s total operating revenue for the years indicated.


	Percentage of Total Operating Revenue
	For the Year Ended December 31,
Revenue Component	2025			2024
Interest and Fees on Loans		65.00	%		60.59	%
Interest on Investments		19.54	%		22.80	%

Market Area

The Company serves customers through its offices in southwest, western and central Virginia. Although largely rural, the market area is home to several major state-supported universities, including Virginia Polytechnic Institute and State University (“Virginia Tech”) and Radford University. The branches acquired in 2024 and the loan production office in Charlottesville also service areas that contain the University of Virginia, James Madison University, Virginia Military Institute, Washington and Lee University, Liberty University, and Mary Baldwin University.

In addition to education, the market area has a diverse economic base with manufacturing, agriculture, tourism, healthcare, retail and service industries. Large manufacturing facilities in the region include Celanese Acetate, the largest employer in Giles County, and Volvo Heavy Trucks, the largest company in Pulaski County. Tazewell County's economic base is centered on the coal mining industry and agriculture. Montgomery County, Bluefield in Tazewell County, Abingdon in Washington County and the cities of Roanoke, Charlottesville, Waynesboro, Lynchburg and Staunton are regional retail centers and have facilities to provide basic health care for the regions.

NBI’s market area offers the advantages of a good quality of life, scenic beauty, moderate climate and historical and cultural attractions. Because NBI’s market area is economically diverse and includes large public employers, it has historically avoided the most extreme effects of past economic downturns. Future economic challenges may impact unemployment and other economic indicators that could negatively affect the Company’s market.

Competition

The banking and financial services industry is highly competitive. The competitive business environment is a result of changes in regulation, changes in technology and product delivery systems and competition from other financial institutions as well as non-traditional financial services. NBB competes for loans and deposits with other commercial banks, credit unions, securities and brokerage companies, mortgage companies, insurance companies, retailers, automobile companies and other nonbank financial service providers. Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader array of financial services than NBB. In order to compete, NBB relies upon a deep knowledge of its markets, a service-based business philosophy, personal relationships with customers, speci alized services tailored to meet customers’ needs and the convenience of office locations and technological access. In addition, the Bank is competitive with other financial institutions in its market area with respect to interest rates paid on deposit accounts, interest rates charged on loans and other service charges on loans and deposit accounts.

Organization and Employment

NBI, NBB and NBFS are organized in a holding company/subsidiary structure. As of December 31, 2025, NBB had 243 full time employees and 11 part time employees. NBFS had two full time employees and 1 part time employee.. NBB performs services for and charges commensurate fees to NBI and NBFS.

Regulation, Supervision and Government Policy

NBI and NBB are subject to state and federal banking laws and regulations that provide for general regulatory oversight of all aspects of their operations. As a result of substantial regulatory burdens on banking, financial institutions like NBI and NBB are at a disadvantage to other competitors who are not as highly regulated, and NBI and NBB’s costs of doing business are accordingly higher. The following is a brief summary of certain laws, rules and regulations that affect NBI and NBB.

National Bankshares, Inc.

NBI is a bank holding company qualified as a financial holding company under the BHCA, which is administered by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As such, NBI is subject to the supervision, examination, and reporting requirements of the BHCA and the regulations of the Federal Reserve. NBI is required to furnish to the Federal Reserve an annual report of its operations at the end of each fiscal year and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve is authorized to examine NBI and its subsidiaries. With some limited exceptions, the BHCA requires

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a bank holding company to obtain prior approval from the Federal Reserve before acquiring or merging with a bank or before acquiring more than 5% of the voting shares of a bank unless it already controls a majority of shares.

The Bank Holding Company Act. Under the BHCA, a bank holding company is generally prohibited from engaging in nonbanking activities unless the Federal Reserve has found those activities to be incidental to banking. Amendments to the BHCA that were included in the Gramm-Leach-Bliley Act of 1999 (see below) permitted any bank holding company with bank subsidiaries that are well-capitalized, well-managed and which have a satisfactory or better rating under the Community Reinvestment Act (see below) to file an election with the Federal Reserve to become a financial holding company. A financial holding company may engage in any activity that is (i) financial in nature, (ii) incidental to a financial activity or (iii) complementary to a financial activity. Financial activities include insurance underwriting, insurance agency activities, securities dealing and underwriting and providing financial, investment or economic advising services. NBI is a financial holding company that currently engages in insurance agency activities and provides financial, investment or economic advising services.

The Virginia Banking Act. The Virginia Banking Act requires all Virginia bank holding companies to register with the Virginia State Corporation Commission (the “Commission”). NBI is required to report to the Commission with respect to its financial condition, operations and management. The Commission may also make examinations of any bank holding company and its subsidiaries and must approve the acquisition by a Virginia bank holding company of ownership or control of more than 5% of the voting shares of any Virginia bank or bank holding company.

The Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act (“GLBA”) permits significant combinations among different sectors of the financial services industry, allows for expansion of financial service activities by bank holding companies and offers financial privacy protections to consumers. GLBA preempts most state laws that prohibit financial holding companies from engaging in insurance activities. GLBA permits affiliations between banks and securities firms in the same holding company structure, and it permits financial holding companies to directly engage in a broad range of securities and merchant banking activities.

The Sarbanes-Oxley Act. The Sarbanes-Oxley Act (“SOX”) protects investors by improving the accuracy and reliability of corporate disclosures. It impacts all companies with securities registered under the Securities Exchange Act of 1934 (the “Exchange Act”), including NBI. SOX creates increased responsibility for chief executive officers and chief financial officers with respect to the content of filings with the Securities and Exchange Commission (the “SEC”). Section 404 of SOX and related SEC rules focused increased scrutiny by internal and external auditors on NBI’s systems of internal controls over financial reporting, which is designed to ensure that those internal controls are effective in both design and operation. SOX sets out enhanced requirements for audit committees, including independence and expertise, and it includes stronger requirements for auditor independence and limits the types of non-audit services that auditors can provide. Finally, SOX contains additional and increased civil and criminal penalties for violations of securities laws.

Capital and Related Requirements. The Federal Reserve's Small Bank Holding Company Policy Statement (the "Statement") sets forth requirements for designation as a small bank holding company and related expectations for capital and reporting requirements. Qualified bank holding companies that have consolidated total assets of less than $3 billion are exempt from reporting consolidated regulatory capital ratios and from minimum regulatory capital requirements. The Company qualifies as a small bank holding company.

The Bank continues to be subject to various capital requirements administered by banking agencies as described below. Failure to meet minimum capital requirements can trigger certain mandatory and discretionary actions by regulators that could have a direct material effect on the Company’s consolidated financial statements.

Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") sets forth requirements for consumer mortgage lending, provisions for corporate governance and executive compensation, directed rule-making by the Federal Reserve limiting fees charged to merchants for credit and debit card transactions and established the Consumer Financial Protection Bureau (the “CFPB”). The CFPB has rule marking authority over financial institutions with regard to consumer protection and oversees the enforcement of all federal laws intended to ensure fair access to credit. For smaller financial institutions such as NBI and NBB, the CFPB coordinates its examination activities through their primary regulators.

During 2025, the CFPB reduced its staff by over 80%. The reduction in force is the subject of litigation, and the staffing cuts are currently stayed pending the federal circuit court’s rehearing of the case. The impact of these developments on banking organizations is uncertain. States and state attorneys general may increase regulatory, investigative and enforcement activity with respect to consumer protection, in response to changes in regulation, supervision and enforcement of consumer protection laws by federal regulators.

Notwithstanding ongoing, legal, budgetary and structural challenges affecting the CFPB, the CFPB remains an active federal regulatory agency with continuing supervisory and enforcement authority and retains its broad authority to pursue enforcement actions, including investigations, civil actions and cease and desist proceedings. The CFPB may also refer civil and criminal findings to the Department of Justice for prosecution. NBB is also subject to other federal and state consumer protection laws and regulations that, among other things, prohibit unfair, deceptive and abusive, corrupt or fraudulent business practices, untrue or misleading advertising and unfair competition.

Source of Strength. Federal Reserve policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources and capital to support NBB, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding

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company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

The National Bank of Blacksburg

NBB is a national banking association incorporated under the laws of the United States, and the bank is subject to regulation and examination by the Office of the Comptroller of the Currency (the “OCC”). NBB’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to the limits of applicable law. The OCC, as the primary regulator, and the FDIC regulate and monitor all areas of NBB’s operation. These areas include adequacy of capitalization and loss reserves, loans, deposits, business practices related to the charging and payment of interest, investments, borrowings, payment of dividends, security devices and procedures, establishment of branches, corporate reorganizations and maintenance of books and records. NBB is required to maintain certain capital ratios. It must also prepare quarterly reports on its financial condition for the OCC and conduct an annual audit of its financial affairs. The OCC requires NBB to adopt internal control structures and procedures designed to safeguard assets and monitor and reduce risk exposure. While appropriate for the safety and soundness of banks, these requirements add to overhead expense for NBB and other banks.

The Community Reinvestment Act. NBB is subject to the provisions of the Community Reinvestment Act (“CRA”), which imposes an affirmative obligation on financial institutions to meet the credit needs of the communities they serve, including low and moderate income neighborhoods. The OCC monitors NBB’s compliance with the CRA and assigns public ratings based upon the bank’s performance in meeting stated assessment goals. Unsatisfactory CRA ratings can result in restrictions on bank operations or expansion. NBB received a “satisfactory” rating in its last CRA examination by the OCC.

On October 24, 2023, the federal bank regulatory agencies issued a final rule to modernize their respective CRA regulations. The revised rules would have substantially altered the methodology for assessing compliance with the CRA, and likely would have made it more challenging and/or costly for NBB to maintain its “satisfactory” rating. Following its finalization on March 29, 2024, the 2023 modernization rule became subject to an ongoing injunction. On July 16, 2025, the federal bank regulatory agencies issued a joint proposal to rescind the 2023 modernization rule. The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the rescission of the modernization rule.

Privacy Legislation. Several recent laws, including the Right to Financial Privacy Act and the GBLA, and related regulations issued by the federal bank regulatory agencies, also provide new protections against the transfer and use of customer information by financial institutions. A financial institution must provide to its customers information regarding its policies and procedures with respect to the handling of customers’ personal information. Each institution must conduct an internal risk assessment of its ability to protect customer information. These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice and approval from the customer.

In October 2024, the CFPB issued a final rule regarding personal financial data rights that is designed to promote “open banking.” The final rule requires, among other things, that data providers, including any financial institution, make available to consumers and certain authorized third parties, upon request, certain covered transaction, account, and payment information. Institutions with at least $1.5 billion but less than $3 billion in total assets, including the Company, were required to comply with the final rule by April 1, 2029. On the same day the final rule was released, certain industry participants filed a complaint against the CFPB challenging the final rule. This legal challenge has since been paused to allow time for the CFPB to assess the rule and determine whether it aligns with the agency’s current policy objectives.

Consumer Laws and Regulations. There are a number of laws and regulations that regulate banks’ consumer loan and deposit transactions. Among these are the Truth in Lending Act, the Truth in Savings Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Electronic Funds Transfer Act, the Fair Debt Collections Practices Act, the Home Mortgage Disclosure Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws and various regulations that implement some or all of the foregoing. NBB is required to comply with these laws and regulations in its dealings with customers. In addition, the CFPB has adopted and may continue to refine rules regulating consumer mortgage lending pursuant to the Dodd-Frank Act. There are numerous disclosure and other compliance requirements associated with the consumer laws and regulations.

Deposit Insurance. NBB has deposits that are insured by the FDIC. The FDIC maintains a Deposit Insurance Fund (“DIF”) that is funded by risk-based insurance premium assessments on insured depository institutions. Assessments are determined based upon several factors, including the level of regulatory capital and the results of regulatory examinations. The FDIC may adjust assessments if the insured institution’s risk profile changes or if the size of the DIF declines in relation to the total amount of insured deposits. An institution’s assessment base is consolidated total assets less its average tangible equity as defined by the FDIC. The FDIC has authority to impose special measures to boost the deposit insurance fund such as prepayments of assessments and additional special assessments.

After giving primary regulators an opportunity to first take action, the FDIC may initiate an enforcement action against any depository institution it determines is engaging in unsafe or unsound actions or which is in an unsound condition, and the FDIC may terminate that institution’s deposit insurance. NBB has no knowledge of any matter that would threaten its FDIC insurance coverage.

Capital Requirements. NBB is subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”) as applied by the OCC. The Basel III Capital Rules require NBB to comply with minimum capital ratios plus a “capital conservation buffer” designed to absorb losses during periods of economic stress. The following table presents the required minimum ratios along with the required minimum ratios including the capital conservation buffer:

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Regulatory Capital Ratios	Minimum Ratio		Minimum Ratio With Capital Conservation Buffer
Total Capital to Risk Weighted Assets	8.00	%	10.50	%
Tier 1 Capital to Risk Weighted Assets	6.00	%	8.50	%
Common Equity Tier 1 Capital to Risk Weighted Assets	4.50	%	7.00	%
Tier 1 Capital to Average Assets (Leverage Ratio)	4.00	%	4.00	%

Risk-weighted assets are assets on the balance sheet as well as certain off-balance sheet items, such as standby letters of credit, to which weights between 0% and 1250% are applied, according to the risk of the asset type. Common Equity Tier 1 Capital (“CET1”) is capital according to the balance sheet, adjusted for goodwill and intangible assets and other prescribed adjustments. At NBB’s election, CET1 is also adjusted to exclude accumulated other comprehensive income or loss. Tier 1 Capital is CET1 adjusted for additional capital deductions. Total Capital is Tier 1 Capital increased for the allowance for credit losses and adjusted for other items. The Leverage Ratio is the ratio of Tier 1 Capital to total average assets, less goodwill and intangibles and certain deferred tax assets. As of December 31, 2025, NBB’s capital ratios exceeded the minimum ratios including the capital conservation buffer.

NBB is also subject to the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, as amended, which incorporates a CET1 ratio and increases certain other capital ratios. To be classified as well capitalized under the regulations, NBB must have the following minimum capital ratios: (i) a CET1 ratio of at least 6.5%; (ii) a Tier 1 Capital to Risk Weighted Assets ratio of at least 8.0%; (iii) a Total Capital to Risk Weighted Assets ratio of at least 10.0%; and (iv) a Leverage Ratio of at least 5.0%. NBB exceeded the thresholds to be considered well capitalized as of December 31, 2025.

Limits on Dividend Payments. A significant portion of NBI’s income is derived from dividends paid by NBB. As a national bank, NBB may not pay dividends from its capital, and it may not pay dividends if the bank would become undercapitalized, as defined by regulation, after paying the dividend. Without prior OCC approval, NBB’s dividend payments in any calendar year are restricted to the bank’s retained net income for that year, as that term is defined by the laws and regulations, combined with retained net income from the preceding two years, less any required transfer to surplus.

The OCC and FDIC have authority to limit dividends paid by NBB if the payments are determined to be an unsafe and unsound banking practice. Any payment of dividends that depletes the bank’s capital base could be deemed to be an unsafe and unsound banking practice.

Branching. As a national bank, NBB is required to comply with the state branch banking laws of Virginia, the state in which the main office of the bank is located. NBB must also have the prior approval of the OCC to establish a branch or acquire an existing banking operation. Under Virginia law, NBB may open branch offices or acquire existing banks or bank branches anywhere in the state. Virginia law also permits banks domiciled in the state to establish a branch or to acquire an existing bank or branch in another state. The Dodd-Frank Act permits the OCC to approve applications by national banks like NBB to establish de novo branches in any state in which a bank located in that state is permitted to establish a branch.

Mortgage Banking Regulation. NBB is subject to rules and regulations that, among other things, establish standards for mortgage 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. NBB 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. NBB’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.

Anti-Money Laundering Laws and Regulations. The Company is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated by U.S. authorities (“AML laws”). This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020.

The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. To comply with these obligations, the Company has implemented appropriate internal practices, procedures, and controls.

Office of Foreign Assets Control. The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals and other foreign organizations and entities. OFAC publishes lists of prohibited parties that are regularly consulted by the Company in the conduct of its business in order to assure compliance. The Company is responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such

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parties and reporting blocked transactions after their occurrence. Failure to comply with OFAC requirements could have serious legal, financial and reputational consequences for the Company.

Incentive Compensation. The Interagency Guidance on Sound Incentive Compensation Policies, issued by federal banking agencies, covers all employees that have the ability to materially affect the risk profile of a financial institution, either individually or as part of a group, and 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.

Section 956 of the Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity. Despite numerous proposals, no regulation has been finalized.

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, 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, 2025, the Company had not been made aware of any instances of non-compliance with the final guidance.

The Nasdaq Stock Market, LLC, the exchange on which our common stock is listed, enacted a listing rule that became effective in 2023 requiring listed companies to adopt policies mandating the recovery or “clawback” of excess incentive compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The Company has adopted a clawback policy compliant with such rule, a copy of which is included as Exhibit 97.1 to this Form 10-K.

Cybersecurity. In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should 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. The other statement indicates that 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 also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or 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.

On November 18, 2021, the federal bank regulatory agencies issued a final rule, effective April 1, 2022, imposing new notification requirements for cybersecurity incidents. The rule requires financial institutions to notify their primary federal regulator as soon as possible and no later than 36 hours after the institution determines that a cybersecurity incident has occurred that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the institution’s: (i) ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business, (ii) business line(s), including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value, or (iii) operations, including associated services, functions and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.

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.

Fair Access to Financial Services. In August 2025, President Trump signed Executive Order 14331, “Guaranteeing Fair Banking Access for All Americans,” which states that it is the policy of the United States that no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views. The Executive Order directs the Treasury Secretary and federal banking regulators to address politicized or unlawful debanking activities. In recent years, certain states have also enacted, or have proposed to enact, statutes, regulations or policies that prohibit financial institutions from denying or canceling products or services to a person or business, or otherwise discriminating against a person or business in making available products or services, on the basis of certain social or political factors or other activities.

Artificial Intelligence. CFPB and other federal regulatory guidance reiterates that creditors are not excused from the adverse action notice requirements under the Equal Credit Opportunity Act if they rely on complex algorithmic underwriting models. States have also

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started to regulate the use of artificial intelligence technologies. In July 2024, the federal banking agencies issued a final rule that requires, among other things, financial institutions to ensure that their automated valuation models for property valuation follow certain quality control standards, including a requirement that such valuation models comply with nondiscrimination laws.

Monetary Policy

The monetary and interest rate policies of the Federal Reserve, as well as general economic conditions, affect the business and earnings of NBI. NBB and other banks are particularly sensitive to interest rate fluctuations. The spread between the interest paid on deposits and that which is charged on loans is the most important component of the bank’s earnings. In addition, interest earned on securities investments has a significant effect on earnings. U.S. fiscal policy, including deficits requiring increased governmental borrowing also can affect interest rates. As conditions change in the national and international economy and in the money markets, the Federal Reserve’s actions, particularly with regard to interest rates, and the effects of fiscal policies can impact loan demand, deposit levels and earnings at NBB. It is not possible to accurately predict the effects on NBI of economic and interest rate changes.

Other Legislative and Regulatory Concerns

Federal and state laws and regulations are regularly proposed that could affect the regulation of financial institutions. New, revised or rescinded regulations could add to the regulatory burden on banks and other financial service providers and increase the costs of compliance, or they could change the products that can be offered and the manner in which financial institutions do business. We cannot foresee how regulation of financial institutions may change in the future and how those changes might affect NBI.

Company Website

NBI maintains a website at www.nationalbankshares.com. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are made available on its website as soon as is practical after the material is electronically filed with the SEC. The Company’s proxy materials for the 2026 annual meeting of stockholders will also be posted on a separate website at www.investorvote.com/NKSH. Access through the Company’s websites to the Company’s filings is free of charge. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy, and information statements, and other information the Company files electronically with the SEC.

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Executive Officers of the Company

The following table presents the executive officers of the Company; their age; their terms of office as officers; the positions and offices within the Company held by each officer; and thier principal occupation or employment during the past five years.


Name	Age	Offices and Positions Held	Year Elected an Officer
Lara E. Ramsey	57	National Bankshares, Inc.: Chief Executive Officer ("CEO"), July 2025 to Present; President, January 1, 2025 to Present; Corporate Secretary, June 2016 to June 2025; Executive Vice President ("EVP")/Chief Operating Officer ("COO") May 2022 to December 31, 2024; Senior Vice President ("SVP")/Administration, June 2011 to December 2017; Vice President/Human Resources, January 2001 – June 2011. The National Bank of Blacksburg: CEO, July 2025 to Present; President, January 1, 2025 to Present; Corporate Secretary, June 2016 to June 2025; EVP/COO, May 2022 to December 31, 2024; SVP/Administration, January 2018 to May 2022; Vice President/Human Resources, January 2001 to June 2011. National Bankshares Financial Services, Inc.: Chairman, President and CEO, July 2025 to Present.	2016
David K. Skeens	59	National Bankshares, Inc.: EVP/COO, February 1, 2026 to Present; EVP/Chief Risk Officer, January 8, 2025 to January 31, 2026; SVP/Senior Operations, Risk and Technology Officer, May 2022 to January 7, 2025; Treasurer and Chief Financial Officer ("CFO"), January 2009 to May 2022. The National Bank of Blacksburg: EVP/COO, February 1, 2026 to Present; EVP/Chief Risk Officer, January 8, 2025 to January 31, 2026; SVP/Senior Operations, Risk and Technology Officer, May 2022 to January 7, 2025; SVP/Operations and Risk Management and CFO, January 2009 – May 2022; SVP/Operations and Risk Management, February 2008 – January 2009; Vice President/Operations and Risk Management, April 2004 – February 2008.	2009
Paul M. Mylum	59	National Bankshares, Inc.: EVP/Chief Lending Officer, November 2019 to Present; SVP/Chief Lending Officer, August 2016 – November 2019 The National Bank of Blacksburg: EVP/Chief Lending Officer, November 2019 to Present; SVP/Chief Lending Officer, August 2016 – November 2019; SVP/Loans, August 2012 – August 2016.	2012
Lora M. Jones	48	National Bankshares, Inc.: EVP/CFO and Treasurer, January 8, 2025 to Present; SVP/CFO and Treasurer, May 2022 to January 7, 2025; Vice President/Controller, May 2014 – May 2022; Corporate Analysis Officer June 2011 – May 2014. The National Bank of Blacksburg: EVP/CFO and Cashier, January 8, 2025 to Present; SVP/CFO and Cashier, May 2022 to January 7, 2025; Vice President/Controller, May 2014 – May 2022; Corporate Analysis Officer June 2011 – May 2014. National Bankshares Financial Services, Inc.: Treasurer, July 1, 2025 to Present.	2011
Bobby D. Sanders, II	46	National Bankshares, Inc.: SVP/Chief Credit Officer, March 2022 to Present. The National Bank of Blacksburg: SVP/Chief Credit Officer, March 2022 to Present.	2022

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Item 1A. Risk Factors

An investment in the Company’s common stock involves certain risks, including those described below. In addition to the other information set forth in this Form 10-K, investors in the Company’s securities should carefully consider the factors discussed below. These factors, either alone or taken together, could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations, capital position, and prospects. One or more of these could cause the Company’s future results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report, in which case the trading price of the Company’s securities could decline. References to past events in these risk factors are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

CREDIT RISK

Focus on lending to small to mid-sized community-based businesses may increase our credit risk.

Most of the Company’s commercial business and commercial real estate loans are made to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. If general economic conditions in the market areas in which the Company operates negatively impact this important customer sector, the Company’s results of operations and financial condition may be adversely affected. Moreover, a portion of these loans have been made by the Company in recent years and the borrowers may not have experienced a complete business or economic cycle since becoming borrowers of the Bank. The deterioration of the borrowers’ businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on the Company’s financial condition and results of operations.

The allowance for credit losses may not be adequate to cover actual losses.

In accordance with generally accepted accounting principles in the United States (“GAAP”), the Company maintains an allowance for credit losses on loans (“ACLL”). The ACLL may not be adequate to cover actual credit losses, and future provisions for credit losses could materially and adversely affect operating results. The ACLL is based on available relevant information about the collectability of cash flows, including historical losses, reasonable and supportable forecasts of economic conditions, and current economic and portfolio conditions. The amount of future losses is susceptible to changes in economic, operating, and other outside forces and conditions, including changes in interest rates, all of which are beyond the Company’s control; and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review the Company’s loans and ACLL. The Company also outsources independent loan review. While management believes that the ACLL is adequate to cover current estimated losses, it cannot make assurances that it will not further increase the ACLL or that regulators will not require it to increase this allowance. Either occurrence could adversely affect earnings.

The ACLL requires management to make significant estimates that affect the consolidated financial statements. Due to the inherent nature of these estimates, management cannot provide assurance that it will not significantly increase the ACLL, which could materially and adversely affect earnings.

A decline in the condition of the local real estate market could negatively affect our business.

The Company offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, residential mortgages, home equity loans and lines of credit, consumer and other loans. Many of these loans are secured by real estate (both residential and commercial). As of December 31, 2025, 83.7% of all loans were secured by mortgages on real property. Substantially all of the Company’s real property collateral is located in its market area. If there is a decline in real estate values, especially in the Company’s market area, the collateral for loans would deteriorate and provide significantly less security to the Company. In the event the Company forecloses on a loan that is collateralized with property having reduced market value, the Company may suffer a loss upon liquidation of the collateral.

The Bank has a moderate concentration of credit exposure in commercial real estate, and loans with this type of collateral are viewed as having more risk of default.

As of December 31, 2025, the Bank held $467,783 in loans secured by commercial real estate, representing 46.8% of total loans outstanding at that date. The real estate consists primarily of multi-family housing, non-owner-occupied properties and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the rental of the property to service the debt. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because the Bank’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in the percentage of nonperforming loans. An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on the Company’s financial condition.

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Nonperforming assets take significant time to resolve and adversely affect the Company’s results of operations and financial condition.

The Company’s nonperforming assets adversely affect its net income in various ways. The Company does not record interest income on nonaccrual loans, which adversely affects its income and increases credit administration costs. When the Company receives collateral through foreclosures and similar proceedings, it is required to mark the related asset to the then fair market value of the collateral less estimated selling costs, which may, and often does, result in a loss. An increase in the level of nonperforming assets also increases the Company’s risk profile and may impact the capital levels regulators believe are appropriate in light of such risks. The Company utilizes various techniques such as workouts and restructurings to manage problem assets. Increases in or negative adjustments in the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect the Company’s business, results of operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans. There can be no assurance that the Company will avoid increases in nonperforming loans in the future.

The Company relies upon independent appraisals to determine the value of the real estate which secures a significant portion of its loans, and the values indicated by such appraisals may not be realizable if the Company is forced to foreclose upon such loans.

A significant portion of the Company’s loan portfolio consists of loans secured by real estate. The Company relies upon independent appraisers to estimate the value of such real estate. Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment which adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. As a result of any of these factors, the real estate securing some of the Company’s loans may be more or less valuable than anticipated at the time the loans were made. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, the Company may not be able to recover the outstanding balance of the loan and will suffer a loss.

MARKET RISK

If competition increases, our business could suffer, which could result in loan losses and adversely affect the Company’s financial condition and results of operations.

The financial services industry is highly competitive, with a number of commercial banks, credit unions, insurance companies, stockbrokers, financial technology companies and other nonbank financial service providers seeking to do business with our customers. If there is additional competition from new business or if our existing competitors focus more attention on our market, we could lose customers and our business could suffer.

Consumers may increasingly decide not to use the Bank to process their financial transactions, which would have a material adverse impact on the Company’s financial condition and operations.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on the Company’s financial condition and results of operations.

INTEREST RATE RISK

The Company's business is subject to interest rate risk and variations in interest rates and inadequate management of interest rate risk may negatively affect financial performance.

Changes in the interest rate environment may reduce the Company’s profits. It is expected that the Company will continue to realize income from the differential or “spread” between the interest earned on loans, securities, and other interest-earning assets, and interest paid on deposits, borrowings, and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. Loan and deposit volumes, yields, and costs are affected by market interest rates on these products, and there is substantial competition for loans and deposits that affect rates on these products. Additionally, short-term rates are driven by actions of the Federal Reserve, and movements in such rates may have a significant effect on the Company’s interest rate risk. The Company’s management cannot ensure that it can minimize interest rate risk. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Further, shifts in the Company’s mix of interest-earning assets or interest-bearing liabilities could adversely affect yields

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on assets or costs of funds, respectively. Accordingly, changes in levels of market interest rates or management thereof could materially and adversely affect the net interest spread, loan and deposit volumes, and the Company’s overall profitability.

LIQUIDITY RISK

Liquidity could be impaired by an inability to access the capital markets or an unforeseen outflow of cash.

Liquidity is essential to the Company’s business. Access to funding sources in amounts adequate to finance the Company’s activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that could reduce the Company’s access to liquidity sources include a downturn in the economy, difficult credit markets or the liquidity needs of our depositors. A substantial majority of the Company’s liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while a substantial portion of our assets are loans, which cannot be called or sold in the same time frame. The Company may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw their accounts, regardless of the reason. The Company’s access to deposits may be negatively impacted by, among other factors, changes in interest rates which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. Additionally, negative news about the Company or the banking industry in general could negatively impact market and/or customer perceptions of the Company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, as many regional banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance coverage, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely. As of December 31, 2025, approximately 41.7% of the Company’s deposits were uninsured. Uninsured deposits include municipal deposits, which have additional security from bonds pledged as collateral, in accordance with state regulation. Of the Company’s non-municipal deposits, approximately 19.75% are uninsured. We rely on deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on the Company’s business, financial condition and results of operations.

Unrealized losses in the Company’s securities portfolio could affect liquidity.

As market interest rates increased in 2022 and 2023, the Company experienced significant unrealized losses on our available for sale securities portfolio. Unrealized losses related to available for sale securities are reflected in accumulated other comprehensive loss in the Company’s consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect the Company’s regulatory capital ratios. The Company actively monitors the available for sale securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, the Company believes it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity. Nonetheless, the Company’s access to liquidity sources could be affected by unrealized losses if securities must be sold at a loss; tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; the Federal Home Loan Bank of Atlanta (“FHLB”) or other funding sources reduce capacity; or bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits. Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.

CYBERSECURITY RISK

Our information systems may experience an interruption or security breach.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions of our internet banking, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if it does occur, that it will be adequately addressed.

In the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees, in systems and on networks. The secure processing, maintenance and use of this information is critical to the Company’s operations and business strategy. The Company has invested in industry-accepted technologies, and annually reviews its processes and practices that are designed to protect its networks, computers and data from damage or unauthorized access. Despite these security measures, a cyber breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed. The occurrence of any failure, interruption or security breach of our communications and information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability.

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Cybersecurity attacks may disarm and/or bypass system safeguards that are used by us and our vendors and service providers, and allow unauthorized access and misappropriation of financial data and assets.

As a financial institution, we are vulnerable to and are the target of cybersecurity attacks that attempt to access our digital technology systems, disarm and/or bypass system safeguards, access customer data and ultimately increase the risk of economic and reputational loss. The Company believes its cybersecurity risk management program reasonably addresses the risk from cybersecurity attacks. However, it is not possible to fully eliminate exposure. We may experience human error or have unknown susceptibilities that allow our systems to become victim to a highly-sophisticated cyber-attack. If hackers gain entry to our systems, they may disable other safeguards that limit loss, including limits on the number, amount and frequency of ATM withdrawals, as well as other loss-prevention or detection measures.

We also face risks related to cybersecurity attacks and security breaches in connection with the use, transmission and storage of sensitive information regarding us and our customers by various vendors and service providers. Some of these vendors and service providers have been the target of cybersecurity attacks or suffered security breaches, and because they use systems that we do not control or secure, future cyber-attacks or security breaches affecting any of these vendors and service providers could impact us through no fault of our own. In some cases, we may have exposure and suffer losses relating to these companies. Although we assess the security of our higher risk vendors and service providers, we cannot be sure that the information security protocols of all companies we do business with are sufficient to withstand cyber-attacks or other security breaches.

Insurance may not cover losses from cybersecurity attacks.

The Company has invested in insurance related to cybersecurity. Insurance policies are necessary to protect the Company from major losses but may be written in such a way as to limit the protection from certain risks, including cyber risks. If the insurance carrier denies coverage of losses, the Company may litigate. Because of policy technicalities, litigation may not result in a favorable outcome for the Company and litigation will result in additional legal expense.

OPERATIONAL RISK

The Company is subject to a variety of operational risks, including reputational, legal, and compliance risk, and the risk of fraud or theft by employees, directors, or outsiders.

The Company is exposed to many types of operational risks, including reputational, legal, and compliance risk, the risk of fraud or theft by employees, directors or outsiders, unauthorized transactions by employees, operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or communications systems.

Reputational risk, or the risk to the Company’s earnings and capital from negative public opinion, could result from the Company’s actual or alleged conduct in any number of activities, including lending practices, corporate governance, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect the Company’s ability to attract and keep customers and employees and can expose it to litigation and further regulatory action.

Further, if any of the Company’s financial, accounting, or other data processing systems fail or have other significant issues, the Company could be adversely affected. The Company depends on internal systems and outsourced technology to support these data storage and processing operations. The Company’s inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of the Company’s business operations. It could be adversely affected if one of its employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates its operations or systems. The Company is also at risk of the impact of natural disasters, terrorism, and international hostilities on its systems and from the effects of outages or other failures involving power or communications systems operated by others. The Company may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses, or electrical or communications outages), which may give rise to disruption of service to customers and to financial loss or liability. In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although the Company has policies and procedures in place to verify the authenticity of its customers, it cannot guarantee that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to the Company’s reputation. If any of the foregoing risks materialize, it could have a material adverse effect on the Company’s business, financial condition, and results of operations.

The Company is dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect the Company’s operations and prospects.

The Company currently depends on the services of a number of key management personnel. The loss of key personnel could materially and adversely affect the results of operations and financial condition. The Company’s success also depends in part on the ability to attract and retain additional qualified management personnel. Competition for such personnel is strong and the Company may not be successful in attracting or retaining the personnel it requires.

The Company relies on other companies to provide key components of the Company’s business infrastructure.

Third parties provide key components of the Company’s business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections and network access. While the Company has selected these

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third party vendors carefully, it does not control their actions. Any problem caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, failures of a vendor to provide services for any reason or poor performance of services, could adversely affect the Company’s ability to deliver products and services to its customers and otherwise conduct its business. Financial or operational difficulties of a third party vendor could also hurt the Company’s operations if those difficulties interface with the vendor’s ability to serve the Company. Replacing these third party vendors could also create significant delay and expense and damage the Company’s ability to service its customers, resulting in a loss of customer goodwill. Accordingly, use of such third parties creates an unavoidable inherent risk to the Company’s business operations.

The Company’s ability to operate profitably may be dependent on its ability to integrate or introduce various technologies into its operations.

The market for financial services, including banking and consumer finance services, is increasingly affected by advances in technology, including developments in telecommunications, data processing, computers, automation, online banking and tele-banking. The Company’s ability to compete successfully in its market may depend on the extent to which it is able to exploit such technological changes. If the Company is not able to afford such technologies, properly or timely anticipate or implement such technologies, or effectively train its staff to use such technologies, its business, financial condition or results of operations could be adversely affected.

COMPLIANCE AND REGULATORY RISK

The Company operates in a highly regulated industry, and the laws and regulations that govern the Company’s operations, including changes in them or the Company’s failure to comply with them, and regulatory actions implementing such laws and regulations, may adversely affect the Company.

The Company is subject to extensive regulation and supervision that govern almost all aspects of its operations. These laws and regulations, and regulatory actions implementing such laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the Company’s business activities, limit the dividends or distributions that it can pay, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in its capital than GAAP.

Changes to laws, regulations, or regulatory policies, or supervisory guidance, including changes in interpretation or implementation of laws, regulations, policies, or supervisory guidance, could affect the Company in substantial and unpredictable ways. Regulatory responses in connection with unforeseen stress events, including failures of banks and other financial institutions, often lead to increased regulatory scrutiny and heightened supervisory expectations and could adversely impact the Company’s business, financial condition, and results of operations, or alter or disrupt the Company’s planned future strategies and actions. The Company’s failure to comply with these laws and regulations could subject it to restrictions on its business activities, fines, and other penalties, any of which could adversely affect the Company’s results of operations, capital base, and the price of its securities. Compliance with laws and regulations, and regulatory actions implementing such laws and regulations, can be difficult and costly, and changes to laws and regulations could make compliance more difficult or expensive or otherwise adversely affect the Company’s business and financial condition.

Regulatory capital standards may have an adverse effect on the Company’s profitability, lending, and ability to pay dividends.

The Company is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital that the Company and the Bank must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines. If the Company fails to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected. The Basel III Capital Rules require bank holding companies and their subsidiaries to maintain significantly more capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations. While the Company is exempt from these capital requirements under the Statement, the Bank is not exempt and must comply. The Bank must also comply with the capital requirements set forth in the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, as amended. Satisfying capital requirements may require the Company to limit its banking operations, retain net income or reduce dividends to improve regulatory capital levels, which could negatively affect its business, financial condition and results of operations.

Changes in accounting standards could impact reported earnings.

The authorities who promulgate accounting standards, including the Financial Accounting Standards Board (“FASB”), SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes are difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of consolidated financial statements for prior periods. Such changes could also require the Company to incur additional personnel or technology costs.

Failure to maintain effective systems of internal and disclosure controls could have a material adverse effect on the Company's results of operation and financial condition.

Effective internal and disclosure controls are necessary for the Company to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. Effective internal controls also are a deterrent to fraud. Pursuant to Section 404

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of the SOX, the Company is required to include in its Annual Reports on Form 10-K management’s assessment of the effectiveness of internal controls over financial reporting. If the Company cannot provide reliable financial reports or reasonably prevent fraud, its reputation and operating results would be harmed. As part of its ongoing monitoring of internal controls, the Company may discover material weaknesses or significant deficiencies in its internal controls that require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Compliance with the requirements of Section 404 of SOX, including the costs of remediation efforts relating to weaknesses, is expensive and time-consuming. The Company’s inability to maintain operating effectiveness of the internal controls over financial reporting could result in a material misstatement to financial statements or other disclosures, which could have an adverse effect on its business, financial condition, and results of operations. In addition, any failure to remediate and maintain effective controls or to timely effect any necessary improvement of internal and disclosure controls could, among other things, result in losses from fraud or error, reputational damage, subject the Company to regulatory scrutiny, or cause investors to lose confidence in reported financial information, all of which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s ability to pay dividends depends upon the results of operations of its subsidiaries.

The Company is a financial holding company and a bank holding company that conducts substantially all of its operations through NBB. As a result, the Company’s ability to make dividend payments on its common stock depends primarily on certain federal regulatory considerations and the receipt of dividends and other distributions from NBB. There are various regulatory restrictions on the ability of NBB to pay dividends or make other payments to the Company. Although the Company has historically paid a cash dividend to the holders of its common stock, regulatory or economic factors may cause the Company’s Board of Directors to consider, among other things, the reduction of dividends paid on the Company’s common stock.

The Company is subject to laws regarding the privacy, information security, and protection of personal information and any violation of these laws or another incident involving personal, confidential, or proprietary information of individuals could damage the Company’s reputation and otherwise adversely affect its business.

The Company’s business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”), in various information systems that the Company maintains and in those maintained by third-party service providers. The Company also maintains important internal company data such as PII about its employees and information relating to its operations. The Company is subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including customers, employees and other third parties). For example, the Company’s business is subject to the GLBA, which, among other things: (i) imposes certain limitations on the Company’s ability to share nonpublic PII about its customers with nonaffiliated third parties; (ii) requires that the Company provide certain disclosures to customers about its information collection, sharing, and security practices and afford customers the right to “opt out” of any information sharing by it with nonaffiliated third parties (with certain exceptions); and (iii) requires that the Company develop, implement, and maintain a written comprehensive information security program containing appropriate safeguards based on the Company’s size and complexity, the nature and scope of its activities, and the sensitivity of customer information it processes, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory, or law enforcement notification in the event of a security breach. Ensuring that the Company’s collection, use, transfer, and storage of PII complies with all applicable laws and regulations can increase the Company’s costs. Furthermore, the Company may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with it, particularly where such information is transmitted by electronic means. If personal, confidential, or proprietary information of customers or others were to be mishandled or misused, the Company could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of the Company’s measures to safeguard PII, or even the perception that such measures are inadequate, could cause the Company to lose customers or potential customers and thereby reduce its revenues. Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws and regulations may subject the Company to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or result in significant liabilities, fines, or penalties, and could damage the Company’s reputation and otherwise adversely affect its operations, financial condition, and results of operations.

Climate change may result in operational changes and expenditures that could negatively impact the Company’s business.

The current and anticipated effects of climate change are creating concern for the state of the global environment. The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations; however, the physical effects of climate change may also directly impact the Company. Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in the Company’s loan portfolio. Additionally, if insurance obtained by borrowers is insufficient to cover any losses sustained to the collateral, or if insurance coverage is otherwise unavailable to borrowers, the collateral securing loans may be negatively impacted by climate change, which could impact the Company’s financial condition and results of operations. Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on customers and impact the communities in which the Company operates.

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The federal banking regulators have been focused on the physical and financial risks to financial institutions associated with climate change. Expectations with respect to these matters has been changing, and it is difficult to predict changes in priorities and requirements with respect to these matters, including any changes in compliance costs relating to such changes. To the extent that regulatory initiatives lead to the promulgation of new regulations or supervisory guidance applicable to the Company, the Company would likely experience increased compliance costs and other compliance-related risks.

LEGAL RISK

The Company is subject to claims and litigation pertaining to fiduciary responsibility.

From time to time, customers make claims and take legal action pertaining to the performance of the Company’s fiduciary responsibilities. Whether customer claims and legal action related to the performance of the Company’s fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and its products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations.

GENERAL RISK

Changes in funding for local universities could materially affect our business.

Two major employers in the Company’s market area are Virginia Tech and Radford University, both state-supported institutions. If federal or state support for public colleges and universities wanes, our business may be adversely affected from declines in university programs, capital projects, employment, enrollment, sporting and cultural events, and other related factors.

If the economy suffers a recession, our credit risk will increase and there could be greater loan losses.

If the economy suffers a recession, it is likely to result in a higher rate of business closures and increased job losses in the region in which we do business. These factors would increase the likelihood that more of our customers would become delinquent or default on their loans. A higher level of loan defaults could result in higher loan losses, which could adversely affect our results of operations and financial condition.

While the Company’s common stock is currently traded on the Nasdaq Capital Market, it has less liquidity than stocks for larger companies quoted on a national securities exchange.

The trading volume in the Company’s common stock on the Nasdaq Capital Market has been relatively low when compared with larger companies listed on the Nasdaq Capital Market or other stock exchanges. There is no assurance that a more active and liquid trading market for the common stock will exist in the future. Consequently, stockholders may not be able to sell a substantial number of shares for the same price at which stockholders could sell a smaller number of shares. In addition, the Company cannot predict the effect, if any, that future sales of its common stock in the market, or the availability of shares of common stock for sale in the market, will have on the market price of the common stock. Sales of substantial amounts of common stock in the market, or the potential for large amounts of sales in the market, could cause the price of the Company’s common stock to decline, or reduce the Company’s ability to raise capital through future sales of common stock.

Natural disasters, acts of war or terrorism, geopolitical instability, the impact of public health issues and other adverse external events could detrimentally affect our financial condition and results of operations.

Natural disasters, acts of war or terrorism, geopolitical instability, the impact of public health issues and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties who perform operational services for us or our customers. Such events also could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, impair the value of our investment portfolio, result in lost revenue or cause us to incur additional expenses.

Although the Company has business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. In the event of a natural disaster, acts of war or terrorism, public health issues or other adverse external events, our business, services, asset quality, financial condition and results of operations could be adversely affected.

The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our business.

We or our third-party vendors, clients, or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to our business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce outputs or take actions that are incorrect, that reflect biases included in the data on which they are trained, that result in the release of private, confidential, or proprietary information, that infringe on the intellectual property rights of others, or that are otherwise harmful. In addition, the complexity of

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many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous outputs, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the outputs of their models, matters over which we may have limited visibility. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

Item 1B. Unresolved Staff Comments

There are no unresolved staff comments.

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Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

The Company recognizes the risks posed by cybersecurity threats, including the risk of harm to our customers, our financial condition and results of operations, and our reputation. Following a layered defense-in-depth strategy, the Company utilizes a variety of controls and both internal and third-party resources to assess and manage identified risks. The following components of our information security program address cybersecurity risk management, and have been integrated into the Company’s overall risk management systems and processes:

•

Cybersecurity risks are identified and prioritized for resource allocation using two annual risk assessments: an internal risk assessment utilizing the Federal Financial Institutions Examination Council’s (“FFIEC”) Cybersecurity Assessment Tool, and a formal risk assessment prepared in conjunction with an external consultant.

•

A comprehensive set of security technologies constantly monitor our information systems and data, including endpoint detection and response services, intrusion detection and prevention, various filtering technologies, and event correlation technologies that alert management to potential cybersecurity threats.

•

Skilled internal personnel manage and update cyber defense functions including engineering, configuration, data protection, identity and access management, security operations, and threat intelligence.

•

Training programs continuously educate employees about cybersecurity risks and protection practices.

•

Periodic social engineering testing assists management in identifying training needs.

•

An incident response plan outlines the Company’s response to a cybersecurity incident. Periodic testing of the plan ensures readiness and identifies refinements.

•

Reputable third-party assessors are engaged to conduct various assessments on a regular basis.

Supporting the Company’s information security program is a third-party risk management program that manages the life cycle of external service providers and ensures that vendors meet the Company’s cybersecurity requirements. This includes a periodic risk assessment of vendors and the review of vendor assessment documentation including audit reports and other independent control assessments.

The Company’s cybersecurity risk management and strategy are regularly reviewed and updated to support our business strategy and objectives, our overall risk management, and address evolving potential cybersecurity threats.

Material Effects of Cybersecurity Threats

Cybersecurity risks have the potential to materially affect the Company’s business, financial condition and results of operation. The Company has strengthened its cybersecurity framework in recent years but the sophistication of emerging cyber threats and the utilization of new attack methods continues to evolve. The Company’s cybersecurity risk management and strategy may not protect against all cyber incidents. For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or financial condition, please refer to Item 1A, Risk Factors of this Form 10-K.

Governance

Board of Directors Oversight

The Company’s Board of Directors is charged with overseeing the establishment and execution of the Company’s enterprise risk management framework, including cybersecurity risk, and monitoring adherence to related policies required by applicable statutes, regulations and principles of safety and soundness. The Company’s Information Security Officer (“ISO”) provides the Board Risk Committee with regular updates on information security risk management and an annual comprehensive information security status report, which assesses the effectiveness of the program and updates the Risk Committee on developing trends and emerging threats.

Management’s Role

The Company’s ISO has many years of experience appropriate to the role and is supported by skilled internal personnel. The ISO is responsible for identifying, assessing and managing cybersecurity risks and designing, implementing and maintaining the Company’s information security program. The ISO reports to the Chief Operating Officer and the Board of Directors. Management’s enterprise risk management committee receives regular updates from the ISO on cybersecurity related risks, including trends and emerging threats.

Item 2. Properties

NBB owns and has a branch bank in NBI’s headquarters located at 101 Hubbard Street, Blacksburg, Virginia. NBB’s main office is at 100 South Main Street, Blacksburg, Virginia. NBB owns an additional twenty branch offices and a private office location for support functions. NBB leases six branch locations and one loan production office. As of December 31, 2025, there were no mortgages or liens against any properties. We believe that existing facilities are adequate for current needs and to meet anticipated growth. A list of all branch and ATM locations is available on our website at www.nbbank.com. Information contained on our website is not part of this report. For additional information, please see Note 6 and Note 19 of Notes to Consolidated Financial Statements.

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Item 3. Legal Proceedings

NBI, NBB, and NBFS are not currently involved in any material pending legal proceedings. There are no legal proceedings against the Company related to cybersecurity.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Information and Dividends

NBI’s common stock is traded on the Nasdaq Capital Market under the symbol “NKSH.” As of December 31, 2025, there were 876 record stockholders of NBI common stock.

NBI’s primary source of funds for dividend payments is dividends from its bank subsidiary, NBB. Bank dividend payments are restricted by regulators, as more fully disclosed in “Regulation, Supervision and Government Policy” contained in Part I, Item 1, “Business” and Note 10 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

In May 2025, NBI’s Board of Directors approved the repurchase of up to 250,000 shares of the Company’s common stock. The authorization extends from June 1, 2025 to May 31, 2026. During 2025, the Company did not repurchase any shares. The Company’s share repurchase program does not obligate it to acquire any specific number of shares or any shares at all.

Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

$ in thousands, except per share data.

The purpose of this discussion and analysis is to provide information about the results of operations, financial condition, liquidity and capital resources of the Company. The discussion should be read in conjunction with the material presented in Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K.

Subsequent events have been considered through the date of this Form 10-K.

Cautionary Statement Regarding Forward-Looking Statements

We make forward-looking statements in this Form 10-K that are subject to significant risks and uncertainties. These forward-looking statements include statements regarding our profitability, liquidity, allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals, and are based upon our management’s views and assumptions as of the date of this report. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward-looking statements.

These forward-looking statements are based upon or are affected by factors that could cause our actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, effects of or changes in:

•

inflation and changes in interest rates that may reduce our margins or reduce the fair value of financial instruments,

•

the ability to maintain adequate liquidity by retaining deposit customers and secondary funding sources, especially if the Company’s or banking industry’s reputation becomes damaged,

•

the adequacy of the level of the Company’s allowance for credit losses, the amount of credit loss provisions required in future periods, and the failure of assumptions underlying the allowance for credit losses,

•

general and local economic conditions,

•

monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury, the OCC, the Federal Reserve, the CFPB and the FDIC, and the impact of any policies or programs implemented pursuant to financial reform legislation,

•

unanticipated increases in the level of unemployment in the Company’s market,

•

the quality or composition of the loan and/or investment portfolios,

•

our ability to maintain existing deposit relationships or attract new deposit relationships,

•

changes in consumer spending, borrowing and savings habits,

•

increased competition with other financial institutions and fintech companies,

•

demand for financial services in the Company’s market,

•

the real estate market in the Company’s market,

•

laws, regulations and policies impacting financial institutions,

•

technological risks and developments, and cyber-threats, attacks or events,

•

the Company’s technology initiatives,

•

geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts,

•

the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events,

•

the Company's ability to identify, attract, and retain experienced management, relationship managers, and support personnel, particularly in a competitive labor environment,

•

performance by the Company’s counterparties or vendors,

•

applicable accounting principles, policies and guidelines, and

•

risks associated with mergers, acquisitions, and other expansion activities.

These risks and uncertainties should be considered in evaluating the forward-looking statements contained in this report. We caution readers not to place undue reliance on those statements, which speak only as of the date of this report. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A. of this Form 10-K.

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Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with GAAP. The financial information contained within our statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value obtained when earning income, recognizing expense, recovering an asset or relieving a liability. Although the economics of the Company’s transactions may not change, the timing of events that would impact the transactions could change.

Critical accounting policies are most important to the portrayal of the Company’s financial condition or results of operations and require management’s most difficult, subjective, and complex judgments about matters that are inherently uncertain. If conditions occur that differ from our assumptions, depending upon the severity of such differences, the Company’s financial condition or results of operations may be materially impacted. The Company designates as critical those policies governing the ACLL and the pension plan. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed.

ACLL

The ACLL represents the Company's best estimate of current expected credit losses on loans over the expected life as of the measurement date. The estimation utilizes internal and peer historical credit loss experience, current conditions and reasonable and supportable forecasts. The results are also dependent upon management's selection of methodologies, loan credit risk ratings, and determination of the impact of internal and external variables.

The Company employs a discounted cash flow ("DCF") model whereby cash flows are projected according to each loan's contractual terms and modified by internal historical prepayment rates. Cash flows are then discounted at the loan's effective interest rate, modified by loss rates determined using the probability of default ("PD") and loss given default ("LGD") sourced from internal and peer historical experience, and a forecast variable. Application of historical prepayment rates to project cash flows lowers the ACLL. Historical prepayment rates may not be representative of realized prepayment rates. Similarly, historical loss experience modified by the forecast variable may not be representative of realized loss experience.

Key to loss rate application is the Company's risk grading system, which is governed by a robust policy. Loss rates are calculated and applied by risk grade. Management relies upon risk grades to identify loans with risk characteristics that are different from other loans within a segment. Loans graded special mention or classified and that exceed a value threshold are individually evaluated. If management determines that a borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, 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. Specific reserves for other individually evaluated loans are estimated using a DCF approach. Cash flows are determined by analyzing the borrower's ability to repay and economic conditions affecting the borrower's industry, discounted at loss rates appropriate to the risk grade. The ultimate recoverability of the loan may be higher or lower than the specific reserve.

The Company adjusts collectively-evaluated DCF model results for qualitative risk factors that are not inherent in historical losses, but are relevant in assessing expected credit losses within the loan portfolio. Risks considered include the impact of changes in (i) economic conditions, (ii) the nature and volume of the loan portfolio, (iii) the existence, growth and effect of any concentrations in credit, (iv) lending policies and procedures, including underwriting standards and practices, (v) the quality of the credit review function, (vi) the experience, ability and depth of lending management and staff, (vii) the volume and severity of past due loans, (viii) the value of underlying collateral for collateral-dependent loans, and (ix) other factors such as the regulatory, legal and competitive environments. Because of low loss rate history, statistical correlation between losses and qualitative risk factors is not possible and adjustments are based upon management judgment. Management assesses each factor and determines the adjustment to the ACLL based upon a documented and consistently applied methodology. Management's assessment my be higher or lower than actual impact.

The estimation of the ACLL involves analysis of internal and external variables, methodologies, assumptions and management’s judgment and experience. These judgments are inherently subjective and actual losses could be greater or less than the estimate. Future estimates of the ACLL could increase or decrease based on changes in the financial condition of individual borrowers, concentrations of various types of loans, economic conditions or the markets in which collateral may be sold. The estimate of the ACLL determines the amount of provision expense and directly affects our financial results. Please refer to Note 1 and Note 5 of Notes to Consolidated Financial Statements for additional information.

Pension Plan

Pension obligations are determined through actuarial calculations based upon significant assumptions, including the IRS mortality table, an effective interest rate of 5.32% for December 31, 2025 and 5.24% for December 31, 2024, a discount rate of 5.50% for December 31, 2025 and 4.75% for December 31, 2024, anticipated rate of compensation increases of 4% for both reporting dates, and an expected long-term rate of return of 7.50% for both reporting dates. Actual outcomes could vary from the assumptions and result in underaccrual or overaccrual of pension obligations. Please refer to Note 1 and Note 8 of Notes to Consolidated Financial Statements for information on these and other accounting policies.

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Performance Summary

Key to understanding the Company’s results of operations and financial position is the interest rate environment, the core system conversion in 2025 and the acquisition of FCB in 2024.

The Federal Reserve's interest rate cuts between September 2024 and December 2025 eased deposit pricing pressure for the fourth quarter of 2024 and the year ended December 31, 2025. The interest rate environment continues at a level that allows adjustable rate loans to reprice higher than their previous rates.

The Company completed the core system conversion of both the former FCB and the legacy bank during the second quarter of 2025, with related expenses presented in core system conversion expense on the Consolidated Statements of Income.

The acquisition of FCB on June 1, 2024 expanded the Company's footprint into desirable markets and increased its growth potential. The acquisition added to the balance sheet $118,743 in loans, $129,717 in deposits and $14,299 in equity. The Company also recorded one-time expenses of $2,916 and provision for credit loss of $1,290 associated with the merger. For more information on the acquisition, see Note 22: Business Combination.

Summary information on results of operations, changes in key balances and asset quality is presented below. Expanded discussion is provided in subsequent sections.

Summary Results of Operations

The following tables present summary income, expenses and key performance indicators for the years indicated. Key performance indicators provide a summary of the Company’s results and allow comparison with results from prior years.


	Year Ended December 31,
Summary Income and Expenses	2025			2024
Interest income	$	75,313		$	70,035
Interest expense		29,752			33,724
Net interest income		45,561			36,311
(Recovery of) provision for credit losses		(16	)		1,227
Net interest income after (recovery of) provision for credit losses		45,577			35,084
Noninterest income		10,002			9,046
Noninterest expense		36,413			35,008
Income before income taxes		19,166			9,122
Income tax expense		3,340			1,499
Net income	$	15,826		$	7,623


	Year Ended December 31,
Summary Key Performance Indicators	2025			2024
Return on average assets		0.87	%		0.44	%
Return on average equity		9.29	%		5.17	%
Basic net income per common share	$	2.49		$	1.24
Diluted net income per common share	$	2.49		$	1.24
Net interest margin (1)		2.66	%		2.19	%
Efficiency ratio (1)		60.70	%		68.90	%

(1)

See "Non-GAAP Financial Measures" below.

Net income for the year ended December 31, 2025 increased when compared with the year ended December 31, 2024, due to net interest margin expansion and a lower provision for credit losses. The net interest margin as well as key noninterest income and expense items are discussed under “Income Statement” below.

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Non-GAAP Financial Measures

This report refers to certain financial measures that are computed on a basis other than GAAP (“non-GAAP”). The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP. Details on non-GAAP measures follow.

Net Interest Margin

The Company uses the net interest margin (non-GAAP) to measure profitability of interest generating activities, as a percentage of total interest-earning assets. The Company’s net interest margin is calculated on a fully taxable equivalent (“FTE”) basis. The portion of interest income that is nontaxable is grossed up to the tax equivalent by adding the tax benefit based on a tax rate of 21%. Annualized FTE net interest income is divided by total average earning assets to calculate the net interest margin. The following tables present the reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, for the periods indicated.


	Year Ended December 31,
Net Interest Margin, FTE	2025			2024
Interest income (GAAP)	$	75,313		$	70,035
Add: FTE adjustment		1,004			968
Interest income, FTE (non-GAAP)		76,317			71,003
Interest expense (GAAP)		29,752			33,724
Net interest income, FTE (non-GAAP)	$	46,565		$	37,279
Average balance of interest-earning assets	$	1,751,197		$	1,704,863
Net interest margin (non-GAAP)		2.66	%		2.19	%

Efficiency Ratio

The efficiency ratio (non-GAAP) is computed by dividing noninterest expense by the sum of FTE net interest income and noninterest income, excluding certain items the Company’s management deems unusual or non-recurring. This is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. The components of the efficiency ratio calculation for the periods indicated are summarized in the following table.


	Year Ended December 31,
Efficiency Ratio	2025			2024
Noninterest expense (GAAP)	$	36,413		$	35,008
Less: merger-related expense		-			(2,916	)
Less: core system conversion expense		(2,076	)		(173	)
Adjusted noninterest expense (non-GAAP)	$	34,337		$	31,919
Noninterest income (GAAP)	$	10,002		$	9,046
Net interest income, FTE (non-GAAP)		46,565			37,279
Total income for efficiency ratio (non-GAAP)	$	56,567		$	46,325
Efficiency ratio (non-GAAP)		60.70	%		68.90	%

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Summary Change in Key Balances

Key balances are presented in the following table as of the dates indicated:


	December 31,				Change
	2025		2024		Dollars			Percent
Loans, net of deferred fees and costs, and the ACLL	$	989,418	$	977,688	$	11,730			1.20	%
Securities available for sale		654,377		601,898		52,479			8.72	%
Deposits		1,626,933		1,644,752		(17,819	)		(1.08	)%
Total assets		1,824,506		1,811,635		12,871			0.71	%
Stockholders’ equity		184,908		156,409		28,499			18.22	%

Organic growth accounted for the increase in loans, net of deferred fees and costs and the ACLL, when December 31, 2025 is compared with December 31, 2024. While the Federal Reserve's rate cuts in 2024 and 2025 were favorable for the net interest margin, the interest rate environment continues to restrain loan demand.

Securities available for sale increased from the prior year due to purchases of $83,872 and improvement in fair value, which moves inversely to interest rate changes and expectations of interest rate changes. Further detail is provided in the “Balance Sheet” section below.

Customer deposits decreased when December 31, 2025 is compared with December 31, 2024. The Company manages deposits and deposit pricing in consideration of loan demand, optimizing the net interest margin, liquidity needs, and strategic initiatives. During 2025, the Company strategically lowered pricing on time deposits, resulting in lower time deposit balances and improved deposit costs.

The increase in stockholders’ equity reflects an improvement in unrealized losses on securities available for sale and retained net income.

Summary Asset Quality

Key indicators of the Company’s asset quality are presented in the following table as of the dates indicated:


	December 31,
	2025			2024
Nonaccrual loans	$	188		$	2,222
Loans past due 90 days or more, and still accruing		881			548
ACLL to loans net of deferred fees and costs		0.99	%		1.04	%
Net charge-off to average loans ratio		0.03	%		0.03	%
Ratio of nonperforming loans to loans, net of deferred fees and costs		0.02	%		0.22	%
Ratio of ACLL to nonperforming loans		5261.70	%		461.84	%

The Company monitors asset quality indicators in managing credit risk and in determining the ACLL and provision for credit losses. Nonaccrual loans improved when December 31, 2025 is compared with December 31, 2024, due to the return of one loan relationship to accrual status. The net charge-off ratio remained at the same low level and accruing loans past due 90 days or more increased slightly, but remain low.

The Company dedicates resources to resolving problem assets, and exposure to loss is somewhat mitigated by collateralization. More information about nonaccrual and past due loans is provided in Note 1 and Note 5 of Notes to Consolidated Financial Statements.

Income Statement

The following provides information on the results of operations for the years ended December 31, 2025 and December 31, 2024.

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on customer deposits and other interest-bearing liabilities. Net interest income is affected by various factors, including the Federal Reserve’s monetary policy, U.S. fiscal policy, competitive pressure, the level and composition of the interest-earning assets and the composition of interest-bearing liabilities. Changes in the Federal Reserve’s target interest rate immediately affect the yield on the Company’s interest-bearing deposits in correspondent banks and affect other interest-earning assets over time.

The net interest margin for the year ended December 31, 2025 increased when compared with the year ended December 31, 2024. Loans repriced upward while the Federal Reserve's interest rate cuts resulted in lower yields on adjustable rate securities and interest

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bearing deposit assets, as well as lower cost of deposits. Current interest rates are still at a level that will allow improved yield on loans as adjustable loans reach repricing dates.

The frequency and/or magnitude of future changes in market interest are difficult to predict and may have a greater short-term impact on net interest income than adjustments by management. Please refer to the section titled “Analysis of Changes In Interest Income and Interest Expense” for further information related to rate and volume changes.

Analysis of Net Interest Earnings

The following table presents the major categories of interest‑earning assets and interest‑bearing liabilities, the interest earned or paid, the average yield or rate on the daily average balance outstanding, net interest income and net yield on average interest‑earning assets for the years indicated.


	Year Ended December 31,
	2025							2024
($ in thousands)	Average Balance		Interest		Average Yield/Rate			Average Balance		Interest		Average Yield/Rate
Interest-earning assets:
Loans (1)(2)(3)(4)(5)	$	1,006,277	$	55,974		5.56	%	$	938,446	$	48,397		5.16	%
Taxable securities (4)		605,883		15,331		2.53	%		626,040		16,682		2.66	%
Nontaxable securities (4)(5)		62,700		1,824		2.91	%		63,566		1,828		2.88	%
Federal funds sold		114		5		4.39	%		600		26		4.33	%
Interest-bearing deposits		76,223		3,183		4.18	%		76,211		4,070		5.34	%
Total interest-earning assets	$	1,751,197	$	76,317		4.36	%	$	1,704,863	$	71,003		4.16	%
Interest-bearing liabilities:
Interest-bearing demand deposits	$	842,479	$	17,094		2.03	%	$	838,526	$	20,444		2.44	%
Savings deposits		142,547		209		0.15	%		141,148		231		0.16	%
Time deposits(6)		328,286		12,068		3.68	%		313,401		13,047		4.16	%
Borrowings		8,963		381		4.25	%		57		2		3.51	%
Total interest-bearing liabilities	$	1,322,275	$	29,752		2.25	%	$	1,293,132	$	33,724		2.61	%
Net interest income and interest rate spread			$	46,565		2.11	%			$	37,279		1.55	%
Net interest margin						2.66	%						2.19	%

(1)

Loans are net of deferred fees and costs. Loans include loans held in portfolio and loans held for sale.

(2)

Net loan fees included in interest income in 2025 were $503. Net loan fees included in interest income in 2024 were $245.

(3)

Nonaccrual loans are included in average balances for yield computations.

(4)

Daily averages are presented at amortized cost.

(5)

Interest on nontaxable loans and securities is computed on an FTE basis using a Federal income tax rate of 21%.

(6)

Included in interest expense is amortization of premium on acquired time deposits of $149 and $278 for the twelve months ended December 31, 2025 and 2024, respectively.

The following table reconciles net interest income on an FTE basis (non-GAAP) to net interest income on a GAAP basis for the years indicated.


	December 31,
	2025		2024
Net interest income, GAAP	$	45,561	$	36,311
FTE adjustment		1,004		968
Net interest income, FTE (non-GAAP)	$	46,565	$	37,279

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Analysis of Changes in Interest Income and Interest Expense

The following table summarizes changes in interest income and interest expense resulting from changes in average asset and liability balances (volume) and changes in average interest rates (rate), when the year ended December 31, 2025 is compared with the year ended December 31, 2024.


	2025 Over 2024
	Increase (Decrease) due to Changes in:						Net Dollar
	Rates(2)			Volume(2)			Change
Interest income: (1)
Loans	$	3,947		$	3,630		$	7,577
Taxable securities		(825	)		(526	)		(1,351	)
Nontaxable securities		21			(25	)		(4	)
Federal Funds Sold		-			(21	)		(21	)
Interest-bearing deposits		(888	)		1			(887	)
Interest income	$	2,255		$	3,059		$	5,314
Interest expense:
Interest-bearing demand deposits	$	(3,446	)	$	96		$	(3,350	)
Savings deposits		(24	)		2			(22	)
Time deposits		(1,577	)		598			(979	)
Short-term borrowings		-			379			379
Interest expense	$	(5,047	)	$	1,075		$	(3,972	)
Net interest income	$	7,302		$	1,984		$	9,286

(1)

FTE basis using a Federal income tax rate of 21%.

(2)

Variances caused by the change in rate multiplied by the change in volume have been allocated to rate and volume changes proportional to the relationship of the absolute dollar amounts of the change in each.

Interest Rate Sensitivity

Interest rate risk is the risk to earnings or capital arising from movements in market interest rates. When interest-earning assets and interest-bearing liabilities reprice at different times or in different degrees or when call options are exercised, in response to change in market interest rates, future net interest income is impacted. When interest-earning assets mature or re-price more quickly than interest-bearing liabilities, the balance sheet is considered “asset sensitive”. An asset sensitive position will produce relatively more net interest income when interest rates rise and less net interest income when rates decline. Conversely, when interest-bearing liabilities mature or re-price more quickly than interest-earning assets in a given period, the balance sheet is considered “liability sensitive”. A liability sensitive position will produce relatively more net interest income when interest rates fall and less net interest income when rates increase.

The Company considers interest rate risk to be a significant risk and manages its exposure through policies approved by its Asset Liability Committee ("ALCO") and Board of Directors. ALCO reviews periodic reports of the Company's interest rate risk position, including results of simulation analysis. Simulation analysis applies interest rate shocks, hypothetical immediate shifts in interest rates, to the Company’s financial instruments and determines the impact to projected one-year net interest income and other key measures. The following table shows the results of rate shocks on net interest income projected for one year from the reporting date.


Rate Shift (basis points)	Change in Projected Net Interest Income as of December 31,
	2025			2024
300		-8.60	%		-8.60	%
200		-5.20	%		-4.70	%
100		-2.40	%		-1.90	%
(-)100		6.10	%		7.00	%
(-)200		10.60	%		12.80	%
(-)300		9.80	%		18.00	%

Results of the net interest income simulation indicate that the Company is liability sensitive as of December 31, 2025 and December 31, 2024. The simulation process requires certain estimates and assumptions including, but not limited to, asset growth, the mix of assets and liabilities, the interest rate environment and local and national economic conditions. Asset growth and the mix of

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assets can, to a degree, be influenced by management. Other areas, such as the interest rate environment and economic factors, cannot be controlled. In addition, competitive pressures can make it difficult to price deposits and loans in a manner that optimally minimizes interest rate risk. Actual results will differ from simulated results due to the timing, magnitude, and frequency of interest rate changes; changes in market conditions and customer behavior; and changes in management strategies.

While the asset/liability management program is designed to protect the Company over the long term, it does not provide near-term protection from interest rate shocks, as interest rate sensitive assets and liabilities do not by their nature move up or down in tandem in response to changes in the overall rate environment. The Company’s profitability in the near-term may be temporarily negatively affected in a period of rapidly rising or rapidly falling rates, because it takes some time for the Company’s portfolio to reflect changes to offering rates in response to a new interest rate environment.

(Recovery of) Provision for Credit Losses

The Company recovered provision of $16 for the year ended December 31, 2025 , made up of a recovery of credit losses on funded loans of $63 partially offset by provision for credit losses on unfunded loan balances of $47. For the year ended December 31, 2024, the Company recorded a net provision of $1,227, which included a provision of $1,290 for non-PCD loans recorded upon acquisition of FCB, offset by $48 recovery reflecting changes in the Company's assessment of credit risk for both funded and unfunded loan balances. More information about the ACLL is provided in “Balance Sheet – Loans – Allowance for Credit Losses” below and in Notes 1 and 5 of Notes to Consolidated Financial Statements.

Noninterest Income

The following table presents the Company’s noninterest income for the years indicated.


	Year Ended December 31,				Change
	2025		2024		Dollars			Percent
Service charges on deposit accounts	$	2,804	$	2,728	$	76			2.79	%
Other service charges and fees		310		371		(61	)		(16.44	)%
Credit and debit card fees, net		1,679		1,448		231			15.95	%
Trust income		2,472		2,177		295			13.55	%
BOLI income		1,199		1,120		79			7.05	%
Gain on sale of mortgage loans held for sale		226		168		58			34.52	%
Other income		1,312		1,034		278			26.89	%
Total noninterest income	$	10,002	$	9,046	$	956			10.57	%

Service charges on deposit accounts increased when the year ended December 31, 2025 is compared with the year ended December 31, 2024, due to increased customer use of the Bank’s overdraft program, ATM fees and wire transfer fees.

Other service charges and fees decreased when 2025 is compared with 2024, due to nonrecurring fee income received in 2024 and lower fees associated with non-customer use of NBB ATMs. Other service charges and fees also include charges for official checks, income from the sale of checks to customers, safe deposit box rent, and income from commissions on the sale of credit life, accident and health insurance.

Credit and debit card fees, net, increased when 2025 is compared with 2024 due to contract re-negotiation associated with the core system conversion.

Trust income increased when the year ended December 31, 2025 is compared with the year ended December 31, 2024, reflecting the Company's investment in business development. Trust fees are generated from a number of different types of accounts, including estates, personal trusts, employee benefit trusts, investment management accounts, attorney-in-fact accounts and guardianships. Trust income varies depending on the number and type of accounts under management and financial market conditions.

The gain on sale of mortgage loans increased from 2024 to 2025 as volume improved.

Other income includes dividends, adjustments to partnership basis in investments, commissions from investment and insurance sales and other miscellaneous components. Improved commissions from investment and insurance sales and a vendor incentive payment drove the increase from 2024 to 2025.

Noninterest Expense

The following table presents the Company’s noninterest expense for the years indicated.

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	Year Ended December 31,				Change
	2025		2024		Dollars			Percent
Salaries and employee benefits	$	20,858	$	19,181	$	1,677			8.74	%
Occupancy, furniture and fixtures		3,077		2,650		427			16.11	%
Data processing		3,421		3,558		(137	)		(3.85	)%
FDIC assessment		831		812		19			2.34	%
Intangible asset amortization		373		237		136			57.38	%
Franchise taxes		1,431		1,454		(23	)		(1.58	)%
Professional services		1,446		1,051		395			37.58	%
Merger-related expenses		-		2,916		(2,916	)	NM
Core system conversion expense		2,076		173		1,903		NM
Other operating expenses		2,900		2,976		(76	)		(2.55	)%
Total noninterest expense	$	36,413	$	35,008	$	1,405			4.01	%

Salaries and employee benefits, which include payroll taxes, health insurance, contributions to the employee stock ownership plan and employee 401(k) plan, pension service costs, incentives and salary continuation, increased when 2025 is compared with 2024, reflecting the addition of FCB employees and normal merit adjustments.

When the year ended December 31, 2025 is compared with the year ended December 31, 2024, occupancy, furniture and fixtures expense increased due to higher maintenance costs and depreciation related to assets acquired from FCB, infrastructure investment and the opening of the Roanoke branch.

Data processing expense decreased when the year ended December 31, 2025 is compared with the year ended December 31, 2024, reflecting savings from the core system conversion and other technology upgrades.

FDIC assessment expense increased from 2024 to 2025, due to an expanded assessment base after the FCB acquisition.

Upon acquisition of FCB in 2024, the Company recognized a core deposit intangible asset that is amortized over 10 years.

Franchise tax expense decreased from 2024 to 2025. Franchise taxes are levied by the states in which NBB operates and are based upon NBB’s total equity at the prior year-end, adjusted for real estate taxes and certain other items.

When 2025 is compared with 2024, higher legal and audit expenses drove the increase in professional services, which also includes consulting expense.

Merger-related expenses included legal, accounting, regulatory, and executive and employee severance costs associated with the FCB acquisition.

The core system conversion was completed during the second quarter of 2025 positioning the Company for future growth.

Other operating expenses decreased when the years ended December 31, 2025 and 2024 are compared. The category of other operating expenses includes expense for marketing and business development, supplies, non-service pension cost and charitable donations. The decrease is due to non-service pension cost, resulting from a higher expected return on plan assets when 2025 is compared with 2024, higher recognized net gain due to settlement when 2025 is compared with 2024, and a net actuarial loss in 2024 that was not recognized in 2025.

Included within other operating expense and data processing expense are expenses related to cybersecurity. These expenses include testing and vulnerability assessment, technological defenses, insurance and employee training. The cost of these measures was $409 for 2025 and $365 for 2024.

Income Taxes

Income tax expense for 2025 was $3,340 compared to $1,499 in 2024. The Company’s statutory tax rate was 21% for each year. The Company’s effective tax rates for 2025 and 2024 were 17.43% and 16.43%, respectively. The Company’s effective tax rate is lower than the statutory rate of 21% primarily due to investments in tax-advantaged loans and securities. The Company's effective tax rate for 2024 was also affected by a significant portion of merger related expense that was not tax deductible. See Note 9 of Notes to Consolidated Financial Statements for information relating to income taxes.

Balance Sheet

The following provides information on the Company’s financial position as of December 31, 2025 and December 31, 2024.

Loans

The Company’s loan categorization reflects its approach to loan portfolio management and includes six groups. Real estate construction loans include construction loans for residential and commercial properties as well as land. Consumer real estate loans include conventional and junior lien mortgages, equity lines and investor-owned residential real estate. Commercial real estate loans are comprised of owner-occupied and leased nonfarm, nonresidential properties, multi-family residence loans and farmland. Commercial non-real estate loans include agricultural loans, operating capital lines and loans secured by capital assets. Public sector and industrial

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development authority (“IDA”) loans are extended to municipalities. Consumer non-real estate loans include automobile loans, personal loans, credit cards and consumer overdrafts. The following table presents the composition of the loan portfolio, excluding mortgage loans held for sale, as of the dates indicated.


	December 31,			December 31,
	2025			2024
Real estate construction	$	40,694		$	50,798
Consumer real estate		328,653			307,855
Commercial real estate		467,783			478,078
Commercial non-real estate		52,018			51,844
Public sector and IDA		63,677			57,171
Consumer non-real estate		47,101			42,867
Gross loans	$	999,926		$	988,613
Less: deferred fees and costs		(616	)		(663	)
Loans, net of deferred fees and costs	$	999,310		$	987,950
Allowance for credit losses on loans		(9,892	)		(10,262	)
Total loans, net	$	989,418		$	977,688

Maturities and Interest Rate Sensitivities

The following table presents maturities and interest rate sensitivities for total loans, loans with predetermined interest rates and loans with adjustable interest rates as of the dates indicated. Predetermined interest rates do not adjust throughout the life of the loan. Loans are presented on a gross basis.


	December 31, 2025
	< 1 Year		1-5 Years		6-15 Years		>15 Years		Total
Total loans:
Real estate construction	$	19,458	$	4,039	$	5,915	$	11,282	$	40,694
Consumer real estate		16,911		10,596		70,361		230,785		328,653
Commercial real estate		6,673		22,970		132,230		305,910		467,783
Commercial non-real estate		12,445		34,295		5,031		247		52,018
Public sector and IDA		10,030		9,011		26,704		17,932		63,677
Consumer non-real estate		16,008		23,388		2,684		5,021		47,101
Total loans	$	81,525	$	104,299	$	242,925	$	571,177	$	999,926
Loans with predetermined interest rates:
Real estate construction	$	7,898	$	398	$	96	$	1,791	$	10,183
Consumer real estate		10,796		2,722		13,587		43,628		70,733
Commercial real estate		911		19,308		13,339		4,090		37,648
Commercial non-real estate		3,071		27,735		3,468		–		34,274
Public sector and IDA		10,000		9,011		7,321		–		26,332
Consumer non-real estate		6,862		22,756		2,485		73		32,176
Total loans with predetermined interest rates	$	39,538	$	81,930	$	40,296	$	49,582	$	211,346
Loans with adjustable interest rates:
Real estate construction	$	11,560	$	3,641	$	5,819	$	9,491	$	30,511
Consumer real estate		6,115		7,874		56,774		187,157		257,920
Commercial real estate		5,762		3,662		118,891		301,820		430,135
Commercial non-real estate		9,374		6,560		1,563		247		17,744
Public sector and IDA		30		–		19,383		17,932		37,345
Consumer non-real estate		9,146		632		199		4,948		14,925
Total loans with adjustable interest rates	$	41,987	$	22,369	$	202,629	$	521,595	$	788,580

Modifications

In the ordinary course of business the Company modifies loan terms on a case-by-case basis for a variety of reasons. Modifications may include rate reductions, payment extensions of varying lengths of time, a change in amortization term or method or other arrangements. Modifications to consumer loans generally involve short-term payment extensions to accommodate specific, temporary

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circumstances. Modifications to commercial loans may include, but are not limited to, changes in interest rate, maturity, amortization and financial covenants.

The Company reviews modifications to determine whether the borrower is experiencing financial difficulty, including indicators of default, bankruptcy, going concern, insufficient projected cash flows and inability to obtain financing from other sources. Please refer to Note 5 of Notes to Financial Statements for information on modifications to loans for borrowers experiencing financial difficulty during the years ended December 31, 2025 and December 31, 2024.

During the years ended December 31, 2025 and 2024, the Company modified loans in the normal course of business for borrowers who were not experiencing financial difficulty. During 2025, the Company modified 487 loans totaling $66,886. During 2024, the Company provided modifications for competitive purposes to 875 loans totaling $130,347.

Summary of Loan Loss Experience

The following table provides information about the allowance for credit losses on loans, nonperforming assets and accruing loans past due 90 days or more as of the dates indicated:


	December 31,
	2025			2024
ACLL	$	9,892		$	10,262
Total loans, net of deferred fees		999,310			987,950
ACLL to loans, net of deferred fees and costs		0.99	%		1.04	%
Nonaccrual loans	$	188		$	2,222
Nonperforming loans to total loans, net of deferred fees and costs		0.02	%		0.22	%
ACLL to nonperforming loans		5261.70	%		461.84	%
Accruing loans past due 90 days or more	$	881		$	548

More information about the level and calculation methodology of the allowance for credit losses on loans is provided in the sections “Allowance for Credit Losses on Loans” as well as Notes 1 and 5 of Notes to Consolidated Financial Statements.

Analysis of Net Charge-Offs

The following tables show net charge-offs, average loan balance and the percentage of charge-offs to average loan balance for each of the Company’s loan segments at the end of each period. Average loans are presented net of deferred fees and costs.


December 31, 2025	Net Charge-Offs (Recoveries)			Average Loans, net of deferred fees and costs		Percentage of Net Charge-Offs (Recoveries) to Average Loans
Real estate construction	$	-		$	44,806		0.00	%
Consumer real estate		3			317,882		0.00	%
Commercial real estate		(133	)		487,765		(0.03	)%
Commercial non-real estate		17			52,811		0.03	%
Public Sector and IDA	-				57,845		0.00	%
Consumer non-real estate		420			44,820		0.94	%
Total	$	307		$	1,005,929		0.03	%


December 31, 2024	Net Charge-Offs (Recoveries)			Average Loans, net of deferred fees and costs		Percentage of Net Charge-Offs (Recoveries) to Average Loans
Real estate construction	$	-		$	66,654		0.00	%
Consumer real estate		-			278,351		0.00	%
Commercial real estate		(53	)		445,212		(0.01	)%
Commercial non-real estate		87			48,175		0.18	%
Public Sector and IDA		-			58,953		0.00	%
Consumer non-real estate		215			41,003		0.52	%
Total	$	249		$	938,348		0.03	%

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The Company charges off commercial real estate loans at the time that a loss is confirmed. When delinquency status or other information indicates that the borrower will not repay the loan, the Company considers collateral value based upon a current appraisal or internal evaluation. Any loan amount in excess of collateral value is charged off and the collateral is taken into OREO.

Allowance for Credit Losses on Loans

The Company’s risk analysis as of December 31, 2025 determined an ACLL of $9,892, or 0.99% of loans net of deferred fees and costs. This compares with an ACLL of $10,262 as of December 31, 2024, or 1.04% of loans net of deferred fees and costs. For information on the Company’s policies on the ACLL, please refer to Note 1 and Note 5 of Notes to Consolidated Financial Statements. To determine the appropriate level of the ACLL, the Company considers credit risk for individually evaluated loans and for groups of loans evaluated collectively.

Individually Evaluated Loans

Individually evaluated loans were $8,802 as of December 31, 2025, a decrease from $10,521 as of December 31, 2024. Please refer to Note 1 of Notes to Consolidated Financial Statements for information on the Company’s identification of individually evaluated loans. As of December 31, 2025, two individually evaluated loans were collateral dependent but were adequately collateralized and did not result in an individual allocation. The remaining individually evaluated loans were measured using the DCF method, resulting in an allocation of $106.

Collectively Evaluated Loans

Collectively evaluated loans totaled $991,124 with an ACLL of $9,786 as of December 31, 2025. At December 31, 2024, collectively evaluated loans totaled $978,092, with an allowance of $10,182.

Collectively evaluated loans are divided into classes based upon risk characteristics. Utilizing historical loss information and peer data, the Company calculates PD and LGD for each class, which is adjusted for a reasonable and supportable forecast. Cash flow projections based on each loan’s contractual terms are modified by the adjusted PD and LGD for its class. Loan classes are allocated additional loss estimates based upon the Company’s analysis of qualitative factors including economic measures, asset quality indicators, loan characteristics, and changes to internal Company policies and management.

Reasonable and Supportable Forecast

The Company applies national unemployment forecasts to project cash flows. The Company determined that 12 months represents a reasonable and supportable forecast period as of December 31, 2025, and set a period of 12 months to revert to historical losses on a straight-line basis. The forecast applied as of December 31, 2025 projects that unemployment will be stable over the next 12 months at a similar level to the forecast applied as of December 31, 2024.

Qualitative Factors: Economic

The Company sources economic data pertinent to its market from the most recently available publications, including business and personal bankruptcy filings, the residential vacancy rate and the inventory of new and existing homes.

Higher bankruptcy filings indicate heightened credit risk and increase the ACLL, while lower bankruptcy filings have a beneficial impact on credit risk. Compared with data available at December 31, 2024, business bankruptcy filings decreased while personal bankruptcy filings increased.

Residential vacancy rates and housing inventory are used to measure the health of the housing market. The housing market directly or indirectly affects all loan classes. Higher vacancy and inventory levels increase credit risk. The residential vacancy rate available at December 31, 2025 increased compared to the data incorporated into the December 31, 2024 calculation, resulting in a higher allocation. Housing inventory increased when December 31, 2025 is compared with December 31, 2024, resulting in a higher allocation.

Qualitative Factors: Asset Quality Indicators

Accruing past due loans are analyzed at the class level and compared with previous levels. Increases in past due loans indicate heightened credit risk. On a portfolio level, accruing loans past due 30-89 days increased to 0.35% of total loans at December 31, 2025, from 0.30% at December 31, 2024.

Qualitative Factors: Other Considerations

The Company considers other factors that impact credit risk, including the competitive, legal and regulatory environments, changes in lending policies and loan review, changes in lending management, and high risk loans.

Competitive, legal and regulatory environments were evaluated for changes that would affect credit risk. Higher competition for loans is deemed to increase credit risk, while lower competition is deemed to decrease credit risk. Prior allocations for the competitive and regulatory environments were evaluated and management determined that a sufficient period of time had passed so as to conclude that the impact is now integrated to loss rates, reducing the allocation. The legal environment remains in a similar posture to December 31, 2024, and no allocation was provided.

Lending policies, loan review procedures and management experience influence credit risk. Policies and procedures remain similar to those at December 31, 2024. The Company maintained an allocation to account for integration of FCB lenders.

Levels of high-risk loans are considered in the determination of the level of the ACLL. A decrease in the level of high-risk loans

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within a class decreases the required allocation for the loan class, and an increase in the level of high-risk loans within a class increases the required allocation for the loan class. Total high-risk loans increased from the level at December 31, 2024.

The Company monitors local economic news and internal indicators to consider the presence of risk that may not be reflected in its designated qualitative factors above. As of December 31, 2025, management identified local unemployment data and collection activity. An unanticipated increase in unemployment in some of the Company’s market areas during the third quarter of 2025 resulted in a local unemployment rate that exceeded national unemployment. Historically, local unemployment has been correlated with national unemployment but slightly lower. The levels moderated during the fourth quarter of 2025, but remain higher than those as of December 31, 2024. The Company also documented an increase in collection activity, that while successful, may indicate additional credit risk. The Company added an allocation to account for the change.

Unallocated Surplus

The unallocated surplus as of December 31, 2025 was $50, or 0.51% in excess of the calculated requirement. The unallocated surplus at December 31, 2024 was $50, or 0.49% in excess of the calculated requirement. The surplus provides some mitigation of current economic uncertainty that may impact credit risk.

Conclusion

The calculation of the appropriate level for the ACLL incorporates analysis of multiple factors and requires management’s prudent and informed judgment. Based on analysis of historical indicators, asset quality and economic factors, management believes the level of ACLL is reasonable for the credit risk in the loan portfolio as of December 31, 2025.

Please refer to Note 5 of Notes to Consolidated Financial Statements for further information on collectively evaluated loans, individually evaluated impaired loans and the unallocated portion of the allowance for credit losses on loans.

Allocation of the Allowance for Credit Losses on Loans

The allowance for credit losses on loans has been allocated according to the amount deemed necessary to provide for anticipated losses within the categories of loans as of the dates indicated. Loans are presented net of deferred fees and costs. The following table presents information on the ACLL as of the dates indicated:

      
     December 31, 2025

     December 31, 2024

      
     Allowance
Amount

     Percent of
Loans to
Total Gross
Loans

     Percent of
Allowance to
Gross Loans

     Allowance
Amount

     Percent of
Loans to
Total Gross
Loans

     Percent of
Allowance to
Gross Loans

Real estate construction

335

NATIONAL BANKSHARES INC 10-K