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First Quarter 2025 Income Statement Review

Net interest income after provision for credit losses in the first quarter of 2025 was $11.5 million, compared to $8.8 million in the first quarter of 2024, reflecting an increase in the provision for credit losses of $85 thousand in the quarterly comparison. Total interest income was $15.5 million in the first quarter of 2025, representing an increase of $3.5 million in comparison to the $12.0 million in the first quarter of 2024. Interest income on loans increased in the quarterly comparison by $3.6 million, primarily due to organic loan growth, and the addition of loan balances from the JCB acquisition. Management anticipates that this loan growth will continue to have a positive impact on both earning assets and loan yields. Interest expense on deposits increased by $653 thousand in the quarterly comparison, as a result of rate increases on deposit offerings, and the additional interest-bearing deposits from the JCB acquisition. Management anticipates that interest expense on deposits could increase in the near term as competitive pressures for deposits may result in continued increases in rates on deposit offerings, especially on time deposits. Interest on borrowings decreased by $11 thousand.

First quarter 2025 noninterest income was $1.8 million compared with $1.7 million in the first quarter of 2024. Included in noninterest income for the first quarter of 2025 was $60 thousand from life insurance contracts. Included in noninterest income for the first quarter of 2024 was $218 thousand from life insurance contracts and a net realized security loss of $141 thousand. The net security loss resulted from the recognition of unamortized premiums on a called bond. Excluding these items, noninterest income increased by $104 thousand in the quarter over quarter comparison, primarily as a result of an increase in service charges of $100 thousand.

Noninterest expense in the first quarter of 2025 was $8.9 million compared with $8.0 million in the first quarter of 2024, an increase of $887 thousand, or 11.12%. Salary and benefits increased by $179 thousand in the quarterly comparison due to personnel additions and routine salary adjustments, as well as increased benefit costs. Occupancy and equipment expenses increased by $68 thousand, and data processing increased by $199 thousand in the quarterly comparisons primarily due the JCB acquisition. FDIC assessments increased by $102 thousand due to increased deposit levels from the JCB acquisition and organic deposit growth. Core deposit intangible amortization increased by $132 thousand in the quarterly comparison as a result of the JCB acquisition.

Income tax expense increased by $449 thousand in the quarter-to-quarter comparison, primarily due to an increase in net income before taxes of $2.0 million in the quarterly comparison.

Balance Sheet Review

Total assets increased in the first quarter of 2025 by $33.9 million, or 2.78%, to $1.25 billion at March 31, 2025, from $1.22 billion at December 31, 2024, and increased by $201.4 million, or 19.18%, from $1.05 billion at March 31, 2024. The increase in total assets during the quarter can be primarily attributed to the loan growth of $15.9 million and deposit growth of $22.2 million during the quarter.

Total loans increased during the first quarter by $15.9 million, or 1.61%, to $1.0 billion at March 31, 2025 from $984.5 million at December 31, 2024, and increased by $173.6 million, or 21.01%, compared to $826.7 million at March 31, 2024. Core loan growth during the first quarter was at an annualized rate of 6.60%.

Asset quality has remained strong, with a ratio of nonperforming loans to total loans of 0.22% at March 31, 2025 compared to 0.26% at December 31, 2024. The allowance for credit losses remained comparable at approximately 0.82% of total loans as of March 31, 2025 and December 31, 2024, respectively.

Investment securities increased by $196 thousand during the first quarter to $118.5 million at March 31, 2025 from $118.3 million at December 31, 2024, and decreased by $3.9 million from $122.4 million at March 31, 2024. The increase in the first quarter of 2025 was the result of a $2.6 million decrease in unrealized losses on investment securities and paydowns $2.4 million.

Total deposits increased in the first quarter of 2025 by $22.2 million, or 2.03%, to $1.11 billion at March 31, 2025 from $1.09 billion at December 31, 2024, and increased $183.9 million, or 19.77%, compared to $930.4 million at March 31, 2024. Noninterest-bearing deposits increased by $12.5 million and interest-bearing deposits increased by $9.7 million during the quarter. Lower cost interest-bearing deposits increased by $8.3 million during the quarter, and time deposits increased by $1.4 million.

Stockholders’ equity increased by $4.2 million, or 4.80%, to $92.9 million at March 31, 2025, from $88.7 million at December 31, 2024, and increased $10.0 million, or 12.12%, from $82.9 million at March 31, 2024. The change during the quarter was due to earnings of $3.6 million, less dividends paid of $1.4 million, and $2.0 million in other comprehensive income. Book value increased from $15.69 per share at December 31, 2024 to $16.44 per share at March 31, 2025.

Forward-looking statements

This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934 as amended. These include statements as to expectations regarding future financial performance and any other statements regarding future results or expectations. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by the use of words such as "believe," "expect," "intend," "anticipate," "estimate," or "project" or similar expressions. Our ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to: changes in interest rates; general economic and financial market conditions; the effect of changes in banking, tax and other laws and regulations and interpretations or guidance thereunder; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board; the economic impact of duties, tariffs or other barriers or restrictions on trade, and any retaliatory counter measures, and the volatility and uncertainty arising therefrom; the quality and composition of the loan and securities portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company’s market area; the implementation of new technologies; the ability to develop and maintain secure and reliable electronic systems; accounting principles, policies, and guidelines; disruptions to customer and employee relationships and business operations caused by the Johnson County Bank acquisition; the ability to achieve the cost savings and synergies contemplated by the acquisition within the expected timeframe, or at all; and other factors identified in Item 1A, “Risk Factors,” in the Company’s Annual Report on 10-K for the year ended December 31, 2024. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or clarify these forward‐looking statements, whether as a result of new information, future events or otherwise.

(See Attached Financial Statements for quarter ending March 31, 2025)

Skyline Bankshares, Inc.
Condensed Consolidated Statement of Operations

Skyline Bankshares, Inc.
Reconciliation of Non-GAAP Financial Measures

For more information contact:
Blake Edwards, President & CEO – 276-773-2811
Lori Vaught, EVP & CFO – 276-773-2811