NEW PEOPLES BANKSHARES ANNOUNCES RECORD FIRST QUARTER 2022 RESULTS

Honaker, Virginia -- New Peoples Bankshares (the “Company”) (OTCBB: NWPP) and its wholly-owned subsidiary, New Peoples Bank (the “Bank”), today announced first quarter net income of $1.92 million, or $0.08 per share, for the quarter ended March 31, 2022 as compared to $1.58 million or $0.07 per share, for the quarter ended March 31, 2021, which is a year-over-year improvement of $336,000, or21.2%. The primary drivers for the increase were increases in net interest income of $208,000, a reduction in the provision for loan losses of $86,000, and an increase in total noninterest income of $240,000.

C. Todd Asbury, President and CEO of the Company, stated, “The first quarter of 2022 proved to be quite significant as we paid the first cash dividend to our shareholders on March 31^st and reported record quarterly earnings; our fifth consecutive quarter of increased net income. Our efforts to expand services to our customers and manage costs continue to drive performance as we generated returns on average assets and equity of 0.97% and 12.35%, respectively. These results are the culmination of a lot of hard work over the past several years. I am pleased with our progress to become a high performing financial institution. We are delivering on what we have promised our investors and customers and plan to continue to do so going forward.”

Net interest income increased $208,000 resulting from a $270,000 decrease in interest expense, which more than offset a $62,000 decrease in interest income. Despite growth in earning assets, particularly in the investment and loan portfolios, interest income shrunk year-over-year, due to a decrease in fees generated from Payroll Protection Program loans. The reduction in interest expense was driven, principally, by the continued low market interest rates throughout 2021 and into 2022, as our cost of funds fell 16 basis points year-over-year to 0.30% for the first quarter of 2022. This net rate reduction resulted in decreased interest expense of $174,000. In addition, declines in the volume of interest-bearing time deposits and Federal Home Loan Bank advances resulted in a volume-related decrease in interest expense of $96,000. In March 2022, the Federal Open Market Committee raised the target federal funds rate 25 basis points (bps), in what is largely considered to be the first of a series of rate increases during 2022.

The year-over-year reduction in the provision for loan losses of $86,000 to $100,000 for the quarter ended March 31, 2022 is due to the continued improvement in the loan portfolio, exhibited by reductions in past due and nonperforming loans, combined with improving economic trends during the first quarter, including continued improving employment statistics. Annualized net charge-offs to average loans remain at low levels and were 0.05% for the quarter ended March 31, 2022. Nonaccrual loans to total loans and nonperforming assets to total assets declined to 0.44% to 0.42%, respectively at March 31, 2022

Total non-interest income increased $240,000 during the first quarter of 2022 compared to the first quarter of 2021 due to increases in service charges and fees and card processing fees of $175,000 and $52,000, respectively. The service charges and fees increase relates to increased volume in overdraft charges related to customer activity beginning to return to pre-pandemic levels as businesses reopened and as customers spend savings from stimulus payments accumulated during the pandemic. Card processing fee revenue is also volume related for reasons similar to those impacting service charge income. In addition, year-over-year, fees generated through financial and merchant services increased $12,000 and $11,000, respectively, due to increased volume from both new and existing customers using these services. We continue efforts to increase noninterest income revenue through product enhancements and customer development.

Total non-interest expense increased $90,000, as salaries and benefits expense increased $196,000 due to the impact of increasing our minimum base hourly wage, targeted salary adjustments to retain and attract employees, combined with normal annual wage adjustments and added costs for performance incentive plans initiated during the third quarter of 2021. Occupancy expense decreased $170,000 due largely to the reduction in the number of buildings through sales or transfers to other real estate owned. Additionally, net depreciation costs for furniture, equipment and computer equipment decreased $89,000 as assets reached the end of their estimated economic useful lives, along with the decommissioning of a number of interactive teller machines during the fourth quarter of 2021. Other operating expenses increased $64,000 year-over-year, primarily due to costs related to the holding and disposal of other real estate owned, which increased $33,000 to $130,000. ATM network expenses increased $25,000 to $367,000, due to increased activity combined with general cost increases. Miscellaneous losses increased $69,000 to $50,000 in 2022, as compared to net recoveries of $19,000 in 2021. These increased expenses were offset by decreases in data processing and telecommunications costs, and FDIC insurance which decreased $19,000 and $21,000, respectively. Data processing and telecommunication costs decreased due to the reduction in the number of branch sites and renegotiated contracts, while FDIC insurance decreased due to the improved risk factors considered in the premium assessment. Efforts continue to decrease non-interest expenses of the Company and improve efficiency.

Total assets increased $18.9 million, or 2.4%, to $813.5 million at March 31, 2022 from $794.6 million at December 31, 2021, funded largely by increased deposits as the low interest rate environment continues to provide liquidity. Total loans increased $1.4 million, or 0.23%, to $595.1 million at March 31, 2022 from $593.7 million at December 31, 2021. Loan growth has resulted from increases in commercial construction, multi-family and home equity loans, which increased $5.6 million, $1.7 million and $1.0 million, respectively. These increases offset a decrease in commercial loans of $7.2 million, which resulted largely from repayments and forgiveness of Paycheck Protection Program loans of $3.6 million during the first three months of 2022. Our loan production operation in Boone, North Carolina, continues to generate positive results. Total deposits increased $23.5 million, or 3.3%, to $731.0 million at March 31, 2022 from $707.5 million at December 31, 2021, driven by liquidity resulting from the continuing low interest rate environment and seasonal growth from income tax refunds.

At March 31, 2022, shareholders’ equity totaled $58.9 million, a decrease of $4.7 million, or 7.4%, from December 31, 2021. The primary cause for the net decrease was the change in the net unrealized loss on investment securities available for sale, which increased $5.4 million, or 668.8%, during the first quarter of 2022, due to the impact of the change in interest rates. Excluding the impact of the unrealized loss, equity increased $725,000, due to net income of $1.9 million less the cash dividend payment of $1.2 million.

During March of 2022, our market area began to see a significant easing from the impact of the COVID-19 pandemic. As a result, employees have returned to the office and customers are afforded full service at our branch locations. Asbury stated, “Throughout the pandemic our primary goal has been to assure the safety of our customers and employees. I am grateful to our customers for their patience and understanding and proud of the poise and commitment exhibited by our employees during this pandemic. We look forward to resuming business as usual as we strive to become the preeminent community financial institution in Appalachia.”

On April 20, 2022, the United States District Court for the Western District of Virginia issued summary judgment, in favor of the Bank, dismissing all remining claims made in a lawsuit filed by a former employee in January 2021, alleging wrongful termination based on gender, religion and age.

Highlights

Earnings for the quarter ended March 31, 2022:

Balance Sheet:

Asset Quality:

About New Peoples Bankshares, Inc.

New Peoples Bankshares, Inc. is a one-bank financial holding company headquartered in Honaker, Virginia. Its wholly-owned subsidiary provides banking products and services through its 20 locations throughout southwest Virginia, eastern Tennessee, western North Carolina and southern West Virginia. The Company’s common stock is traded over the counter under the trading symbol “NWPP”. Additional investor information can be found on the Company’s website at https://newpeoples.bank/Bankshares-About-Us.

This news release contains statements concerning the Company’s expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements may constitute “forward-looking statements” as defined by federal securities laws. These statements may address issues that involve estimates and assumptions made by management, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Important factors that may cause actual results to differ from projections include:

(i) the success or failure of efforts to implement the Company’s business plan; (ii) any required increase in the Company’ regulatory capital ratios; (iii) satisfying other regulatory requirements that may arise from examinations, changes in the law and other similar factors; (iv) deterioration of asset quality; (v) changes in the level of the Company’s nonperforming assets and charge-offs; (vi) fluctuations of real estate values in the Company’s markets; (vii) the Company’s ability to attract and retain talent; (viii) demographical changes in the Company’s markets which negatively impact the local economy; (ix) the uncertain outcome of enacted legislation to stabilize the United States financial system; (x) the successful management of interest rate risk; (xi) the successful management of liquidity; (xii) changes in general economic and business conditions in the Company’s market area and the United States in general; (xiii) credit risks inherent in making loans such as changes in a borrower’s ability to repay and the Company’s management of such risks; (xiv) competition with other banks and financial institutions, and companies outside of the banking industry, including online lenders and those companies that have substantially greater access to capital and other resources; (xv) demand, development and acceptance of new products and services the Company has offered or may offer; (xvi) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; (xvii) the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues (including the novel coronavirus (COVID-19) outbreak and the associated efforts to limit the spread of the disease), and other catastrophic events; (xviii) technology utilized by the Company; (xix) the Company’s ability to successfully manage cyber security; (xx) the Company’s reliance on third-party vendors and correspondent banks; (xxi) changes in generally accepted accounting principles; (xxii) changes in governmental regulations, tax rates and similar matters; and (xxiii) other risks which may be described in future filings the Company makes with the Securities and Exchange Commission. The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2022 AND DECEMBER 31, 2021

(IN THOUSANDS EXCEPT SHARE DATA)

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NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED

    NEW PEOPLES BANKSHARES, INC.  

KEY PERFORMANCE AND CAPITAL RATIOS

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*The efficiency ratio is computed as a percentage of non-interest expense divided by the sum of net interest income and non-interest income. This is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Management believes such financial information is meaningful to the reader in understanding operating performance, but cautions that such information should not be viewed as a substitute for GAAP. Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate it differently.