AUBN filing — read by section

Item 2. Management’s Discussion and Analysis

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 
OF FINANCIAL CONDITION AND RESULTS 
OF 
 OPERATIONS 
 The following discussion and analysis is designed to provide a better understanding of 
various factors related to the results 
 of operations and financial condition of the Company and the Bank. 
This discussion is intended to supplement and 
 highlight information contained in the accompanying unaudited condensed consolidated 
financial statements and related 
 notes for the quarters ended March 31, 2023 and 2022, as well as the information contained 
in our Annual Report on Form 
 10-K for the year ended December 31, 2022. 

 Special Cautionary Notice Regarding Forward-Looking Statements 
 Various 
of the statements made herein under the captions “Management’s 
Discussion and Analysis of Financial Condition 
 and Results of Operations”, “Quantitative and Qualitative Disclosures about Market 
Risk”, “Risk Factors” “Description of 
 Property” and elsewhere, are “forward-looking statements” within the 
meaning and protections of Section 27A of the 
 Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 
as amended (the “Exchange Act”). 
 Forward-looking statements include statements with respect to our beliefs, plans, objectives, 
goals, expectations, 
 anticipations, assumptions, estimates, intentions and future performance, and involve 
known and unknown risks, 
 uncertainties and other factors, which may be beyond our control, and 
which may cause the actual results, performance, 
 achievements or financial condition of the Company to be materially different 
from future results, performance, 
 achievements or financial condition expressed or implied by such forward-looking 
statements. 
You 
should not expect us to 
 update any forward-looking statements. 
 All statements other than statements of historical fact are statements that could be 
forward-looking statements. 
You 
can 
 identify these forward-looking statements through our use of words such as “may,” 
“will,” “anticipate,” “assume,” 
 “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” 
“estimate,” “continue,” “designed”, “plan,” “point to,” 
 “project,” “could,” “intend,” “seeks,” “model,” “simulations,” “target” and 
other similar words and expressions of the 
 future. 
These forward-looking statements may not be realized due to a variety of factors, 
including, without limitation: 
 ●
 the effects of future economic, business and market conditions and 
changes, foreign, domestic and local, including 
 inflation, seasonality, natural 
disasters or climate change, such as rising sea and water levels, hurricanes and 
 tornados, COVID-19 or other epidemics or pandemics including supply chain disruptions, 
inventory volatility, and 
 changes in consumer behaviors; 
 ●
 the effects of war or other conflicts, acts of terrorism, trade restrictions, sanctions or 
other events that may affect 
 general economic conditions; 
 ●
 governmental monetary and fiscal policies, including the continuing effects 
of fiscal and monetary stimuli in 
 response to the COVID-19 crisis, followed by changes in monetary policies beginning 
in March 2022 in response 
 to inflation, including increases in the Federal Reserve’s 
target federal funds rate and reductions in the Federal 
 Reserve’s holdings of securities; 
 ●
 legislative and regulatory changes, including changes in banking, securities and tax laws, 
regulations and rules and 
 their application by our regulators, including capital and liquidity requirements, and changes 
in the scope and cost 
 of FDIC insurance, including changes being considered in light of two regional bank 
failures in California and 
 New York in 
March 2023; 
 ●
 the failure of assumptions and estimates, as well as differences in, and changes to, 
economic, market and credit 
 conditions, including changes in borrowers’ credit risks and payment behaviors from 
those used in our loan 
 portfolio reviews; 
 ●
 the risks of inflation, changes in market interest rates and the shape of the yield curve on the levels, composition 
 and costs of deposits and borrowings, the values of our securities and loans, loan demand 
and mortgage loan 
 originations, and the values and liquidity of loan collateral, securities, and interest-sensitive 
assets and liabilities, 
 and the risks and uncertainty of the amounts realizable on collateral; 

 
 Table of Contents 
 28 
 ●
 the risks of further increases in market interest rates creating unrealized losses on our 
securities available for sale, 
 which adversely affect our stockholders’ equity (including tangible stockholders’ 
equity) for financial reporting 
 purposes; 
 ●
 changes in borrower liquidity and credit risks, and savings, deposit and payment behaviors; 
 ●
 changes in the availability and cost of credit and capital in the financial markets, and the types 
of instruments that 
 may be included as capital for regulatory purposes; 
 ●
 changes in the prices, values and sales volumes of residential and commercial real estate; 
 ●
 the effects of competition from a wide variety of local, regional, national 
and other providers of financial, 
 investment and insurance services, including the disruptive effects of 
financial technology and other competitors 
 who are not subject to the same regulations as the Company and the Bank and credit unions, 
which are not subject 
 to federal income taxation; 
 ●
 the failure of assumptions and estimates underlying the establishment of allowances 
for credit losses, including 
 asset impairments, losses valuations of assets and liabilities and other 
estimates; 
 ●
 the timing and amount of rental income from third parties following the June 2022 
opening of our new 
 headquarters; 
 ●
 the risks of mergers, acquisitions and divestitures, including, 
without limitation, the related time and costs of 
 implementing such transactions, integrating operations as part of these transactions and 
possible failures to achieve 
 expected gains, revenue growth and/or expense savings from such transactions; 
 ●
 changes in technology or products that may be more difficult, costly, 
or less effective than anticipated; 
 ●
 cyber-attacks and data breaches that may compromise our systems, our 
vendors’ systems or customers’ 
 information; 
 ●
 the risks that our deferred tax assets (“DTAs”) 
included in “other assets” on our consolidated balance sheets, if 
 any, could be reduced if estimates of future 
taxable income from our operations and tax planning strategies are less 
 than currently estimated, and sales of our capital stock could trigger a reduction in the amount of 
net operating loss 
 carry-forwards that we may be able to utilize for income tax purposes; and 
 ●
 other factors and risks described under “Risk Factors” herein and in any of our subsequent 
reports that we make 
 with the Securities and Exchange Commission (the “Commission” or “SEC”) 
under the Exchange Act. 
 All written or oral forward-looking statements that are we make or are 
attributable to us are expressly qualified in their 
 entirety by this cautionary notice. 
We have no obligation and 
do not undertake to update, revise or correct any of the 
 forward-looking statements after the date of this report, or after the respective dates on which such 
statements otherwise are 
 made. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 29 
 Summary of Results of Operations 
 Quarter ended March 31, 
 (Dollars in thousands, except per share data) 
 2023 
 2022 
 Net interest income (a) 
 $ 
 7,217 
 $ 
 6,190 
 Less: tax-equivalent adjustment 
 108 
 112 
 Net interest income (GAAP) 
 7,109 
 6,078 
 Noninterest income 

 792 
 908 
 Total revenue 

 7,901 
 6,986 
 Provision for credit losses 
 66 
 (250) 
 Noninterest expense 
 5,604 
 4,901 
 Income tax expense 

 267 
 254 
 Net earnings 
 $ 
 1,964 
 $ 
 2,081 
 Basic and diluted earnings per share 
 $ 
 0.56 
 $ 
 0.59 
 (a) Tax-equivalent. 
See "Table 1 - Explanation of Non-GAAP 
Financial Measures." 
 Financial Summary 
 The Company’s net earnings were $2.0 
million for the first quarter of 2023, compared to $2.1 million for the first quarter of 
 2022. 
Basic and diluted earnings per share were $0.56 per share for the first quarter of 2023, 
compared to $0.59 per share 
 for the first quarter of 2022. 

 Net interest income (tax-equivalent) was $7.2 million for the first quarter of 2023, 
a 17% increase 
compared to $6.2 million 
 for the first quarter of 2022. 
This increase was primarily due to improvements in the Company’s 
net interest margin. 
The 
 Company’s net interest margin 
(tax-equivalent) was 3.17% in the first quarter of 2023 compared to 2.43% 
in the first 
 quarter of 2022. 
This increase was primarily due to a more favorable asset mix and higher yields on interest 
earning assets. 

 These higher yields on interest earning assets were partially offset by increased 
cost of funds. 
The cost of funds increased 
 to 71 basis points, compared to 34 basis points in the first quarter of 2022, 
which also reflected higher market interest rates. 

 Average loans for the first quarter 
of 2023 were $502.2 million, a 14% increase from the first quarter of 2022. 
 At March 31, 2023, the Company’s allowance 
for credit losses was $6.8 million, or 1.35% of total loans, compared to $5.8 
 million, or 1.14% of total loans, at December 31, 2022, and $4.7 
million, or 1.09% of total loans, at March 31, 2022. 
The 
 implementation of CECL required pursuant to Accounting Standards (“ASC”) 
326, was effective January 1, 2023, 
 increased our allowance for credit losses by $1.0 million, or 0.20% of total loans, as a day one 
transition adjustment. 
At 
 March 31, 2023 and December 31, 2022, the Company’s 
recorded investment in loans individually evaluated was $2.6 
 million with a corresponding valuation allowance (included in the allowance 
for credit losses) of $0.5 million, compared to 
 a recorded investment in loans individually evaluated of $0.2 million with no corresponding 
valuation allowance at March 
 31, 2022. 
 The Company recorded a provision for credit losses during the first quarter of 2023 
of $0.1 million, compared to a negative 
 provision for credit losses of $0.3 million during the first quarter of 2022. 
The provision for credit losses under CECL is 
 reflective of the Company’s credit risk profile 
and the future economic outlook and forecasts. 
Our CECL model is largely 
 influenced by economic factors including, most notably, 
the anticipated unemployment rate. 
The negative provision for 
 credit losses during the first quarter of 2022 was primarily related to a decrease in total loans, excluding PPP, 
during the 
 first quarter of 2022. 
 Noninterest income was $0.8 million in the first quarter of 2023, 
compared to $0.9 million in the first quarter of 2022. 
The 
 decrease in noninterest income was primarily due to a decrease in mortgage lending income 
of $0.2 million as a result of 
 higher mortgage market interest rates. 
 Noninterest expense was $5.6 million in the first quarter of 2023, 
compared 
to $4.9 million for the first quarter of 2022. 

 The increase in noninterest expense was primarily due to an increase in net occupancy and 
equipment expense of $0.3 
 million related to the Company’s new headquarters, 
which opened in June 2022, professional fees expense of $0.1 million, 
 and other noninterest expenses of $0.3 million. 

 
 Table of Contents 
 30 
 Income tax expense was $0.3 million for the first quarter of 2023 and 2022, 
respectively. 
The Company's effective tax rate 
 for the first quarter of 2023 was 11.97%, 
compared to 10.88% in the first quarter of 2022. 
The Company’s effective 
 income tax rate is principally affected by tax-exempt earnings from the Company’s 
investment in municipal securities, 
 bank-owned life insurance (“BOLI”), and New Markets Tax 
Credits (“NMTCs”). 
 The Company paid cash dividends of $0.27 per share in the first quarter of 2023, an increase of 2% 
from the same period of 
 2022. 
The Company repurchased 
2,648 shares for $0.1 
million during the first quarter of 2023. 
At March 31, 2023, the 
 Bank’s regulatory capital ratios 
were well above the minimum amounts required to be “well capitalized” under current 
 regulatory standards with a total risk-based capital ratio of 16.48%, 
a tier 1 leverage ratio of 10.07% and a common equity 
 tier 1 (“CET1”) ratio of 15.45% at March 31, 2023. 
At March 31, 
2023, the Company’s equity to total assets ratio 
was 
 7.24%, compared to 6.65% at December 31, 2022, and 7.79% at March 31, 
2022. 
 CRITICAL ACCOUNTING POLICIES 
 The accounting and financial reporting policies of the Company conform with U.S. generally accepted 
accounting 
 principles and with general practices within the banking industry. 
In connection with the application of those principles, we 
 have made judgments and estimates which, in the case of the determination of our allowance 
for credit losses for loans, our 
 determination of credit losses for investment securities, 
recurring and non-recurring fair value measurements, the valuation 
 of other real estate owned, and the valuation of deferred tax assets, were critical to the determination 
of our financial 
 position and results of operations. Other policies also require subjective judgment and 
assumptions and may accordingly 
 impact our financial position and results of operations. 

 Accounting Standards Adopted in 2023 
 On January 1, 2023, the Company adopted ASC 326 as described more fully in our 
unaudited financial statements in Part I 
 of this Quarterly report, 
especially Note 1, Accounting Standards Adopted in 2023 and Note 5, Loans and Allowance 
for 
 Credit Losses. 
This standard replaced the incurred loss methodology with an expected loss 
methodology that is referred to 
 as the current expected credit loss (“CECL”) methodology. 
CECL requires an estimate of credit losses for the remaining 
 estimated life of the financial asset using historical experience, current conditions, 
and reasonable and supportable forecasts 
 and generally applies to financial assets measured at amortized cost, including loan 
receivables and held-to-maturity debt 
 securities, and some off-balance sheet credit exposures such as unfunded 
commitments to extend credit. Financial assets 
 measured at amortized cost will be presented at the net amount expected to be collected 
by using an allowance for credit 
 losses. 

 In addition, CECL made changes to the accounting for available for sale 
debt securities. One such change is to require 
 credit losses to be presented as an allowance rather than as a write-down on available for sale debt 
securities if management 
 does not intend to sell and does not believe that it is more likely than not, they will be required 
to sell. 
 The Company adopted ASC 326 and all related subsequent amendments thereto 
effective January 1, 2023 using the 
 modified retrospective approach for all financial assets measured 
at amortized cost and off-balance sheet credit exposures. 
 The transition adjustment upon the adoption of CECL on January 1, 2023 included an increase 
in the allowance for credit 
 losses on loans of $1.0 million, which is presented as a reduction to net loans outstanding, 
and an increase in the allowance 
 for credit losses on unfunded loan commitments of $0.1 million, which is recorded 
within other liabilities. The Company 
 recorded a net decrease to retained earnings of $0.8 million as of January 1, 2023 
for the cumulative effect of adopting 
 CECL, which reflects the transition adjustments noted above, net of the applicable deferred 
tax assets recorded. Results for 
 reporting periods beginning after January 1, 2023 are presented under CECL 
while prior period amounts continue to be 
 reported in accordance with previously applicable accounting standards. 
 The Company adopted ASC 326 using the prospective transition approach 
for debt securities for which other-than-
 temporary impairment had been recognized prior to January 1, 2023. 
As of December 31, 2022, the Company did not have 
 any other-than-temporarily impaired investment securities. Therefore, 
upon adoption of ASC 326, the Company determined 
 that an allowance for credit losses on available for sale securities was not deemed 
material. 

 The Company elected not to measure an allowance for credit losses for accrued interest receivable 
and instead elected to 
 reverse interest income on loans or securities that are placed on nonaccrual status, 
which is generally when the instrument is 
 90 days past due, or earlier if the Company believes the collection of interest is doubtful. 
The Company has concluded that 
 this policy results in the timely reversal of uncollectible interest. 

 
 Table of Contents 
 31 
 The Company also adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 
326): Troubled Debt 
 Restructurings and Vintage Disclosures” 
on January 1, 2023, the effective date of the guidance, on a prospective basis. 
 ASU 2022-02 eliminated the accounting guidance for TDRs, while enhancing disclosure 
requirements for certain loan 
 refinancings and restructurings by creditors when a borrower is experiencing 
financial difficulty. 
Specifically, rather than 
 applying the recognition and measurement guidance for TDRs, an entity 
must apply the loan refinancing and restructuring 
 guidance to determine whether a modification results in a new loan or a continuation of an 
existing loan. Additionally, 
ASU 
 2022-02 requires an entity to disclose current-period gross write-offs 
by year of origination for financing receivables within 
 the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at 
Amortized Cost. ASU 2022-02 did not 
 have a material impact on the Company’s consolidated 
financial statements. 
 Loans 
 Loans that management has the intent and ability to hold for the foreseeable 
future or until maturity or payoff are reported 
 at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums 
and discounts and 
 deferred fees and costs. Accrued interest receivable related to loans is recorded 
in other assets on the consolidated balance 
 sheets. Interest income is accrued on the unpaid principal balance. Loan origination 
fees, net of certain direct origination 
 costs, are deferred and recognized in interest income using methods that approximate a 
level yield without anticipating 
 prepayments. 
 The accrual of interest is generally discontinued when a loan becomes 90 days past due and 
is not well collateralized and in 
 the process of collection, or when management believes, after considering economic and 
business conditions and collection 
 efforts, that the principal or interest will not be collectible in the normal course 
of business. Past due status is based on 
 contractual terms of the loan. A loan is considered to be past due when a scheduled payment has 
not been received 30 days 
 after the contractual due date. 
 All accrued interest is reversed against interest income when a loan is placed on nonaccrual 
status. Interest received on such 
 loans is accounted for using the cost-recovery method, until qualifying for return to accrual. 
Under the cost-recovery 
 method, interest income is not recognized until the loan balance is reduced to zero. 
Loans are returned to accrual status 
 when all the principal and interest amounts contractually due are brought current, there 
is a sustained period of repayment 
 performance, and future payments are reasonably assured. 
 Allowance for Credit Losses – Loans 
 The allowance for credit losses is a valuation account that is deducted from the loans' amortized 
cost basis to present the net 
 amount expected to be collected on the loans. Loans are charged 
off against the allowance when management believes the 
 uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate 
of amounts previously 
 charged-off and expected to be charged-off 
. 
Accrued interest receivable is excluded from the estimate of credit losses. 
 The allowance for credit losses represents management’s 
estimate of lifetime credit losses inherent in loans as of the 
 balance sheet date. The allowance for credit losses is estimated by management using relevant 
available information, from 
 both internal and external sources, relating to past events, current conditions, and reasonable 
and supportable forecasts. 

 The Company’s loan loss estimation process includes 
procedures to appropriately consider the unique characteristics of 
its 
 loan segments (commercial and industrial, construction and land development, commercial 
real estate, multifamily, 
 residential real estate, and consumer loans). 
These segments are further disaggregated into loan classes, the level at which 
 credit quality is monitored. 
See Note 5, Loans and Allowance for Credit Losses for additional information about our loan 
 portfolio. 
 Credit loss assumptions are estimated using a discounted cash flow ("DCF") model 
for each loan segment, except consumer 
 loans. 
The weighted average remaining life method is used to estimate credit loss assumptions 
for consumer loans. 

 
 Table of Contents 
 32 
 The DCF model calculates an expected life-of-loan loss percentage by considering the 
forecasted probability that a 
 borrower will default (the “PD”), adjusted for relevant forecasted macroeconomic 
factors, and LGD, which is the estimate 
 of the amount of net loss in the event of default. 
This model utilizes historical correlations between default experience and 
 certain macroeconomic factors as determined through a statistical regression analysis. 
The forecasted Alabama 
 unemployment rate is considered in the model for commercial and industrial, construction 
and land development, 
 commercial real estate, multifamily, 
and residential real estate loans. 
In addition, forecasted changes in the Alabama home 
 price index is considered in the model for construction and land development and residential 
real estate loans; forecasted 
 changes in the national commercial real estate (“CRE”) price index is considered in the 
model for commercial real estate 
 and multifamily loans; and forecasted changes in the Alabama gross state product 
is considered in the model for 
 multifamily loans. 
Projections of these macroeconomic factors, obtained from an independent 
third party, are utilized to 
 predict quarterly rates of default 
based on the statistical PD models. 

 Expected credit losses are estimated over the contractual term of the loan, adjusted for 
expected prepayments and principal 
 payments (“curtailments”) when appropriate. Management's determination of the 
contract term excludes expected 
 extensions, renewals, and modifications unless the extension or 
renewal option is included in the contract at the reporting 
 date and is not unconditionally cancellable by the Company. 
To the extent the lives of the 
loans in the portfolio extend 
 beyond the period for which a reasonable and supportable forecast can be 
made (which is 4 quarters for the Company), the 
 Company reverts, on a straight-line basis back to the historical rates over an 8 quarter 
reversion period. 
 The weighted average remaining life method was deemed most appropriate 
for the consumer loan segment because 
 consumer loans contain many different payment structures, 
payment streams and collateral. 
The weighted average 
 remaining life method uses an annual charge-off rate over several vintages 
to estimate credit losses. 
The average annual 
 charge-off rate is applied to the contractual term adjusted for prepayments. 
 Additionally, the allowance 
for credit losses calculation includes subjective adjustments for qualitative risk 
factors that are 
 believed likely to cause estimated credit losses to differ from historical experience. 
These qualitative adjustments may 
 increase or reduce reserve levels and include adjustments for lending management experience 
and risk tolerance, loan 
 review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, 
trends in 
 underlying collateral, external factors and economic conditions not already captured. 
 Loans that do not share risk characteristics are evaluated on an individual basis. When 
management determines that 
 foreclosure is probable and the borrower is experiencing financial difficulty, 
the expected credit losses are based on the 
 estimated fair value of collateral held at the reporting date, adjusted for selling costs as appropriate. 

 Allowance for Credit Losses – Unfunded Commitments 
 Financial instruments include off-balance sheet credit instruments, 
such as commitments to make loans and commercial 
 letters of credit issued to meet customer financing needs. The Company’s 
exposure to credit loss in the event of 
 nonperformance by the other party to the financial instrument for off-balance sheet 
loan commitments is represented by the 
 contractual amount of those instruments. Such financial instruments are recorded 
when they are funded. 
 The Company records an allowance for credit losses on off-balance 
sheet credit exposures, unless the commitments to 
 extend credit are unconditionally cancelable, through a charge to provision 
for credit losses in the Company’s consolidated 
 statements of earnings. The allowance for credit losses on off-balance sheet credit 
exposures is estimated by loan segment 
 at each balance sheet date under the current expected credit loss model using the same 
methodologies as portfolio loans, 
 taking into consideration the likelihood that funding will occur as well as any third-party 
guarantees. The allowance for 
 unfunded commitments is included in other liabilities on the Company’s 
consolidated balance sheets. 
 On January 1, 2023, the Company recorded an adjustment for unfunded commitments of $77 
thousand for the adoption of 
 ASC 326. For the three months ended March 31, 2023, the Company recorded a provision 
for credit losses for unfunded 
 commitments of $26 thousand. At March 31, 2023, the liability for credit losses on off 
-balance-sheet credit exposures 
 included in other liabilities was $0.3 million. 

 
 Table of Contents 
 33 
 Assessment for Allowance for Credit Losses – Available 
-for-Sale Securities 
 For any securities classified as available-for-sale that are in an unrealized 
loss position at the balance sheet date, the 
 Company assesses whether or not it intends to sell the security, 
or more likely than not will be required to sell the security, 
 before recovery of its amortized cost basis. 
If either criteria is met, the security's amortized cost basis is written down to 
 fair value through net income. 
If neither criteria is met, the Company evaluates whether any portion of the decline in 
fair 
 value is the result of credit deterioration. 
Such evaluations consider the extent to which the amortized cost of the security 
 exceeds its fair value, changes in credit ratings and any other known adverse conditions related 
to the specific security. 
If 
 the evaluation indicates that a credit loss exists, an allowance for credit losses is recorded 
for the amount by which the 
 amortized cost basis of the security exceeds the present value of cash flows expected 
to be collected, limited by the amount 
 by which the amortized cost exceeds fair value. 
Any impairment not recognized in the allowance for credit losses is 
 recognized in other comprehensive income. 
 The Company is required to own certain stock as a condition of membership, such as the 
FHLB of Atlanta and Federal 
 Reserve Bank of Atlanta (“FRB”). 
These non-marketable equity securities are accounted for at cost which equals par 
or 
 redemption value. 
These securities do not have a readily determinable fair value as their ownership is restricted and 
there is 
 no market for these securities. 
The Company records these non-marketable equity securities as a component 
of other 
 assets, which are periodically evaluated for impairment. Management considers 
these non-marketable equity securities to 
 be long-term investments. Accordingly, 
when evaluating these securities for impairment, management considers 
the 
 ultimate recoverability of the par value rather than by recognizing temporary declines in value. 
 Fair Value 
Determination 
 U.S. GAAP requires management to value and disclose certain of the Company’s 
assets and liabilities at fair value, 
 including investments classified as available-for-sale and derivatives. 
ASC 820, 
 Fair Value 
Measurements and Disclosures
 , 
 which defines fair value, establishes a framework for measuring fair value in accordance 
with U.S. GAAP and expands 
 disclosures about fair value measurements. 
For more information regarding fair value measurements and disclosures, 
 please refer to Note 7, Fair Value, 
of the unaudited consolidated financial statements that accompany this report. 
 Fair values are based on active market prices of identical assets or liabilities when available. 
Comparable assets or 
 liabilities or a composite of comparable assets in active markets are used when identical assets 
or liabilities do not have 
 readily available active market pricing. 
However, some of the Company’s 
assets or liabilities lack an available or 
 comparable trading market characterized by frequent transactions between 
willing buyers and sellers. In these cases, fair 
 value is estimated using pricing models that use discounted cash flows and 
other pricing techniques. Pricing models and 
 their underlying assumptions are based upon management’s 
best estimates for appropriate discount rates, default rates, 
 prepayments, 
market volatility and other factors, taking into account current observable market data and 
experience. 
 These assumptions may have a significant effect on the reported 
fair values of assets and liabilities and the related income 
 and expense. As such, the use of different models and assumptions, as 
well as changes in market conditions, could result in 
 materially different net earnings and retained earnings results. 

 Other Real Estate Owned 
 Other real estate owned or OREO, consists of properties obtained through foreclosure or otherwise 
in satisfaction of loans 
 and is reported at the lower of cost or fair value, less estimated costs to sell at the date acquired 
with any loss recognized as 
 a charge-off through the allowance for credit losses. 
Additional OREO losses for subsequent valuation adjustments are 
 determined on a specific property basis and are included as a component of other noninterest 
expense along with holding 
 costs. Any gains or losses on disposal of OREO are also reflected in noninterest expense. 
Significant judgments and 
 complex estimates are required in estimating the fair value of OREO, and the period of time 
within which such estimates 
 can be considered current is significantly shortened during periods of 
market volatility. As a result, the net proceeds 
 realized from sales transactions could differ significantly from appraisals, 
comparable sales, and other estimates used to 
 determine the fair value of OREO. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 34 
 Deferred Tax 
Asset Valuation 
 A valuation allowance is recognized for a deferred tax asset if, based on the weight of available 
evidence, it is more-likely-
 than-not that some portion or the entire deferred tax asset will not be realized. The ultimate 
realization of deferred tax assets 
 is dependent upon the generation of future taxable income during the periods 
in which those temporary differences become 
 deductible. Management considers the scheduled reversal of deferred 
tax liabilities, projected future taxable income and tax 
 planning strategies in making this assessment. At March 31, 2023 
we had total deferred tax assets of $12.2 million included 
 as “other assets”, including $11.9 million resulting from 
unrealized losses in our securities portfolio. 
Based upon the level 
 of taxable income over the last three years and projections for future taxable income over 
the periods in which the deferred 
 tax assets are deductible, management believes it is more likely than not that 
we will realize the benefits of these deductible 
 differences at March 31, 2023. The amount of the deferred tax assets considered 
realizable, however, could be reduced if 
 estimates of future taxable income are reduced. 
 RESULTS 
OF OPERATIONS 
 Average Balance 
Sheet and Interest Rates 
 Quarter ended March 31, 
 

 2023 
 2022 
 Average 
 Yield/ 
 Average 
 Yield/ 
 (Dollars in thousands) 
 Balance 
 Rate 
 Balance 
 Rate 
 Loans and loans held for sale 

 $ 
 502,158 
 4.65% 
 $ 
 440,608 
 4.46% 
 Securities - taxable 
 344,884 
 2.19% 
 374,825 
 1.45% 
 Securities - tax-exempt 

 57,800 
 3.59% 
 60,272 
 3.57% 
 Total securities 

 402,684 
 2.39% 
 435,097 
 1.74% 
 Federal funds sold 
 7,314 
 4.71% 
 73,575 
 0.17% 
 Interest bearing bank deposits 
 11,607 
 4.47% 
 83,161 
 0.16% 
 Total interest-earning assets 
 923,763 
 3.66% 
 1,032,441 
 2.66% 
 Deposits: 
 

 

 NOW 
 187,566 
 0.54% 
 200,907 
 0.12% 
 Savings and money market 
 300,657 
 0.39% 
 345,549 
 0.20% 
 Time Deposits 
 155,676 
 1.51% 
 159,785 
 0.90% 
 Total interest-bearing deposits 
 643,899 
 0.70% 
 706,241 
 0.34% 
 Short-term borrowings 
 3,046 
 1.11% 
 3,943 
 0.50% 
 Total interest-bearing liabilities 
 646,945 
 0.71% 
 710,184 
 0.34% 
 Net interest income and margin (tax-equivalent) 
 $ 
 7,217 
 3.17% 
 $ 
 6,190 
 2.43% 
 Net Interest Income and Margin 
 Net interest income (tax-equivalent) was $7.2 million for the first quarter of 2023, 
a 17% increase compared to $6.2 million 
 for the first quarter of 2022. 
This increase was primarily due to improvements in the Company’s 
net interest margin (tax-
 equivalent). 
The Company’s net interest 
margin (tax-equivalent) was 3.17% in the first quarter of 2023 
compared to 2.43% 
 in the first quarter of 2022. 
This increase was primarily due to a more favorable asset mix and higher yields on interest 
 earning assets. 
Since March of 2022, the Federal Reserve increased the target 
federal funds range from 0 – 0.25% to 4.75 – 
 5.00%. 
The target rate was increased another 25 basis points on May 3, 2023, 
and further increases in the target federal 
 funds rate appear likely if inflation remains elevated. 
 The tax-equivalent yield on total interest-earning assets increased by 100 
basis points to 3.66% 
in the first quarter of 2023 
 compared to 2.66% in the first quarter of 2022. 
This increase was primarily due to changes in our asset mix and higher 
 market interest rates on interest earning assets. 

 The cost of total interest-bearing liabilities increased by 37 basis points to 
0.71% in the first quarter of 2023 compared to 
 0.34% in the first quarter of 2022. 
Our deposit costs may continue to increase as the Federal Reserve increases its target 
 federal funds rate, market interest rates increase, and as customer behaviors change 
as a result of inflation and higher 
 market interest rates on deposits and other alternative investments. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 35 
 The Company continues to deploy various asset liability management strategies 
to manage its risks from interest rate 
 fluctuations. Deposit and loan pricing remain competitive in our 
markets. 
We believe this challenging 
rate environment 
 will continue throughout 2023. 
Our ability to compete and manage our deposit costs until our interest-earning assets 
 reprice will be important to maintaining or potentially increasing our net interest 
margin during the monetary tightening 
 cycle that we believe will continue throughout 2023. 
 Provision for Credit Losses 
 On January 1, 2023, we adopted ASC 326, which introduces the current expected credit 
losses (CECL) methodology and 
 requires us to estimate all expected credit losses over the remaining life of our loans. 
Accordingly, the provision for credit 
 losses represents a charge to earnings necessary to establish an allowance 
for credit losses that, in management's evaluation, 
 is adequate to provide coverage for all expected credit losses. The Company recorded 
a provision for credit losses during 
 the first quarter of 2023 of $0.1 million, compared to a negative provision for credit 
losses of $0.3 million during the first 
 quarter of 2022. 
Provision expense is affected by organic loan growth in our loan 
portfolio, our internal assessment of the 
 credit quality of the loan portfolio, our expectations about future economic conditions and 
net charge-offs. 
Our CECL 
 model is largely influenced by economic factors including, 
most notably, the anticipated 
unemployment rate, which may be 
 affected by monetary policy. 
The negative provision for credit losses during the first quarter of 2022 
was primarily related 
 to a decrease in total loans, excluding federally-guaranteed PPP loans, 
during the first quarter of 2022. 
 Our allowance for credit losses reflects an amount we believe appropriate, 
based on our allowance assessment 
 methodology, to adequately cover 
all expected future losses as of the date the allowance is determined. At March 31, 
2023, 
 the Company’s allowance for credit 
losses was $6.8 million, or 1.35% of total loans, compared to $5.8 million, or 1.14% of 
 total loans, at December 31, 2022, and $4.7 million, or 1.09% of total loans, at March 31, 2022. 
The implementation of 
 CECL, as of January 1, 2023, increased our allowance for credit losses by $1.0 
million, or 0.20% of total loans, as a day 
 one transition adjustment to ASC 326. 
At March 31, 2023 and December 31, 2022, the Company’s 
recorded investment in 
 loans individually evaluated was $2.6 million with a corresponding valuation allowance 
(included in the allowance for 
 credit losses) of $0.5 million, compared to a recorded investment in loans individually 
evaluated of $0.2 million with no 
 corresponding valuation allowance at March 31, 2022. 
One of the downgraded loans, with a recorded investment of $1.3 
 million and a corresponding valuation allowance of $0.5 million at March 31, 
2023, was paid in full subsequent to March 
 31, 2023. 
 Noninterest Income 
 Quarter ended March 31, 
 (Dollars in thousands) 
 2023 
 2022 
 Service charges on deposit accounts 
 $ 
 154 
 $ 
 142 
 Mortgage lending income 
 93 
 253 
 Bank-owned life insurance 
 156 
 99 
 Other 
 389 
 414 
 Total noninterest income 
 $ 
 792 
 $ 
 908 
 The Company’s income from mortgage lending 
was primarily attributable to the (1) origination and sale of mortgage loans 
 and (2) servicing of mortgage loans. Origination income, net, is comprised of gains or losses 
from the sale of the mortgage 
 loans originated, origination fees, underwriting fees, and other fees associated 
with the origination of loans, which are 
 netted against the commission expense associated with these originations. The 
Company’s normal practice is to originate 
 mortgage loans for sale in the secondary market and to either sell or retain the associated 
MSRs when the loan is sold. 

 MSRs are recognized based on the fair value of the servicing right on the date 
the corresponding mortgage loan is sold. 

 Subsequent to the date of transfer, the Company 
has elected to measure its MSRs under the amortization method. 
Servicing 
 fee income is reported net of any related amortization expense. 

 The Company evaluates MSRs for impairment on a quarterly basis. 
Impairment is determined by grouping MSRs by 
 common predominant characteristics, such as interest rate and loan type. 
If the aggregate carrying amount of a particular 
 group of MSRs exceeds the group’s aggregate fair 
value, a valuation allowance for that group is established. 
The valuation 
 allowance is adjusted as the fair value changes. 
An increase in mortgage interest rates typically results in an increase in the 
 fair value of the MSRs while a decrease in mortgage interest rates typically results in a decrease 
in the fair value of MSRs. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 36 
 The following table presents a breakdown of the Company’s 
mortgage lending income. 
 

 Quarter ended March 31, 
 (Dollars in thousands) 
 2023 
 2022 
 Origination income, net 
 $ 
 4 
 $ 
 229 
 Servicing fees, net 
 89 
 24 
 Total mortgage lending income 
 $ 
 93 
 $ 
 253 
 The Company’s income from mortgage lending 
typically fluctuates as mortgage interest rates change and is primarily 
 attributable to the origination and sale of mortgage loans. Origination income decreased 
as market interest rates on 
 mortgage loans increased. 
The decrease in origination income was partially offset by an increase 
in servicing fees, net of 
 related amortization expense as prepayment speeds slowed, resulting in decreased 
amortization expense. 

 Noninterest Expense 
 Quarter ended March 31, 
 (Dollars in thousands) 
 2023 
 2022 
 Salaries and benefits 
 $ 
 2,927 
 $ 
 2,950 
 Net occupancy and equipment 
 799 
 434 
 Professional fees 
 338 
 230 
 Other 
 1,540 
 1,287 
 Total noninterest expense 
 $ 
 5,604 
 $ 
 4,901 
 The increase in net occupancy and equipment expense was primarily due to increased 
expenses related to the Company’s 
 new headquarters in downtown Auburn. 
This amount includes depreciation expense and other costs associated 
with 
 operating the new headquarters. 
The Company relocated its main office branch and bank operations into its 
newly 
 constructed headquarters during June 2022. 
 The increase in other noninterest expense was due to a variety of miscellaneous items 
including increased information 
 technology and systems expenses, losses on New Markets Tax 
Credits investments and other miscellaneous operating 
 expenses. 
 Income Tax 
Expense 
 Income tax expense was $0.3 million for the first quarter of 2023 
and 2022, respectively. 
The Company’s effective income 
 tax rate for the first quarter of 2023 was 11.97%, compared 
to 10.88% in the first quarter of 2022. 
The Company’s 
 effective income tax rate is principally impacted by tax-exempt earnings 
from the Company’s investments 
in municipal 
 securities, bank-owned life insurance, and New Markets Tax 
Credits. 

 BALANCE SHEET ANALYSIS 
 Securities 

 Securities available-for-sale were $405.7 
million at March 31, 2023 compared to $405.3 million at December 31, 2022. 

 This increase reflects a $7.3 million increase in the fair value of securities available 
-for-sale, offset by a decrease in the 
 amortized cost basis of securities available-for-sale of $6.9 million. 
The average annualized tax-equivalent yields earned 
 on total securities were 2.39% 
in the first quarter of 2023 and 1.74% in the first quarter of 2022. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 37 
 Loans 
 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (In thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Commercial and industrial 
 $ 
 59,602 
 66,212 
 70,715 
 70,117 
 73,327 
 Construction and land development 
 66,500 
 66,479 
 54,773 
 38,654 
 33,058 
 Commercial real estate 
 267,962 
 264,576 
 249,527 
 239,873 
 234,637 
 Residential real estate 
 101,975 
 97,648 
 91,469 
 85,106 
 78,983 
 Consumer installment 
 9,002 
 9,546 
 7,551 
 7,122 
 8,412 
 Total loans 
 $ 
 505,041 
 504,461 
 474,035 
 440,872 
 428,417 
 Total loans 
were $505.0 million at March 31, 2023, compared to $504.5 million at December 
31, 2022. 
Four loan 
 categories represented the majority of the loan portfolio at March 31, 2023: 
commercial real estate (53%), residential real 
 estate (20%), commercial and industrial (12%) and construction and land development 
(13%). 
Approximately 25% of the 
 Company’s commercial real estate loans 
were classified as owner-occupied at March 31, 2023. 
 Within the residential real estate portfolio segment, the 
Company had junior lien mortgages of approximately $7.6 
million, 
 or 2%, and $7.4 million, or 1%, of total loans at March 31, 2023 and December 31, 2022, respectively. 
For residential real 
 estate mortgage loans with a consumer purpose, the Company had no loans that required 
interest only payments at March 
 31, 2023 and December 31, 2022. The Company’s 
residential real estate mortgage portfolio does not include any option 
or 
 hybrid ARM loans, subprime loans, or any material amount of other consumer 
mortgage products which are generally 
 viewed as high risk. 

 The average yield earned on loans and loans held for sale was 4.65% in the first quarter of 
2023 and 4.46% in the first 
 quarter of 2022. 

 The specific economic and credit risks associated with our loan portfolio include, but are 
not limited to, the effects of 
 current economic conditions, including inflation and the continuing increases in 
market interest rates, remaining COVID-19 
 pandemic effects including supply chain disruptions, commercial 
office occupancy levels, housing supply shortages and 
 inflation, on our borrowers’ cash flows, real estate market sales volumes and liquidity, 
valuations used in making loans and 
 evaluating collateral, availability and cost of financing properties, real 
estate industry concentrations, competitive pressures 
 from a wide range of other lenders, deterioration in certain credits, interest rate fluctuations, 
reduced collateral values or 
 non-existent collateral, title defects, inaccurate appraisals, financial deteriora 
tion of borrowers, fraud, and any violation of 
 applicable laws and regulations. Various 
projects financed earlier that were based on lower interest rate assumptions 
than 
 currently in effect may not be as profitable or successful at higher interest rate 
currently in effect and currently expected in 
 the future. 
 The Company attempts to reduce these economic and credit risks through its loan-to-value 
guidelines for collateralized 
 loans, investigating the creditworthiness of borrowers and monitoring borrowers’ financial 
position. Also, we have 
 established and periodically review, 
lending policies and procedures. Banking regulations limit a bank’s 
credit exposure by 
 prohibiting unsecured loan relationships that exceed 10% of its capital; or 20% 
of capital, if loans in excess of 10% of 
 capital are fully secured. Under these regulations, we are prohibited from having secured 
loan relationships in excess of 
 approximately $22.8 million. 
Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding 
plus 
 unfunded commitments) to a single borrower of $20.6 million. Our loan policy requires that 
the Loan Committee of the 
 Board of Directors approve any loan relationships that exceed this internal limit. 
At March 31, 2023, the Bank had no 
 relationships exceeding these limits. 

 
 
 
 
 
 
 
 
 
 Table of Contents 
 38 
 We periodically analyze 
our commercial and industrial and commercial real estate loan portfolios to 
determine if a 
 concentration of credit risk exists in any one or more industries. We 
use classification systems broadly accepted by the 
 financial services industry in order to categorize our commercial borrowers. 
Loan concentrations to borrowers in the 
 following classes exceeded 25% of the Bank’s total risk 
-based capital at March 31, 2023 and December 31, 2022. 
 

 March 31, 
 December 31, 
 (Dollars in thousands) 
 2023 
 2022 
 Lessors of 1-4 family residential properties 
 $ 
 53,467 
 $ 
 52,278 
 Multi-family residential properties 
 40,974 
 41,084 
 Hotel/motel 
 32,959 
 33,378 
 Allowance for Credit Losses 

 The Company maintains the allowance for credit losses at a level that management believes 
appropriate to adequately cover 
 the Company’s estimate of expected 
losses in the loan portfolio. The allowance for credit losses was $6.8 million at March 
 31, 2023 compared to $5.8 million at December 31, 2022, 
which management believed to be adequate at each of the 
 respective dates. The judgments and estimates associated with the determination of the 
allowance for credit losses are 
 described under “Critical Accounting Policies.” 
 On January 1, 2023, we adopted ASC 326, 
which introduces the current expected credit losses (CECL) methodology and 
 requires us to estimate all expected credit losses over the remaining life of our loan portfolio. 
Accordingly, beginning in 
 2023, the allowance for credit losses represents an amount that, in management's evaluation, 
is adequate to provide 
 coverage for all expected future credit losses on outstanding loans. As of March 31, 
2023 and December 31, 2022, our 
 allowance for credit losses was approximately $6.8 million and $5.8 
million, respectively, which our 
management believes 
 to be adequate at each of the respective dates. Our allowance for credit losses as a percentage of total 
loans was 1.35% at 
 March 31, 2023, up from 1.14% 
at December 31, 2022. 
 The increase in the allowance for credit losses is largely the result of the implementation 
of ASC 
326 on January 1, 2023, 
 which resulted in an adjustment to the opening balance of the allowance for credit losses of 
$1.0 million. Our CECL models 
 rely largely on projections of macroeconomic conditions to estimate 
future credit losses. Macroeconomic factors used in the 
 model include the Alabama unemployment rate, the Alabama home price index, the 
national commercial real estate price 
 index and the Alabama gross state product. Projections of these 
macroeconomic factors, obtained from an independent third 
 party, are utilized to predict 
quarterly rates of default. 

 Under the CECL methodology the allowance for credit losses is measured 
on a collective basis for pools of loans with 
 similar risk characteristics, and for loans that do not share similar risk characteristics 
with the collectively evaluated pools, 
 evaluations are performed on an individual basis. Losses are predicted over 
a period of time determined to be reasonable 
 and supportable, and at the end of the reasonable and supportable period 
losses are reverted to long term historical averages. 
 At March 31, 2023, reasonable and supportable periods of 12 months were utilized 
followed by a 24 month straight line 
 reversion period to long term averages. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 39 
 A summary of the changes in the allowance for credit losses and certain asset 
quality ratios for the first quarter of 2023 and 
 the previous four quarters is presented below. 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (Dollars in thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Balance at beginning of period 
 $ 
 5,765 
 4,966 
 4,716 
 4,658 
 4,939 
 Impact of adopting ASC 326 
 1,019 
 Charge-offs: 
 Commercial and industrial 
 — 
 (205) 
 (13) 
 (4) 
 — 
 Consumer installment 
 (11) 
 (3) 
 (3) 
 (16) 
 (48) 
 Total charge 
-offs 
 (11) 
 (208) 
 (16) 
 (20) 
 (48) 
 Recoveries 
 8 
 7 
 16 
 78 
 17 
 Net (charge-offs) recoveries 
 (3) 
 (201) 
 — 
 58 
 (31) 
 Provision for credit losses 
 40 
 1,000 
 250 
 — 
 (250) 
 Ending balance 
 $ 
 6,821 
 5,765 
 4,966 
 4,716 
 4,658 
 as a % of loans 
 1.35 
 % 
 1.14 
 1.05 
 1.07 
 1.09 
 as a % of nonperforming loans 
 255 
 % 
 211 
 1,431 
 1,314 
 1,256 
 Net charge-offs (recoveries) as % of average loans (a) 
 — 
 % 
 0.04 
 — 
 (0.05) 
 0.03 
 (a) Net charge-offs (recoveries) are annualized. 
 Nonperforming Assets 
 At March 31, 2023 and December 31, 2022 the Company had $2.7 million in nonperforming assets, 
respectively. 

 The table below provides information concerning total nonperforming assets 
and certain asset quality ratios for the first 
 quarter of 2023 and the previous four quarters. 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (Dollars in thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Nonperforming assets: 
 Nonaccrual loans 
 $ 
 2,680 
 2,731 
 347 
 359 
 371 
 Other real estate owned 
 — 
 — 
 — 
 — 
 374 
 Total nonperforming assets 
 $ 
 2,680 
 2,731 
 347 
 359 
 745 
 as a % of loans and other real estate owned 
 0.53 
 % 
 0.54 
 0.07 
 0.08 
 0.17 
 as a % of total assets 
 0.26 
 % 
 0.27 
 0.03 
 0.03 
 0.07 
 Nonperforming loans as a % of total loans 
 0.53 
 % 
 0.54 
 0.07 
 0.08 
 0.09 
 The table below provides information concerning the composition of nonaccrual 
loans for the first quarter of 2023 and the 
 previous four quarters. 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (In thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Nonaccrual loans: 
 Commercial and industrial 
 $ 
 432 
 443 
 — 
 — 
 — 
 Commercial real estate 
 2,103 
 2,116 
 170 
 176 
 182 
 Residential real estate 
 136 
 172 
 177 
 183 
 189 
 Consumer installment 
 10 
 — 
 — 
 — 
 — 
 Total nonaccrual loans 
 $ 
 2,681 
 2,731 
 347 
 359 
 371 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 40 
 The Company discontinues the accrual of interest income when (1) there is a significant 
deterioration in the financial 
 condition of the borrower and full repayment of principal and interest is not expected or 
(2) the principal or interest is 
 90 days or more past due, unless the loan is both well-secured and in the process of collection 
. 
The Company had $2.7 
 million in loans on nonaccrual status at March 31, 2023 and December 31, 
2022, respectively. 

 The Company had no loans 90 days or more past due and still accruing at March 31, 
2023 and December 31, 2022, 
 respectively. 
 The table below provides information concerning the composition of OREO 
for the third quarter of 2023 and the previous 
 four quarters. 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (In thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Other real estate owned: 
 Commercial real estate 
 $ 
 — 
 — 
 — 
 — 
 374 
 Total other real estate owned 
 $ 
 — 
 — 
 — 
 — 
 374 
 Deposits 
 Total deposits decreased 
$11.1 million, or 1%, to $939.2 million at March 31, 202 
3, compared to $950.3 million at 
 December 31, 2022. This decrease reflects net outflows to higher yield investment 
alternatives in a rising interest rate 
 environment and a decline in balances in existing accounts due to increased customer 
spending. 
Noninterest-bearing 
 deposits were $304.2 million, or 32% of total deposits, at March 31, 2023, 
compared to $311.4 million, or 33% of total 
 deposits at December 31, 2022. 
We had no brokered 
deposits on March 31, 2023 
or at December 31, 2022. 

 Estimated uninsured deposits totaled $368.6 million and $381.7 million at March 31, 
2023 and December 31, 2022, 
 respectively. 
Uninsured amounts are estimated based on the portion of account balances in excess of 
FDIC insurance 
 limits. 
 The average rate paid on total interest-bearing deposits was 0.70% in the first quarter of 2023 
compared to 0.34% in the 
 first quarter of 2022. 

 Other Borrowings 
 Other borrowings consist of short-term borrowings and long-term debt. Short-term 
borrowings generally consist of federal 
 funds purchased and securities sold under agreements to repurchase 
with an original maturity of one year or less. 
The Bank 
 had available federal funds lines totaling $61.0 million with none outstanding 
at March 31, 2023, and December 31, 2022, 
 respectively. Securities sold 
under agreements to repurchase totaled $2.5 million and $2.6 million at March 31, 
2023 and 
 December 31, 2022, respectively. 
At March 31, 2023 and December 31, 2022, the Bank had no borrowings from the 
 Federal Reserve discount window and no borrowings under the Federal Reserve’s 
new Bank Term Facility Program 
 (“BTFP”), which opened March 12, 2023. 
 The average rate paid on short-term borrowings was 1.11 
% 
in the first quarter of 2023 and 2022, 
respectively. 
 The Company had no long-term debt at March 31, 2023 and December 31, 2022. 

 
 Table of Contents 
 41 
 CAPITAL ADEQUACY 

 The Company’s consolidated 
stockholders’ equity was $73.6 million and $68.0 million as of March 31, 
2023 and 
 December 31, 2022, respectively. 
The increase from December 31, 2022 was primarily driven by other comprehensive 
 income due to the change in unrealized gains/losses on securities available-for-sale, 
net of tax of $5.5 million. 
These 
 unrealized losses do not affect the Bank’s 
capital for regulatory capital purposes. 
The Company’s consolidated 
 stockholders’ equity was also increased by net earnings of $2.0 million. 
These increases in the Company’s consolidated 
 stockholders’ equity were partially offset by cash dividends 
paid of $0.9 million, the cumulative effect of adopting the 
 CECL accounting standard of $0.8 million, and repurchases of the Company’s 
stock of $0.1 
million. 

 The Company paid cash dividends of $0.27 per share in the first quarter of 2023, an increase of 2% 
from the same period in 
 2022. The Company’s share repurchases of $0. 
1 
million since December 31, 2022 resulted in 2,648 fewer outstanding 
 common shares at March 31, 2023. 
These shares were repurchased at an average cost per share of $24.11 
. 
 On January 1, 2015, the Company and Bank became subject to the rules of the Basel III regulatory 
capital framework and 
 related Dodd-Frank Wall 
Street Reform and Consumer Protection Act changes. 
The rules included the implementation of a 
 capital conservation buffer that is added to the minimum requirements 
for capital adequacy purposes. 
The capital 
 conservation buffer was subject to a three year phase-in period 
that began on January 1, 2016 and was fully phased-in on 
 January 1, 2019 at 2.5%. 
A banking organization with a conservation buffer of less than the 
required amount will be 
 subject to limitations on capital distributions, including dividend payments and certain discretionary 
bonus payments to 
 executive officers. 
At March 31, 2023, the Bank’s ratio 
was sufficient to meet the fully phased-in conservation buffer. 
 Effective March 20, 2020, the Federal Reserve and the other federal 
banking regulators adopted an interim final rule that 
 amended the capital conservation buffer. 
The interim final rule was adopted as a final rule on August 26, 2020. 
The new 
 rule revises the definition of “eligible retained income” for purposes of the maximum payout 
ratio to allow banking 
 organizations to more freely use their capital buffers to promote 
lending and other financial intermediation activities, by 
 making the limitations on capital distributions more gradual. 
The eligible retained income is now the greater of (i) net 
 income for the four preceding quarters, net of distributions and associated 
tax effects not reflected in net income; and (ii) 
 the average of all net income over the preceding four quarters. 
This rule only affects the capital buffers, and banking 
 organizations were encouraged to make prudent capital distribution decisions. 
 The Federal Reserve has treated us as a “small bank holding company’ under the Federal 
Reserve’s Small Bank Holding 
 Company Policy. 
Accordingly, our capital adequacy is evaluated 
at the Bank level, and not for the Company and its 
 consolidated subsidiaries. 
The Bank’s tier 1 leverage ratio 
was 10.07%, CET1 risk-based capital ratio was 15.45%, tier 1 
 risk-based capital ratio was 15.45%, and total risk-based capital ratio was 16.48% at 
March 31, 2023. These ratios exceed 
 the minimum regulatory capital percentages of 5.0% for tier 1 leverage ratio, 6.5% 
for CET1 risk-based capital ratio, 8.0% 
 for tier 1 risk-based capital ratio, and 10.0% for total risk-based capital ratio 
to be considered “well capitalized.” 
The 
 Bank’s capital conservation buffer 
was 8.48% at March 31, 2023. 

 MARKET AND LIQUIDITY RISK MANAGEMENT 
 Management’s objective is to manage assets and 
liabilities to provide a satisfactory, 
consistent level of profitability within 
 the framework of established liquidity, 
loan, investment, borrowing, and capital policies. The Bank’s 
Asset Liability 
 Management Committee (“ALCO”) is charged with the responsibility 
of monitoring these policies, which are designed to 
 ensure an acceptable asset/liability composition. Two 
critical areas of focus for ALCO are interest rate risk and liquidity 
 risk management. 

 Interest Rate Risk Management 
 In the normal course of business, the Company is exposed to market risk arising from fluctuations 
in interest rates. ALCO 
 measures and evaluates interest rate risk so that the Bank can meet customer demands for 
various types of loans and 
 deposits. Measurements used to help manage interest rate sensitivity include an earnings simulation 
model and an economic 
 value of equity (“EVE”) model. 

 
 Table of Contents 
 42 
 Earnings simulation
 . Management believes that interest rate risk is best estimated by our earnings simulation 
modeling. 
 Forecasted levels of earning assets, interest-bearing liabilities, and off 
-balance sheet financial instruments are combined 
 with ALCO forecasts of market interest rates for the next 12 months and other 
factors in order to produce various earnings 
 simulations and estimates. To 
help limit interest rate risk, we have guidelines for earnings at risk which seek to limit the 
 variance of net interest income from gradual changes in interest rates. 
For changes up or down in rates from management’s 
 flat interest rate forecast over the next 12 months, policy limits for net interest income 
variances are as follows: 
 ●
 +/- 20% for a gradual change of 400 basis points 
 ●
 +/- 15% for a gradual change of 300 basis points 
 ●
 +/- 10% for a gradual change of 200 basis points 
 ●
 +/- 5% for a gradual change of 100 basis points 
 While a gradual change in interest rates was used in the above analysis to provide an estimate 
of exposure under these 
 scenarios, our modeling under both a gradual and instantaneous change in interest rates indicates 
our balance sheet is asset 
 sensitive. 
 At March 31, 2023, our earnings simulation model indicated that we were in compliance 
with the policy guidelines noted 
 above. 

 Economic Value 
of Equity
 . EVE measures the extent that the estimated economic values of our assets, liabilities, and off-
 balance sheet items will change as a result of interest rate changes. Economic values 
are estimated by discounting expected 
 cash flows from assets, liabilities, and off-balance sheet items, 
which establishes a base case EVE. In contrast with our 
 earnings simulation model, which evaluates interest rate risk over a 12 month timeframe, 
EVE uses a terminal horizon 
 which allows for the re-pricing of all assets, liabilities, and off-balance sheet items. 
Further, EVE is measured using values 
 as of a point in time and does not reflect any actions that ALCO might take in responding to 
or anticipating changes in 
 interest rates, or market and competitive conditions. 
To help limit interest rate risk, 
we have stated policy guidelines for an 
 instantaneous basis point change in interest rates, such that our EVE should not decrease from our 
base case by more than 
 the following: 
 ●
 45% for an instantaneous change of +/- 400 basis points 
 ●
 35% for an instantaneous change of +/- 300 basis points 
 ●
 25% for an instantaneous change of +/- 200 basis points 
 ●
 15% for an instantaneous change of +/- 100 basis points 
 At March 31, 2023, our EVE model indicated that we were in compliance 
with our policy guidelines. 
 Each of the above analyses may not, on its own, be an accurate indicator of how our net interest 
income will be affected by 
 changes in interest rates. Income associated with interest-earning assets and costs associated 
with interest-bearing liabilities 
 may not be affected uniformly by changes in interest rates. In addition, 
the magnitude and duration of changes in interest 
 rates may have a significant impact on net interest income. For example, although certain 
assets and liabilities may have 
 similar maturities or periods of repricing, they may react in different 
degrees to changes in market interest rates, and other 
 economic and market factors, including market perceptions. 
Interest rates on certain types of assets and liabilities fluctuate 
 in advance of changes in general market rates, while interest rates on other types of assets 
and liabilities may lag behind 
 changes in general market rates. In addition, certain assets, such as adjustable rate 
mortgage loans, have features (generally 
 referred to as “interest rate caps and floors”) which limit changes in interest rates. 
Prepayments 
and early withdrawal levels 
 also could deviate significantly from those assumed in calculating the maturity of certain instruments. 
The ability of many 
 borrowers to service their debts also may decrease during periods of rising interest rates or economic 
stress, which may 
 differ across industries and economic sectors. ALCO reviews each of the 
above interest rate sensitivity analyses along with 
 several different interest rate scenarios in seeking satisfactory, 
consistent levels of profitability within the framework of the 
 Company’s established liquidity, 
loan, investment, borrowing, and capital policies. 

 The Company may also use derivative financial instruments to improve the balance betw 
een interest-sensitive assets and 
 interest-sensitive liabilities, and as a tool to manage interest rate sensitivity 
while continuing to meet the credit and deposit 
 needs of our customers. From time to time, the Company also may enter into back-to-back 
interest rate swaps to facilitate 
 customer transactions and meet their financing needs. These interest rate swaps qualify 
as derivatives, but are not 
 designated as hedging instruments. At March 31, 2023 and December 31, 
2022, the Company had no derivative contracts 
 designated as part of a hedging relationship to assist in managing its interest rate sensitivity. 

 
 Table of Contents 
 43 
 Liquidity Risk Management 

 Liquidity is the Company’s ability to convert 
assets into cash equivalents in order to meet daily cash flow requirements, 
 primarily for deposit withdrawals, loan demand and maturing obligations. 
The Company seeks to manage its liquidity to 
 manage or reduce its costs of funds by maintaining liquidity believed adequate 
to meet its anticipated funding needs, while 
 balancing against excessive liquidity that likely would reduce earnings due to the 
cost of foregoing alternative higher-
 yielding assets. 

 Liquidity is managed at two levels. The first is the liquidity of the Company. 
The second is the liquidity of the Bank. The 
 management of liquidity at both levels is essential, because the Company and the Bank are 
separate and distinct legal 
 entities with different funding needs and sources, and each are subject 
to regulatory guidelines and requirements. 
The 
 Company depends upon dividends from the Bank for liquidity to pay its operating expenses, 
debt obligations and 
 dividends. 
The Bank’s payment of dividends depends 
on its earnings, liquidity, capital 
and the absence of regulatory 
 restrictions on such dividends. 

 The primary source of funding and liquidity for the Company has been dividends received 
from the Bank. 
If needed, the 
 Company could also borrow money, 
or issue common stock or other securities. 
Primary uses of funds by the Company 
 include dividends paid to stockholders, Company stock repurchases, and payment of 
Company expenses. 

 Primary sources of funding for the Bank include customer deposits, other borrowings, 
interest payments on earning assets, 
 repayment and maturity of securities and loans, sales of securities, and the 
sale of loans, 
particularly residential mortgage 
 loans. The Bank has access to federal funds lines from various banks and borrowings 
from the Federal Reserve discount 
 window and the Federal Reserve’s recent 
BTFP borrowing facility. 
In addition to these sources, the Bank may participate in 
 the FHLB’s advance program 
to obtain funding for its growth. Advances include both fixed and variable terms and 
may be 
 taken out with varying maturities. At March 31, 2023, the Bank had a remaining available 
line of credit with the FHLB of 
 $307.0 million. At March 31, 2023, the Bank also had $61.0 
million of available federal funds lines with no borrowings 
 outstanding. Primary uses of funds include repayment of maturing obligations and 
growing the loan portfolio. 
The Bank 
 has no brokered deposits on March 31, 2023 or at December 31, 2022. 

 Management believes that the Company and the Bank have adequate sources of liquidity 
to meet all their respective known 
 contractual obligations and unfunded commitments, including loan commitments 
and reasonably 
rexpected borrower, 
 depositor, and creditor requirements over the next twelve 
months. 

 Off-Balance Sheet Arrangements, Commitments, Contingencies and Contractual 
Obligations 
 At March 31, 2023, the Bank had outstanding standby letters of credit of $0.8 million and 
unfunded loan commitments 
 outstanding of $91.1 million. 
Because these commitments generally have fixed expiration dates and 
many will expire 
 without being drawn upon, the total commitment level does not necessarily represent future 
cash requirements. If needed to 
 fund these outstanding commitments, 
the Bank could liquidate federal funds sold or a portion of our securities available-
 for-sale, or draw on its available credit facilities or raise deposits. 

 Mortgage lending activities 
 We generally sell residential 
mortgage loans in the secondary market to Fannie Mae while retaining the servicing 
of these 
 loans. The sale agreements for these residential mortgage loans with Fannie Mae and other 
investors include various 
 representations and warranties regarding the origination and characteristics of the 
residential mortgage loans. 
Although the 
 representations and warranties vary among investors, they typically cover ownership 
of the loan, validity of the lien 
 securing the loan, the absence of delinquent taxes or liens against the property securing the 
loan, compliance with loan 
 criteria set forth in the applicable agreement, compliance with applicable federal, 
state, and local laws, among other 
 matters. 

 
 Table of Contents 
 44 
 As of March 31, 2023, the unpaid principal balance of residential mortgage loans, 
which we have originated and sold, but 
 retained the servicing rights, was $226.7 million. 
Although these loans are generally sold on a non-recourse basis, we may 
 be obligated to repurchase residential mortgage loans or reimburse investors 
for losses incurred (make whole requests) if a 
 loan review reveals a potential breach of seller representations and warranties. 
Upon receipt of a repurchase or make whole 
 request, we work with investors to arrive at a mutually agreeable resolution. Repurchase 
and make whole requests are 
 typically reviewed on an individual loan by loan basis to validate the claims made by the investor 
and to determine if a 
 contractually required repurchase or make whole event has occurred. We 
seek to reduce and manage the risks of potential 
 repurchases, make whole requests, or other claims by mortgage loan investors 
through our underwriting and quality 
 assurance practices and by servicing mortgage loans to meet investor and secondary 
market standards. 
 The Company was not required to repurchase any loans during the first quarter of 2023 
as a result of representation and 
 warranty provisions contained in the Company’s 
sale agreements with Fannie Mae, and had no pending repurchase or 
 make-whole requests at March 31, 2023. 
 We service all residential 
mortgage loans originated and sold by us to Fannie Mae. 
As servicer, our primary duties are to: 
 (1) collect payments due from borrowers; 
(2) advance certain delinquent payments of principal and interest; 
(3) maintain 
 and administer any hazard, title, or primary mortgage insurance policies relating to the 
mortgage loans; 
(4) maintain any 
 required escrow accounts for payment of taxes and insurance and administer escrow payments; 
and (5) foreclose on 
 defaulted mortgage loans or take other actions to mitigate the potential losses to investors 
consistent with the agreements 
 governing our rights and duties as servicer. 
 The agreement under which we act as servicer generally specifies standard 
s 
of responsibility for actions taken by us in such 
 capacity and provides protection against expenses and liabilities incurred by us when acting 
in compliance with the 
 respective servicing agreements. 
However, if we commit a material breach of our obligations 
as servicer, we may be 
 subject to termination if the breach is not cured within a specified period following notice. 
The standards governing 
 servicing and the possible remedies for violations of such standards are determined 
by servicing guides issued by Fannie 
 Mae as well as the contract provisions established between Fannie Mae and the Bank. 
Remedies could include repurchase 
 of an affected loan. 
 Although repurchase and make whole requests related to representation and 
warranty provisions and servicing activities 
 have been limited to date, it is possible that requests to repurchase mortgage loans or reimburse 
investors for losses incurred 
 (make whole requests) may increase in frequency if investors more aggressively 
pursue all means of recovering losses on 
 their purchased loans. 
As of March 31, 2023, we do not believe that this exposure is material due to the historical level 
of 
 repurchase requests and loss trends, in addition to the fact that 99% of our residential 
mortgage loans serviced for Fannie 
 Mae were current as of such date. 
We maintain ongoing communications 
with our investors and will continue to evaluate 
 this exposure by monitoring the level and number of repurchase requests as well as the delinquency 
rates in our investor 
 portfolios. 
 The Bank sells mortgage loans to Fannie Mae and services these on an actual/actual basis. 
As a result, the Bank is not 
 obligated to make any advances to Fannie Mae on principal and interest on such mortgage 
loans where the borrower is 
 entitled to forbearance. 
 Effects of Inflation and Changing Prices 
 The consolidated financial statements and related consolidated financial data presented 
herein have been prepared in 
 accordance with GAAP and practices within the banking industry which require 
the measurement of financial position and 
 operating results in terms of historical dollars without considering the changes in 
the relative purchasing power of money 
 over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities 
of a financial institution 
 are monetary in nature. As a result, interest rates have a more significant impact on a 
financial institution’s performance 
 than the effects of general levels of inflation. 
 Inflation can affect our noninterest expenses. It also can affect 
the interest rates we have to pay on our deposits and other 
 borrowings, and the interest rates we earn on our earning assets. 
The difference between our interest expense and interest 
 income is also affected by the shape of the yield curve and the speed 
at which our assets and liabilities reprice in response 
 to interest rate changes. 
The yield curve was inverted on March 2023, which means shorter 
term interest rates are higher 
 than longer interest rates. 
This results in a lower spread between our costs of funds and our interest income. 
In addition, 
 net interest income could be affected by asymmetrical changes in the different 
interest rate indexes, given that not all of our 
 assets or liabilities are priced with the same index. Higher market interest rates and sales 
of securities held by the Federal 
 Reserve to reduce inflation generally reduce economic activity and may reduce loan 
demand and growth. 

 
 Table of Contents 
 45 
 Inflation is running at levels unseen in decades and well above the Federal Reserve’s 
long term inflation goal of 2.0% 
 annually. 
Beginning in March 2022, the Federal Reserve has been raising target 
federal funds interest rates and reducing its 
 securities holdings in an effort to reduce inflation During 2022, 
the Federal Reserve increased the target federal funds range 
 from 0 – 0.25% to 4.25 – 4.50%. 
The target rate was increased another 25 basis points on each of January 31, 
March 7 and 
 May 3, 2023 to 5.00-5.25%, and further increases in the target federal 
funds rate appear likely if inflation remains elevated. 

 Our deposit costs may increase as the Federal Reserve increases its target 
federal funds rate, market interest rates increase, 
 and as customer savings behaviors change as a result of inflation and seek higher market interest 
rates on deposits and other 
 alternative investments. 
Monetary efforts to control inflation may also affect 
unemployment which is an important 
 component in our CECL model used to estimate our allowance for credit losses. 
 CURRENT ACCOUNTING DEVELOPMENTS 
 The following ASU has been issued by the FASB 
but is not yet effective. 

 ●
 ASU 2023-02, 
 Investments – Equity Method and Joint Ventures 
(Topic 323): 
Accounting for Investments in Tax 
 Credit Structures Using 
the Proportional Amortization Method
 Information about this pronouncement is described in more detail below. 
 ASU 2023-02, 
 Investments – Equity Method and Joint Ventures 
(Topic 323): 
Accounting for Investments in Tax 
Credit 
 Structures Using the Proportional 
Amortization Method
 , The amendments in this Update permit reporting entities to elect 
 to account for their tax equity investments, regardless of the tax credit program from which 
the income tax credits are 
 received, using the proportional amortization method if certain conditions are 
met. The new standard is effective for fiscal 
 years, and interim periods within those fiscal years, beginning after December 15, 
2023. 
The Company is currently 
 evaluating the impact of the new standard on the Company’s 
consolidated financial statements. 

 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 46 
 Table 1 
– Explanation of Non-GAAP Financial Measures 
 In addition to results presented in accordance with U.S. generally accepted accounting principles 
(GAAP), this quarterly 
 report on Form 10-Q includes certain designated net interest income amounts 
presented on a tax-equivalent basis, a non-
 GAAP financial measure, including the presentation and calculation of the efficiency 
ratio. 

 The Company believes the presentation of net interest income on a tax-equivalent 
basis provides comparability of net 
 interest income from both taxable and tax-exempt sources and facilitates comparability 
within the industry. Although the 
 Company believes these non-GAAP financial measures enhance investors’ 
understanding of its business and performance, 
 these non-GAAP financial measures should not be considered an alternative to 
GAAP. 
The reconciliations 
of these non-
 GAAP financial measures to their most directly comparable GAAP financial 
measures are presented below. 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (in thousands) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Net interest income (GAAP) 
 $ 
 7,109 
 7,471 
 7,243 
 6,374 
 6,078 
 Tax-equivalent adjustment 
 108 
 117 
 117 
 110 
 112 
 Net interest income (Tax 
-equivalent) 
 $ 
 7,217 
 7,588 
 7,360 
 6,484 
 6,190 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 47 
 Table 2 
- Selected Quarterly Financial Data 
 

 2023 
 2022 
 First 
 Fourth 
 Third 
 Second 
 First 
 (Dollars in thousands, except per share amounts) 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Quarter 
 Results of Operations 
 Net interest income (a) 
 $ 
 7,217 
 7,588 
 7,360 
 6,484 
 6,190 
 Less: tax-equivalent adjustment 
 108 
 117 
 117 
 110 
 112 
 Net interest income (GAAP) 
 7,109 
 7,471 
 7,243 
 6,374 
 6,078 
 Noninterest income 
 792 
 3,898 
 852 
 848 
 908 
 Total revenue 
 7,901 
 11,369 
 8,095 
 7,222 
 6,986 
 Provision for credit losses 
 66 
 1,000 
 250 
 — 

 (250) 
 Noninterest expense 
 5,604 
 4,449 
 5,415 
 5,058 
 4,901 
 Income tax expense 
 267 
 1,454 
 432 
 363 
 254 
 Net earnings 
 $ 
 1,964 
 4,466 
 1,998 
 1,801 
 2,081 
 Per share data: 
 Basic and diluted net earnings 

 $ 
 0.56 
 1.27 
 0.57 
 0.51 
 0.59 
 Cash dividends declared 
 0.27 
 0.265 
 0.265 
 0.265 
 0.265 
 Weighted average shares outstanding: 
 Basic and diluted 
 3,502,143 
 3,504,344 
 3,507,318 
 3,513,353 
 3,518,657 
 Shares outstanding, at period end 
 3,500,879 
 3,503,452 
 3,505,355 
 3,509,940 
 3,516,971 
 Book value 
 $ 
 21.03 
 19.42 
 17.06 
 21.68 
 24.57 
 Common stock price 
 High 
 $ 
 24.50 
 24.71 
 29.02 
 33.57 
 34.49 
 Low 

 22.55 
 22.07 
 23.02 
 27.04 
 31.75 
 Period end: 
 22.66 
 23.00 
 23.02 
 27.04 
 33.21 
 To earnings ratio 
 7.79 
 7.82 
 10.46 
 12.52 
 14.44 
 To book value 
 108 
 % 
 118 
 135 
 125 
 135 
 Performance ratios: 
 Return on average equity 

 11.44 
 % 
 28.23 
 10.35 
 8.26 
 7.97 
 Return on average assets 

 0.77 
 % 
 1.75 
 0.75 
 0.66 
 0.75 
 Dividend payout ratio 
 48.21 
 % 
 20.87 
 46.49 
 51.96 
 44.92 
 Asset Quality: 
 Allowance for credit losses as a % of: 
 Loans 
 1.35 
 % 
 1.14 
 1.05 
 1.07 
 1.09 
 Nonperforming loans 
 255 
 % 
 211 
 1,431 
 1,314 
 1,256 
 Nonperforming assets as a % of: 
 Loans and other real estate owned 
 0.53 
 % 
 0.54 
 0.07 
 0.08 
 0.17 
 Total assets 

 0.26 
 % 
 0.27 
 0.03 
 0.03 
 0.07 
 Nonperforming loans as a % of total loans 
 0.53 
 % 
 0.54 
 0.07 
 0.08 
 0.09 
 Annualized net charge-offs (recoveries) as % of average loans 
 - 
 % 
 0.16 
 - 
 (0.05) 
 0.03 
 Capital Adequacy: (c) 
 CET 1 risk-based capital ratio 
 15.45 
 % 
 15.39 
 15.39 
 16.59 
 17.26 
 Tier 1 risk-based capital ratio 
 15.45 
 % 
 15.39 
 15.39 
 16.59 
 17.26 
 Total risk-based capital ratio 
 16.48 
 % 
 16.25 
 16.16 
 17.38 
 18.08 
 Tier 1 leverage ratio 
 10.07 
 % 
 10.01 
 9.29 
 9.16 
 9.09 
 Other financial data: 
 Net interest margin (a) 
 3.17 
 % 
 3.27 
 3.00 
 2.60 
 2.43 
 Effective income tax rate 
 11.97 
 % 
 24.56 
 17.78 
 16.77 
 10.88 
 Efficiency ratio (b) 
 69.97 
 % 
 38.73 
 65.94 
 68.99 
 69.05 
 Selected average balances: 
 Securities available-for-sale 
 $ 
 402,684 
 407,792 
 432,393 
 427,426 
 435,097 
 Loans 
 502,158 
 490,163 
 457,722 
 428,612 
 439,713 
 Total assets 
 1,022,938 
 1,022,863 
 1,069,973 
 1,092,759 
 1,114,407 
 Total deposits 
 948,393 
 951,122 
 987,614 
 999,867 
 1,003,394 
 Total stockholders’ equity 
 68,655 
 63,283 
 77,191 
 87,247 
 104,493 
 Selected period end balances: 

 Securities available-for-sale 
 $ 
 405,692 
 405,304 
 411,538 
 429,220 
 417,459 
 Loans 
 505,041 
 504,458 
 474,035 
 440,872 
 428,417 
 Allowance for credit losses 
 6,821 
 5,765 
 4,966 
 4,716 
 4,658 
 Total assets 
 1,017,746 
 1,023,888 
 1,042,559 
 1,084,251 
 1,109,664 
 Total deposits 
 939,190 
 950,337 
 977,938 
 1,002,698 
 1,017,742 
 Total stockholders’ equity 
 73,640 
 68,041 
 59,793 
 76,107 
 86,411 
 (a) Tax-equivalent. See "Table 1 - Explanation of Non-GAAP Financial Measures." 
 (b) Efficiency ratio is the result of noninterest expense divided by 
the sum of noninterest income and tax-equivalent net interest 
income. 
 (c) Regulatory capital ratios presented are for the Company's 
wholly-owned subsidiary, AuburnBank. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 48 
 Table 3 
- Average Balances 
and Net Interest Income Analysis 
 

 Quarter ended March 31, 
 2023 
 2022 
 Interest 
 Interest 
 Average 
 Income/ 
 Yield/ 
 Average 
 Income/ 
 Yield/ 
 (Dollars in thousands) 
 Balance 
 Expense 
 Rate 
 Balance 
 Expense 
 Rate 
 Interest-earning assets: 
 

 

 Loans and loans held for sale (1) 
 $ 
 502,158 
 $ 
 5,754 
 4.65% 
 $ 
 440,608 
 $ 
 4,850 
 4.46% 
 Securities - taxable 
 344,884 
 1,865 
 2.19% 
 374,825 
 1,336 
 1.45% 
 Securities - tax-exempt (2) 
 57,800 
 511 
 3.59% 
 60,272 
 531 
 3.57% 
 Total securities 

 402,684 
 2,376 
 2.39% 
 435,097 
 1,867 
 1.74% 
 Federal funds sold 
 7,314 
 85 
 4.71% 
 73,575 
 31 
 0.17% 
 Interest bearing bank deposits 
 11,607 
 128 
 4.47% 
 83,161 
 32 
 0.16% 
 Total interest-earning assets 
 923,763 
 $ 
 8,343 
 3.66% 
 1,032,441 
 $ 
 6,780 
 2.66% 
 Cash and due from banks 
 15,527 
 15,105 
 Other assets 
 83,648 
 66,861 
 Total assets 
 $ 
 1,022,938 
 $ 
 1,114,407 
 Interest-bearing liabilities: 
 Deposits: 
 

 

 NOW 
 $ 
 187,566 
 $ 
 248 
 0.54% 
 $ 
 200,907 
 $ 
 57 
 0.12% 
 Savings and money market 
 300,657 
 290 
 0.39% 
 345,549 
 172 
 0.20% 
 Time deposits 
 155,676 
 580 
 1.51% 
 159,785 
 356 
 0.90% 
 Total interest-bearing deposits 
 643,899 
 1,118 
 0.70% 
 706,241 
 585 
 0.34% 
 Short-term borrowings 
 3,046 
 8 
 1.11% 
 3,943 
 5 
 0.50% 
 Total interest-bearing liabilities 
 646,945 
 $ 
 1,126 
 0.71% 
 710,184 
 $ 
 590 
 0.34% 
 Noninterest-bearing deposits 
 304,494 
 

 297,153 
 

 Other liabilities 
 2,844 
 2,577 
 Stockholders' equity 
 68,655 
 

 104,493 
 

 Total liabilities and stockholders' equity 
 $ 
 1,022,938 
 $ 
 1,114,407 
 Net interest income and margin (tax-equivalent) 
 $ 
 7,217 
 3.17% 
 $ 
 6,190 
 2.43% 
 

 

 

 (1) Loans on nonaccrual status have been included in the computation of average balances. 
 (2) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal income 
 tax rate of 21%. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 49 
 Table 4 
- Allocation of Allowance for Credit Losses 
 

 2023 
 2022 
 First Quarter 
 Fourth Quarter 
 Third Quarter 
 Second Quarter 
 First Quarter 
 (Dollars in thousands) 
 Amount 
 %* 
 Amount 
 %* 
 Amount 
 %* 
 Amount 
 %* 
 Amount 
 %* 
 Commercial and industrial 
 $ 
 1,232 
 11.8 
 $ 
 747 
 13.1 
 $ 
 732 
 14.9 
 $ 
 761 
 15.9 
 $ 
 774 
 17.1 
 Construction and land 

 development 
 1,021 
 13.2 
 949 
 13.2 
 789 
 11.6 
 576 
 8.8 
 508 
 7.7 
 Commercial real estate 
 3,966 
 53.0 
 3,109 
 52.4 
 2,561 
 52.6 
 2,523 
 54.4 
 2,536 
 54.8 
 Residential real estate 
 497 
 20.2 
 828 
 19.4 
 783 
 19.3 
 753 
 19.3 
 737 
 18.4 
 Consumer installment 
 105 
 1.8 
 132 
 1.9 
 101 
 1.6 
 103 
 1.6 
 103 
 2.0 
 Total allowance for credit 
losses 
 $ 
 6,821 
 $ 
 5,765 
 $ 
 4,966 
 $ 
 4,716 
 $ 
 4,658 
 * Loan balance in each category expressed as a percentage of total loans. 

 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 50 
 Table 5 
– Estimated Uninsured Time Deposits by Maturity 

 (Dollars in thousands) 
 March 31, 2023 
 Maturity of: 
 3 months or less 
 $ 
 175 
 Over 3 months through 6 months 
 12,975 
 Over 6 months through 12 months 
 16,969 
 Over 12 months 
 14,321 
 Total estimated uninsured 
time deposits 
 $ 
 44,440 

 
 Table of Contents 
 51 
 ITEM 3. 
QUANTITATIVE 
AND QUALITATIVE 
DISCLOSURES ABOUT MARKET RISK 
 The information called for by ITEM 3 is set forth in ITEM 2 under the caption 
“MARKET AND LIQUIDITY RISK 
 MANAGEMENT” and is incorporated herein by reference.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
AUBURN NATIONAL BANCORPORATION, INC 10-Q

Item 2. Management’s Discussion and Analysis
