AUBN filing — read by section

Item 7. Management’s Discussion and Analysis

ITEM 7. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 
OF FINANCIAL CONDITION AND RESULTS 
OF 
 OPERATIONS 
 The following is a discussion of our financial condition at December 31, 
2023 and 2022 and our results of operations for 
 the years ended December 31, 2023 and 2022. The purpose of this discussion is to provide 
information about our financial 
 condition and results of operations which is not otherwise apparent from the consolidated 
financial statements. The 
 following discussion and analysis should be read along with our consolidated 
financial statements and the related notes 
 included elsewhere herein. In addition, this discussion and analysis contains 
forward-looking statements, so you should 
 refer to Item 1A, “Risk Factors” and “Special Cautionary Notice Regarding Forward-Looking Statements”. 

 OVERVIEW 
 The Company was incorporated in 1990 under the laws of the State of Delaware and became a bank 
holding company after 
 it acquired its Alabama predecessor, 
which was a bank holding company established in 1984. The Bank, the Company's 
 principal subsidiary, is an Alabama 
state-chartered bank that is a member of the Federal Reserve System and has operated 
 continuously since 1907. Both the Company and the Bank are headquartered 
in Auburn, Alabama. The Bank conducts its 
 business primarily in East Alabama, including 
Lee County and surrounding areas. The Bank operates full-service branches 
 in Auburn, Opelika, Notasulga and Valley, 
Alabama. 
The Bank also operates a loan production office in Phenix 
City, 
 Alabama. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 55 
 Summary of Results of Operations 
 Year ended December 31 
 (Dollars in thousands, except per share data) 
 2023 
 2022 
 Net interest income (a) 
 $ 
 26,745 
 $ 
 27,622 
 Less: tax-equivalent adjustment 
 417 
 456 
 Net interest income (GAAP) 
 26,328 
 27,166 
 Noninterest income 
 (2,981) 
 6,506 
 Total revenue 
 23,347 
 33,672 
 Provision for credit losses 
 135 
 1,000 
 Noninterest expense 
 22,594 
 19,823 
 Income tax (benefit) expense 

 (777) 
 2,503 
 Net earnings 
 $ 
 1,395 
 $ 
 10,346 
 Basic and diluted net earnings per share 
 $ 
 0.40 
 $ 
 2.95 
 (a) Tax-equivalent. 
See "Table 1 - Explanation of Non-GAAP Financial Measures". 
 Financial Summary 
 The Company’s net earnings were $1.4 
million for the full year 2023, compared to $10.3 million for the full year 2022. 

 Basic and diluted net earnings per share were $0.40 per share for the full year 2023, 
compared to $2.95 per share for the full 
 year 2022. 

 Net earnings for 2023 included a loss on sale of securities, while 2022 net earnings included 
a gain on sale of land and a 
 one-time payroll tax credit provided by the CARES Act. 
The after-tax impact of the loss on securities reduced 2023 
net 
 earnings by $4.7 million, while non-routine items in 2022 improved net earnings by $3.6 
million. 
Excluding non-routine 
 items, net earnings for the full year 2023 would have been $6.1 million, or $1.75 
per share, compared to $6.7 million, or 
 $1.92 per share for the full year 2022. 
 Net interest income (tax-equivalent) was $26.7 million in 2023, a 
3% decrease compared to $27.6 million in 2022. This 
 decrease was primarily due to a decline in interest earning assets, increased cost 
of funds and changes in our deposit mix, 
 which was partially offset by a more favorable asset mix and higher 
yields on interest 
earnings assets. 
The Company’s net 
 interest margin (tax-equivalent) was 2.89% in 2023, 
compared to 2.81% in 2022. 
Average loans for 2023 were $523.8 
 million, a 15% increase from 2022. 

 At December 31, 2023, the Company’s allowance 
for credit losses was $6.9 million, or 1.23% of total loans, compared to 
 $5.8 million, or 1.14% of total loans, at December 31, 2022. 
The implementation of CECL required pursuant to 
 Accounting Standards Codification (“ASC”) 326, which 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. 
For the full year 2023, increases in the 
 allowance for credit losses due to changes in the composition and balance of loans during 2023 
were largely offset by 
 reductions in the allowance for credit losses due to the resolution of collateral dependent 
nonperforming loans. 
 The Company recorded a provision for credit losses of $0.1 million in 2023 compared 
to $1.0 million during 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 decrease in provision for credit losses was primarily related 
to the downgrade of one borrowing 
 relationship in the fourth quarter of 2022, where one of these loans was repaid in full during the 
second quarter of 2023. 

 Noninterest income was a loss of $3.0 million in 2023 compared to 
income of $6.5 million in 2022. 
Excluding the pre-tax 
 securities loss of $6.3 million related to the balance sheet repositioning strategy in 2023, 
noninterest income would have 
 been $3.3 million for 2023, 
compared to noninterest income of $3.3 million in 2022 after excluding the pre-tax gain of $3.2 
 million on the sale of land. 

 
 
 
 
 
 
 
 
 
 
 
 
 
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 56 
 Noninterest expense was $22.6 million in 2023 compared to $19. 
8 
million in 2022. 
Excluding the impact of the one-
 time payroll tax credit of $1.6 million, noninterest expense would have been $21.4 
million in 2022. This increase in 
 noninterest expense reflects increases in net occupancy and equipment expenses of $0.2 
million related to the Company’s 
 new headquarters, which opened in June 2022, professional fees expense of $0. 
3 
million, other real estate owned expense 
 of $0.1 million, FDIC and other regulatory assessments expenses of $0.2 
million and other noninterest expense of $0.5 
 million, partially offset by decreases in salaries and benefits expense of 
$0.2 million. 
 The provision for income taxes was a benefit of $0.8 million for an effective 
tax rate of (125.73)% for 2023, compared to 
 tax expense of $2.5 million and an effective tax rate of 19.48% for 2022. 
This decrease was primarily due to a decrease 
 in pre-tax earnings in 2023 resulting from the balance sheet repositioning. The 
Company’s effective income 
tax rate 
 otherwise is principally affected by tax-exempt earnings from the 
Company’s investments 
in municipal securities, bank-
 owned life insurance, and New Markets Tax 
Credits. 
 The Company paid cash dividends of $1.08 per share in 2023, an increase of 2% from 2022. 
At December 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 15.52%, a 
tier 1 leverage ratio of 9.72% and common equity tier 
 1 (“CET1”) of 14.52% 
at December 31, 2023. 

 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, 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. 
On January 1, 2023, we adopted FASB 
ASU 2016-13 
 Financial 
 Instruments - Credit Losses 
 (Topic 
326) which significantly changes our methodology for determining our allowance 
for 
 credit losses, and ASU 2022-02
 , Financial Instruments – Credit Losses (Topic 
326): 
Troubled 
Debt Restructurings and 
 Vintage Disclosures 
 which 
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. 
 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 
 uncollectability 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 
 57 
 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 
 forecast 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. 

 
 Table of Contents 
 58 
 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 of these criteria are met, the security's amortized cost basis is written 
 down to fair value through net income. 
If neither criterion 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-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 14, 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. 

 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 December 31, 
2023 we had total deferred tax assets of $12.5 million 
 included as “other assets”, including $9.7 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 December 31, 2023. 
The amount of the deferred tax assets considered realizable, however, 
could 
 be reduced if estimates of future taxable income are reduced. 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 59 
 Average Balance 
Sheet and Interest Rates 
 Year ended December 31 
 

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

 $ 
 523,838 
 4.76% 
 $ 
 454,604 
 4.45% 
 Securities - taxable 
 335,366 
 2.15% 
 364,006 
 1.81% 
 Securities - tax-exempt (a) 
 52,122 
 3.81% 
 61,614 
 3.53% 
 Total securities 
 387,488 
 2.37% 
 425,620 
 2.06% 
 Federal funds sold 
 5,221 
 4.79% 
 43,766 
 1.00% 
 Interest bearing bank deposits 
 8,593 
 4.92% 
 58,141 
 0.99% 
 Total interest-earning assets 
 925,140 
 3.76% 
 982,131 
 3.05% 
 Deposits: 
 

 

 NOW 
 193,451 
 0.99% 
 197,177 
 0.19% 
 Savings and money market 
 289,235 
 0.74% 
 327,139 
 0.20% 
 Certificates of deposits 
 175,085 
 2.25% 
 154,273 
 0.84% 
 Total interest-bearing deposits 
 657,771 
 1.21% 
 678,589 
 0.34% 
 Short-term borrowings 
 3,255 
 2.21% 
 4,516 
 1.33% 
 Total interest-bearing liabilities 
 661,026 
 1.22% 
 683,105 
 0.35% 
 Net interest income and margin (a) 
 $ 
 26,745 
 2.89% 
 $ 
 27,622 
 2.81% 
 (a) Tax-equivalent. 
See "Table 1 - Explanation of Non-GAAP 
Financial Measures". 
 RESULTS 
OF OPERATIONS 
 Net Interest Income and Margin 
 Net interest income (tax-equivalent) was $26.7 million in 2023, compared 
to $27.6 million in 2022. 
This decrease was 
 primarily due to a decline in interest earning assets and higher costs of funds partially offset 
by improvements in the 
 Company’s yield on interest earning assets. 
Net interest margin (tax-equivalent) increased 
to 2.89% in 2023, compared to 
 2.81% in 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. 
During 2023, the cost of 
 funds increased to 122 basis points, compared to 35 basis points during 2022. 
Since March of 2022, the Federal Reserve 
 increased the target federal funds range from 0 – 0.25% to 5.25 
– 5.50%. 
 The tax-equivalent yield on total interest-earning assets increased by 71 basis points 
to 3.76% in 2023 compared to 3.05% 
 in 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 87 basis points to 
1.22% 
in 2023 compared to 0.35% in 2022. 
Our 
 deposit costs may continue to increase if the Federal Reserve 
maintains or 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, and we 
 compete for deposits against other banks, money market mutual funds 
, 
Treasury securities and other interest bearing 
 alternative investments. 
 The Company continues to deploy various asset liability management strategies 
to manage its risk from interest rate 
 fluctuations. 
Deposit and loan pricing remains competitive in our markets. 
We believe this 
challenging rate environment 
 will continue in 2024. 
Our ability to compete and manage our deposits costs until our interest-earning assets reprice 
and we 
 generate new fixed rate loans with current market interest rates will be important to our 
net interest margin during the 
 monetary tightening cycle that we believe will continue in 2024. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 60 
 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 of $0.1 
 million during 2023, compared to a provision for loan losses of $1.0 million for 2022. 
Provision for credit losses 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 
 provision for credit losses during 2023 was primarily related to an increase in the calculation 
of current expected credit 
 losses due to loan growth during 2023. 
This was largely offset by the resolution of a collateral dependent 
nonperforming 
 loan, with a recorded investment of $1.3 million and a corresponding allowance of $0.5 
million, that was collected in full 
 during the second quarter of 2023. 
 Our allowance for credit losses reflects an amount we believe appropriate, 
based on our allowance assessment 
 methodology, to adequately cover 
all expected credit losses as of the date the allowance is determined. 
At December 31, 
 2023, the Company’s allowance 
for credit losses was $6.9 
million, or 1.23% of total loans, compared to $5.8 million, or 
 1.14% of total loans, at December 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. 

 

 Noninterest Income 

 Year ended December 31 
 (Dollars in thousands) 
 2023 
 2022 
 Service charges on deposit accounts 
 $ 
 603 
 $ 
 598 
 Mortgage lending 
 430 
 650 
 Bank-owned life insurance 
 411 
 317 
 Gain on sale of premises and equipment 
 — 
 3,234 
 Securities (losses) gains, net 
 (6,295) 
 12 
 Other 
 1,870 
 1,695 
 Total noninterest income 
 $ 
 (2,981) 
 $ 
 6,506 
 The Company’s noninterest income from 
mortgage lending is primarily attributable to the (1) origination and sale of new 
 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 
 mortgage 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 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 quarterly. 
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. 

 The following table presents a breakdown of the Company’s 
mortgage lending income for 2023 and 2022. 
 Year ended December 31 
 (Dollars in thousands) 
 2023 
 2022 
 Origination income 
 $ 
 71 
 $ 
 309 
 Servicing fees, net 
 359 
 341 
 Total mortgage lending income 
 $ 
 430 
 $ 
 650 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 61 
 The Company’s income from mortgage lending 
typically fluctuates as mortgage interest rates change and is primarily 
 attributable to the origination and sale of new mortgage loans. 
Origination income decreased as market interest rates on 
 mortgage loans increased and mortgage loan volumes also decreased. 
The decrease in origination income was partially 
 offset by an increase in mortgage servicing fees, net of related 
amortization expense as mortgage prepayment speeds 
 slowed, resulting in decreased amortization expense. 
 Income from bank-owned life insurance was $411 
thousand and $317 thousand for 2023 and 2022, respectively. 
Excluding 
 a $52 thousand non-taxable death benefit received during 2023, income from bank 
-owned life insurance would have been 
 $359 thousand and $317 thousand for 2023 and 2022, respectively. 
 In October 2022, the Company closed the sale of approximately 0.85 acres of land located 
next to the Company’s 
 headquarters in Auburn, Alabama for a purchase price of $4.3 million. 
The sale resulted in a gain of $3.2 million, net of 
 prorations, closing costs and costs of demolishing the Bank’s 
former main office 
building. 

 In December 2023, the Company announced it had repositioned its balance sheet by selling 
approximately $117.6 million, 
 or 27%, of its available-for-sale securities with a 
weighted average book yield of 2.11% and a 
weighted average duration of 
 4.0 years, resulting in net losses on sale of the securities of approximately $6.3 
million. Proceeds of $111.3 
million from the 
 sale of securities were used to repay wholesale funding of $48.0 
million with a weighted average cost of 5.38%, while the 
 remaining amounts were held in cash to fund future loan growth, higher-yielding 
securities, and other banking operations. 
 Other noninterest income was $1.9 million and $1.7 million for 2023 
and 2022, respectively. 
The increase in other 
 noninterest income was primarily related to insurance proceeds of $0.2 
million received during 2023 related to property 
 claims. 
 

 Noninterest Expense 
 Year ended December 31 
 (Dollars in thousands) 
 2023 
 2022 
 Salaries and benefits 
 $ 
 12,101 
 $ 
 12,307 
 Employee retention credit 
 — 

 (1,569) 
 Net occupancy and equipment 
 2,954 
 2,742 
 Professional fees 
 1,299 
 975 
 FDIC and other regulatory assessments 
 631 
 404 
 Other 
 5,609 
 4,964 
 Total noninterest expense 
 $ 
 22,594 
 $ 
 19,823 
 Salaries and benefits decreased during 2023 compared to 2022. 
A decrease in the number of full-time equivalents was 
 partially offset by routine annual increases in salaries and 
wages. 

 The employee retention tax credit of $1.6 million in 2022 relates to a one-time payroll tax 
credit provided by the CARES 
 Act and the 2020 Consolidated Appropriations Act. 

 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 costs associated with ope 
rating of 
 the new headquarters. 
The Company relocated its main office branch and bank operations into 
its newly constructed 
 headquarters during June 2022. 
 The increase in professional fees expense during 2023 compared to 
2022 was primarily related to increased consulting and 
 audit related fees during 2023. 
 The increase in FDIC and other regulatory assessments during 2023 compared to 
2022 was primarily related to increases in 
 the FDIC’s initial base deposit insurance assessment 
rate. 
On October 18, 2022, the FDIC adopted an amended restoration 
 plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% 
by September 30, 2028. 
The 
 FDIC’s amended restoration plan increases the 
initial base deposit insurance assessment rate schedules uniformly by 2 basis 
 points, which began the first quarterly assessment period of 2023. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 62 
 The increase in other noninterest expense was due to a variety of items including software 
costs, ATM 
and checkcard 
 expenses, impairment related to new market tax credit investment due to remaining tax 
credit being less than the 
 Company’s investment, and a gain on sale of other 
real estate owned that was realized in 2022. 
 Income Tax 
Expense 
 The provision for income taxes was a benefit of $0.8 million for an effective 
tax rate of (125.73)% for 2023, compared to 
 tax expense of $2.5 million and an effective tax rate of 19.48% for 2022. 
This decrease was primarily due to a decrease 
 in pre-tax earnings in 2023 resulting from the balance sheet repositioning. The Company’s 
effective income tax rate 
 otherwise is principally affected 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 $270.9 
million at December 31, 2023, compared to $405.3 million at December 31, 2022. 

 This decrease reflects a decrease in the amortized cost basis of securities available-for-sale 
of $150.3 million, offset by an 
 increase of $15.9 million in the fair value of securities available-for-sale. 
The decrease in the amortized cost basis of 
 securities available-for-sale was primarily attributable to 
the sale of $117.6 million securities available-for-sale 
as part of 
 the balance sheet repositioning in December 2023 and normal paydowns and maturities on 
other securities. 
The increase 
 in the fair value of securities was primarily due to a decrease in long-term 
market interest rates at the end of 2023. 
The 
 average annualized tax-equivalent yields earned on total securities were 2.37 
% 
in 2023 and 2.06% in 2022. 
 The following table shows the carrying value and weighted average yield of securities available 
-for-sale as of December 
 31, 2023 according to contractual maturity. 
Actual maturities may differ from contractual maturities of mortgage-backed 
 securities (“MBS”) because the mortgages underlying the securities may be called 
or prepaid with or without penalty. 

 

 December 31, 2023 
 1 year 

 1 to 5 
 5 to 10 

 After 10 
 Total 

 (Dollars in thousands) 
 or less 
 years 
 years 
 years 
 Fair Value 
 Agency obligations 
 $ 
 331 
 10,339 
 43,209 
 — 
 53,879 
 Agency MBS 
 32 
 15,109 
 22,090 
 161,058 
 198,289 
 State and political subdivisions 
 — 
 — 
 9,691 
 9,051 
 18,742 
 Total available-for-sale 
 $ 
 363 
 25,448 
 74,990 
 170,109 
 270,910 
 Weighted average yield (1): 
 Agency obligations 
 3.40% 
 0.99% 
 1.66% 
 — 
 1.54% 
 Agency MBS 
 3.47% 
 1.19% 
 1.84% 
 2.20% 
 2.08% 
 State and political subdivisions 
 — 
 — 
 1.95% 
 2.55% 
 2.23% 
 Total available-for-sale 
 3.41% 
 1.11% 
 1.75% 
 2.21% 
 1.98% 
 (1) Yields are calculated based on amortized cost. 
 Loans 
 December 31 
 (In thousands) 
 2023 
 2022 
 Commercial and industrial 
 $ 
 73,374 
 66,212 
 Construction and land development 
 68,329 
 66,479 
 Commercial real estate 

 287,307 
 264,573 
 Residential real estate 
 117,457 
 97,648 
 Consumer installment 
 10,827 
 9,546 
 Total loans 
 557,294 
 504,458 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 63 
 Total loans, net of unearned income, 
were $557.3 million at December 31, 2023, and $504.5 million at December 
31, 2022, 
 an increase of $52.8 million, or 11%. 
Four loan categories represented the majority of the loan portfolio at December 31, 
 2023: commercial real estate (52%), residential real estate (21%), construction and land development 
(12%), and 
 commercial and industrial (13%). 
Approximately 23% of the Company’s commercial 
real estate loans were classified as 
 owner-occupied at December 31, 2023. 
 Within the residential real estate portfolio 
segment, the Company had junior lien mortgages of approximately $8.7 million, 
 or 2%, and $7.4 million, or 1%, of total loans at December 31, 2023 and 2022, respectively. 
For residential real estate 
 mortgage loans with a consumer purpose, the Company had no loans that required interest only payments 
at December 31, 
 2023 and 2022. The Company’s residential 
real estate mortgage portfolio does not include any option 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 4.76% in 2023 
and 4.45% in 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 higher 
levels of 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 
deterioration 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 the higher interest rates currently in effect 
 and which may exist 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, 
our 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 $22.2 million. Furthermore, we have an internal limit 
for aggregate credit exposure (loans outstanding plus 
 unfunded commitments) to a single borrower of $20.0 million. Our loan policy requires 
that the Loan Committee of the 
 Board of Directors approve any loan relationships that exceed this internal limit. 
At December 31, 2023, the Bank had one 
 loan relationship exceeding our internal limit. 
 We periodically analyze 
our commercial loan portfolio 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 December 31, 2023 (and related balances at December 31, 
2022). 

 December 31 
 (In thousands) 
 2023 
 2022 
 Lessors of 1-4 family residential properties 
 $ 
 56,912 
 $ 
 52,278 
 Multi-family residential properties 
 45,841 
 41,084 
 Hotel/motel 
 39,131 
 33,378 
 Office buildings 
 30,871 
 27,074 
 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 $6.9 million at 
 December 31, 2023 compared to $5.8 million at December 31, 2022, which management 
believed to be adequate at each of 
 the respective dates. The assumptions, judgments and estimates, as well as the 
methodologies and models associated with 
 the determination of the allowance for credit losses are described under “Critical Accounting Policies.” 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 64 
 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 December 
31, 2023 and December 31, 2022, our 
 allowance for credit losses was approximately $6.9 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 1.23% at 
 December 31, 2023, compared to 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. 
See Note 5 to our Financial Statements. 
 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 December 31, 2023, reasonable and supportable periods of 4 quarters were utilized 
followed by an 8 quarter straight line 
 reversion period to long term averages. 
 A summary of the changes in the allowance for credit losses and certain asset quality 
ratios for the years ended December 
 31, 2023 and 2022 are presented below. 
 

 Year ended December 31 
 (Dollars in thousands) 
 2023 
 2022 
 Allowance for credit losses: 
 Balance at beginning of period 
 $ 
 5,765 
 4,939 
 Impact of adopting ASC 326 
 1,019 
 — 
 Charge-offs: 
 Commercial and industrial 
 (164) 
 (222) 
 Consumer installment 
 (105) 
 (70) 
 Total charge 
-offs 
 (269) 
 (292) 
 Recoveries: 
 Commercial and industrial 
 204 
 7 
 Commercial real estate 

 — 
 23 
 Residential real estate 

 14 
 26 
 Consumer installment 
 5 
 62 
 Total recoveries 
 223 
 118 
 Net charge-offs 
 (46) 
 (174) 
 Provision for credit losses 
 125 
 1,000 
 Ending balance 
 $ 
 6,863 
 5,765 
 as a % of loans 
 1.23 
 % 
 1.14 
 as a % of nonperforming loans 
 753 
 % 
 211 
 Net charge-offs 
as a % of average loans 
 0.01 
 % 
 0.04 
 Nonperforming Assets 

 At December 31, 2023 the Company had $0.9 million in nonperforming assets compared 
to $2.7 million at December 31, 
 2022. 
The decrease in nonperforming was primarily related to the resolution of a collateral 
dependent nonperforming loan 
 relationship, with a recorded investment of $1.3 million, that was collected in full during 
the second quarter of 2023. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 65 
 The table below provides information concerning total nonperforming assets 
and certain asset quality ratios. 
 

 December 31 
 (Dollars in thousands) 
 2023 
 2022 
 Nonperforming assets: 
 Nonperforming (nonaccrual) loans 
 $ 
 911 
 2,731 
 Total nonperforming assets 
 $ 
 911 
 2,731 
 as a % of loans and other real estate owned 
 0.16 
 % 
 0.54 
 as a % of total assets 
 0.09 
 % 
 0.27 
 Nonperforming loans as a % of total loans 
 0.16 
 % 
 0.54 
 Accruing loans 90 days or more past due 
 $ 
 — 
 — 
 The table below provides information concerning the composition of nonaccrual 
loans at December 31, 2023 and 2022, 
 respectively. 
 

 December 31 
 (In thousands) 
 2023 
 2022 
 Nonaccrual loans: 
 Commercial and industrial 
 $ 
 — 
 443 
 Commercial real estate 
 783 
 2,116 
 Residential real estate 
 128 
 172 
 Total nonaccrual loans 
 $ 
 911 
 2,731 
 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 more 
 than 90 days past due, unless the loan is both well-secured and in the process of collection. 

 There were no loans 90 days past due and still accruing interest at December 31, 2023 
and 2022, respectively. 
 The Company had no OREO at December 31, 2023 and 2022, respectively. 
 Deposits 
 December 31 
 (In thousands) 
 2023 
 2022 
 Noninterest bearing demand 
 $ 
 270,723 
 311,371 
 NOW 
 190,724 
 178,641 
 Money market 
 148,040 
 214,298 
 Savings 
 88,541 
 95,652 
 Certificates of deposit under $250,000 
 100,572 
 93,017 
 Certificates of deposit and other time deposits of $250,000 or more 
 97,643 
 57,358 
 Total deposits 
 $ 
 896,243 
 950,337 
 Total deposits decreased 
$54.1 million, or 6%, to $896.2 million at December 31, 2023, 
compared to $950.3 million at 
 December 31, 2022. 
During 2023, deposit outflows due to the sale of $59.0 million of reciprocal deposits 
were partially 
 offset by net deposit inflows of $4.9 million. The Company 
had no brokered deposits at December 31, 2023 and 2022. 
The 
 Company had no FHLB-Atlanta advances or other wholesale borrowings outstanding 
at December 31, 2023 and 2022. 

 Noninterest-bearing deposits were $270.7 million, or 30% of total deposits, at December 
31, 2023, compared to $311.4 
 million, or 33% of total deposits at December 31, 2022. 
The 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. 
 The average rates paid on total interest-bearing deposits were 1.21 
% 
in 2023 and 0.34% in 2022. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 66 
 At December 31, 2023, estimated uninsured deposits totaled $356.3 
million, or 40% of total deposits, compared to $381.7 
 million, or 40% of total deposits at December 2022. 
During 2023, the Bank began participating in the Certificates of 
 Deposit Account Registry Service (the “CDARS”) and the Insured Cash Sweep 
product (“ICS”), which provide for 
 reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose 
of maximizing FDIC insurance. 
The 
 Company had no reciprocal deposits at December 31, 2023. 
Uninsured amounts are estimated based on the portion of 
 account balances that exceed FDIC insurance limits. 
The Bank’s uninsured deposits at December 
31, 2023 and 2022 
 include approximately $206.2 million and $155.0 million, respectively, 
of deposits of state, county and local governments 
 that are collateralized by securities having a fair value equal to such deposits. 
Deposits of state, county and local 
 governments were 53% and 41% of our estimated uninsured deposits at December 
31, 2023 and 2022, respectively. 
 The FDIC has proposed a special assessment on uninsured deposits of banks with over $5 
billion in uninsured deposits to 
 the FDIC Deposit Insurance Fund’s costs 
of the systemic risk determination made in connection with two recent bank 
 failures. 
This proposal will not apply to AuburnBank. 
 Other Borrowings
 The Company had no long-term debt at December 31, 2023 and 2022. 
The Bank utilizes short and long-term non-deposit 
 borrowings from time to time. 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 no federal funds borrowed at December 31, 
2023 and 2022, respectively. Securities 
sold under 
 agreements to repurchase, which were entered into on behalf of certain customers 
totaled $1.5 
million and $2.6 million at 
 December 31, 2023 and 2022, respectively. 
At December 31, 2023 and 2022, the Bank had no borrowings from the 
 Federal Reserve discount window. 
The Company did not borrow under the Federal Reserve BTFP during 2023. 
 The Bank is a member of the FHLB-Atlanta and has borrowed, and may in the future borrow 
from time to time under the 
 FHLB-Atlanta’s advance program 
to obtain funding for its growth. 
FHLB-Atlanta advances include both fixed and 
 variable terms and are taken out with varying maturities, and 
which generally are secured by eligible assets. 
The Bank had 
 no borrowings under FHLB-Atlanta’s advance 
program at December 31, 2023 and 2022, respectively. 
At those dates, the 
 Bank had $309.1 million and $312.6 million, respectively, 
of available lines of credit at the FHLB-Atlanta. 
Advances 
 include both fixed and variable terms and may be taken out with varying maturities. 
 The average rates paid on short-term borrowings were 2.21% 
and 1.33% 
in 2023 and 2022, respectively. 

 CAPITAL ADEQUACY
 At December 31, 2023, the Company’s cons 
olidated stockholders’ equity (book value) was $76.5 million, or $21.90 
per 
 share, compared to $68.0 million, or $19.42 per share, at December 31, 2022. The increase 
from December 31, 2022 was 
 primarily driven by net earnings of $1.4 million and other comprehensive income 
of $11.9 million related to unrealized 
 gains/losses on securities available-for-sale, net of tax. These 
increases were partially offset by cash dividends paid of 
 $3.8 million, a one-time charge of $0.8 million, net of tax, for the cumulative 
effect to adopt the CECL accounting standard 
 on January 1, 2023, and $0.2 million in repurchases of the Company’s 
common stock. 
Unrealized securities losses do not 
 affect the Bank’s capital 
for regulatory capital purposes. 
 

 The Company paid cash dividends of $1.08 per share in 2023, an increase of 2% from the 
same period in 2022. 
The 
 Company’s share repurchases 
of $0.2 million since December 31, 2022 resulted in 10,108 fewer outstanding common 
 shares at December 31, 2023. 
These shares were repurchased at an average cost per share of $22.63. 
 On January 1, 2015, the Company and Bank became subject to the Basel III regulatory capital 
framework. The rules 
 included the implementation of a capital conservation buffer of CET1 
capital of 2.5% that is added to the minimum 
 requirements for capital adequacy purposes. 
A banking organization with a capital conservation buffer 
of 2.5% or less is 
 subject to limitations on capital distributions from “eligible retained earnings”, 
including dividend payments, share 
 repurchases and certain discretionary bonus payments. At December 31, 
2023 and 2022, the Bank had a capital 
 conservation buffer of 7.52% and 8.25%, respectively. 

 
 
 Table of Contents 
 67 
 On August 26, 2020, the Federal Reserve and the other federal banking regulators adopted 
a final rule that amended the 
 capital conservation buffer. 
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 9.72%, CET1 risk-based capital ratio was 14.52%, 
tier 1 
 risk-based capital ratio was 14.52%, and total risk-based capital ratio was 15.52% 
at December 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 7.52% 
at December 31, 2023. 
 On July 27, 2023, the Federal Reserve, the Comptroller of the Currency and the FDIC issued 
a joint notice of proposed 
 rulemaking to implement the Basel III endgame components. 
The proposal which is subject to public comment and change 
 only applies to banks and holding companies with $100 billion or more of assets. 
The proposal includes provisions dealing 
 with: 
 ●
 Credit risk, which arises from the risk than an obligor fails to perform on an obligation 
; 
 ●
 Market risk, which results from changes in the value of trading positions; 
 ●
 Operational risk, which is the risk of losses resulting from inadequate or failed internal process, 
people, and 
 systems, or from external events; and 
 ●
 Credit valuation adjustment risk, which results from the risk of losses on certain derivative 
contracts. 
 The Basel III endgame regulatory proposals are not applicable to the Company or the Bank. 
 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 because 
 assets and liabilities may mature or reprice at different times. For example, 
if liabilities reprice faster than assets, and 
 interest rates are generally rising, earnings will initially decline. In addition, assets 
and liabilities may reprice at the same 
 time but by different amounts. For example, when the general level of interest rates is rising, 
the Company may increase 
 rates paid on interest bearing demand deposit accounts and savings deposit 
accounts by an amount that is less than the 
 general increase in market interest rates. Also, short-term and long-term 
market interest rates may change by different 
 amounts. For example, a flattening yield curve may reduce the interest spread 
between new loan yields and funding costs. 
 The yield curve has been inverted during 2023 and in the first months of 2024. 
An inverted yield curve reduces the net 
 interest margin expansion that may be expected otherwise as 
interest rates rise. 
Further, the remaining maturity of 
various 
 assets and liabilities may shorten or lengthen as interest rates change. For example, if long-term 
mortgage interest rates 
 decline sharply, mortgage-backed 
securities in the securities portfolio may prepay earlier than anticipated, 
which could 
 reduce earnings. Interest rates may also have a direct or indirect effect 
on loan demand, loan losses, mortgage origination 
 volume, the fair value of MSRs and other items affecting earnings. 
 ALCO measures and evaluates the interest rate risk so that we can meet customer demands 
for various types of loans and 
 deposits. ALCO determines the most appropriate amounts of on-balance 
sheet and off-balance sheet items. Measurements 
 used to help manage interest rate sensitivity include an earnings simulation and an economic 
value of equity model. 

 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 68 
 Earnings simulation
 Management believes that interest rate risk is best estimated by our earnings simulation 
modeling. On at least a quarterly 
 basis, we simulate the following 12-month time period to determine a baseline 
net interest income forecast and the 
 sensitivity of this forecast to changes in interest rates. The baseline forecast assumes an 
unchanged or flat interest rate 
 environment. 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 
 The following table reports the variance of net interest income over the next 12 
months assuming a gradual change in 
 interest rates up or down when compared to the baseline net interest income 
forecast at December 31, 2023. 
 

 Changes in Interest Rates 
 Net Interest Income % Variance 
 
400 basis points 
 (5.45) 
 % 
 
300 basis points 
 (3.85) 
 
200 basis points 
 (2.32) 
 
100 basis points 
 (1.03) 
 
(100) basis points 
 (0.57) 
 
(200) basis points 
 (1.33) 
 
(300) basis points 
 (2.12) 
 
(400) basis points 
 (2.95) 
 At December 31, 2023, our earnings simulation model indicated that 
we were in compliance with the policy guidelines 
 noted above. 
 Economic Value 
of Equity
 Economic value of equity (“EVE”) measures the extent that 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, to 
which establish 
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. 

 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 69 
 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: 
 35% for an instantaneous change of +/- 400 basis points 
 30% 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 
 The following table reports the variance of EVE assuming an immediate change in 
interest rates up or down when 
 compared to the baseline EVE at December 31, 2023. 
 

 Changes in Interest Rates 
 EVE % Variance 
 
400 basis points 
 (20.15) 
 % 
 
300 basis points 
 (12.94) 
 
200 basis points 
 (6.79) 
 
100 basis points 
 (2.76) 
 
(100) basis points 
 (0.13) 
 
(200) basis points 
 (3.45) 
 
(300) basis points 
 (10.88) 
 
(400) basis points 
 (12.07) 
 At December 31, 2023, our EVE model indicated that we were in compliance 
with the policy guidelines noted above. 
 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. 
Prepayment 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 between 
interest-sensitive assets and 
 interest-sensitive liabilities and as one tool to manage interest rate sensitivity 
while continuing to meet the credit and 
 deposit needs of our customers. From time to time, the Company may enter into 
interest rate swaps (“swaps”) to facilitate 
 customer transactions and meet their financing needs. These swaps qualify as derivatives, 
but are not designated as hedging 
 instruments. At December 31, 2023 and 2022, the Company had no derivative 
contracts to assist in managing interest rate 
 sensitivity. 
 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. Without 
proper management of its liquidity, 
the 
 Company could experience higher costs of obtaining funds due to insufficient liquidity, 
while excessive liquidity can lead 
 to a decline in earnings due to the cost of foregoing alternative higher-yielding 
investment opportunities. 

 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 70 
 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 any regulatory 
 restrictions. 
 The primary source of funding and liquidity for the Company has been dividends received 
from the Bank. The Company 
 depends upon dividends from the Bank for liquidity to pay its operating expenses, debt 
obligations, if any, and cash 
 dividends on, and repurchases of, Company common stock. 
The Bank’s payment of dividends depends 
on its earnings, 
 liquidity, capital and the absence 
of any regulatory restrictions. 
If needed, the Company could also issue common stock or 
 other securities. 

 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. Primary uses of funds include repayment of maturing obligations and 
growing the loan portfolio. 
 The Bank has access to federal funds lines from various banks and borrowings from 
the Federal Reserve discount window, 
 although it was not used by the Bank, the Federal Reserve’s 
BTFP borrowing facility was available to the Bank during 
 2023. 
In addition to these sources, the Bank is eligible to participate in the FHLB-Atlanta’s 
advance program to obtain 
 funding for growth and liquidity. 
Advances include both fixed and variable terms and may be taken out with varying 
 maturities. At December 31, 2023, the Bank had no FHLB-Atlanta advances outstanding 
and available credit from the 
 FHLB-Atlanta of $312.6 million. At December 31, 2023, the Bank also had $61.0 
million of available federal funds lines 
 with no borrowings outstanding. 

 The following table presents additional information about our contractual obligations 
as of December 31, 2023, which by 
 their terms had contractual maturity and termination dates subsequent to December 
31, 2023: 
 

 Payments due by period 
 1 year 

 1 to 3 
 3 to 5 
 More than 
 (Dollars in thousands) 
 Total 
 or less 
 years 
 years 
 5 years 
 Contractual obligations: 
 Deposit maturities (1) 
 $ 
 896,243 
 864,461 
 16,866 
 14,916 
 
— 

 Operating lease obligations 
 551 
 123 
 210 
 177 
 41 
 Total 
 $ 
 896,794 
 864,584 
 17,076 
 15,093 
 41 
 (1) Deposits with no stated maturity (demand, NOW, money market, and savings deposits) are 
presented in the "1 year or less" column 
 Management believes that the Company and the Bank have adequate sources of liquidity 
to meet all known contractual 
 obligations and unfunded commitments, including loan commitments and reasonable 
borrower, depositor, 
and creditor 
 requirements over the next 12 months. 
 Off-Balance Sheet Arrangements 
 At December 31, 2023, the Bank had outstanding standby letters of credit of $0.6 
million and unfunded loan commitments 
 outstanding of $73.6 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 has the ability to liquidate federal funds sold 
, 
obtain FHLB-Atlanta 
 advances, raise deposits, 
sell securities available-for-sale, or purchase federal funds from other financial 
institutions on a 
 short-term basis while it obtains the other longer-term funding.

 
 
 
 
 Table of Contents 
 71 
 Residential mortgage lending and servicing activities 
 We primarily sell conforming 
residential mortgage loans in the secondary market to Fannie Mae 
while retaining the 
 servicing of these loans (MSRs). 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. 

 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. 
 As of December 31, 2023, the unpaid principal balance of residential mortgage loans, 
which we have originated and sold, 
 but retained the servicing rights (MSRs) totaled $215.5 million. Although these loans 
are generally sold on a non-recourse 
 basis, except for breaches of customary seller representations and warranties, 
we may have to repurchase residential 
 mortgage loans in cases where we breach such representations or 
warranties or the other terms of the sale, such as where we 
 fail to deliver required documents or the documents we deliver are defective. Investors 
also may require the repurchase of a 
 mortgage loan when an early payment default underwriting review reveals significant 
underwriting deficiencies, even if the 
 mortgage loan has subsequently been brought current. Repurchase demands 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 event has 
 occurred. We 
seek to reduce and manage the risks of potential repurchases or other claims by mortgage loan investors 
 through our underwriting, quality assurance and servicing practices, including 
good communications with our residential 
 mortgage investors. 
 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 our 
standards 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 to date repurchase requests related to representation and warranty provisions, 
and servicing activities have been 
 limited, it is possible that requests to repurchase mortgage loans may increase in frequency 
if investors more aggressively 
 pursue all means of recovering losses on their purchased loans. As of December 
31, 2023, we believe that this exposure is 
 not material due to the historical level of repurchase requests and loss trends, the results of 
our quality control reviews, and 
 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 Company was not required to repurchase any loans during 2023 and 2022 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 December 31, 2023. 

 
 Table of Contents 
 72 
 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 
our customers’ behaviors, and 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 speeds at which 
 our assets and liabilities, respectively, 
reprice in response to interest rate changes. The yield curve was inverted on 
 December 31, 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 our assets or liabilities are priced with the 
 same index. Higher market interest rates and sales or maturities of securities held by the 
Federal Reserve to reduce inflation 
 generally reduce economic activity and may reduce loan demand and growth. Inflation 
and related changes in market 
 interest rates, as the Federal Reserve acts to meet its long term inflation goal of 2%, also 
can adversely affect the values and 
 liquidity of our loans and securities, the value of collateral for our loans, and the success of 
our borrowers and such 
 borrowers’ available cash to pay interest on and principal of our loans to them. 
 Inflation is running at levels unseen in decades and, while it has declined during 2023, 
it remains above the Federal 
 Reserve’s long term inflation goal of 2% 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 federal funds rate was 
 increased another 25 basis points on each of January 31, March 7, May 3 and July 26, 2023 
to 5.25-5.50%, and further 
 increases in the target federal funds rate may be made if inflation remains elevated. 
The Federal Reserve has indicated it 
 will maintain higher target rates and restrictive monetary policy to 
meet its 2% inflation rate over the longer term and 
 maximum employment goals. 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 customers seek higher 
 market interest rates on deposits and other alternative investments. Monetary efforts 
to control inflation pursuant to the 
 Federal Act’s mandate to “promote effectively 
the goals of maximum employment, stable prices, and moderate long-term 
 interest rates,” 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; 
and 
 ●
 ASU 2023-09, 
 Income Taxes 
(Topic 740): 
Improvements to Income Tax 
Disclosures. 
 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 does not expect the 
 new standard to have a material impact on the Company’s 
consolidated financial statements. 
 ASU 2023-09, 
 Income Taxes 
(Topic 740): 
Improvements to Income Tax 
Disclosures
 , The amendments in this Update 
 enhance the transparency and decision usefulness of income tax disclosures. 
For public business entities, the new standard 
 is effective for annual periods beginning after December 15, 2024. 
The Company does not expect the new standard to have 
 a material impact on the Company’s consolid 
ated financial statements. 

 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 73 
 Table 1 
– Explanation of Non-GAAP Financial Measures 
 In addition to results presented in accordance with GAAP, 
this annual report on Form 10-K includes certain designated net 
 interest income amounts presented on a tax-equivalent basis, a non-GAAP financial 
measure, including the presentation of 
 total revenue and the 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 reconciliation of these non-
 GAAP financial measures from GAAP to non-GAAP is presented below. 
 Year ended December 31 
 (In thousands) 
 2023 
 2022 
 2021 
 2020 
 2019 
 Net interest income (GAAP) 
 $ 
 26,328 
 27,166 
 23,990 
 24,338 
 26,064 
 Tax-equivalent adjustment 
 417 
 456 
 470 
 492 
 557 
 Net interest income (Tax-equivalent) 
 $ 
 26,745 
 27,622 
 24,460 
 24,830 
 26,621 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 74 
 Table 2 
- Selected Financial Data 
 Year ended December 31 
 (Dollars in thousands, except per share amounts) 
 2023 
 2022 
 2021 
 2020 
 2019 
 Income statement 
 Tax-equivalent interest income (a) 
 $ 
 34,791 
 30,001 
 26,977 
 28,686 
 30,804 
 Total interest expense 
 8,046 
 2,379 
 2,517 
 3,856 
 4,183 
 Tax equivalent net interest income (a) 
 26,745 
 27,622 
 24,460 
 24,830 
 26,621 
 Provision for credit losses 
 135 
 1,000 
 (600) 
 1,100 
 (250) 
 Total noninterest income 
 (2,981) 
 6,506 
 4,288 
 5,375 
 5,494 
 Total noninterest expense 
 22,594 
 19,823 
 19,433 
 19,554 
 19,697 
 Net earnings before income taxes and 

 tax-equivalent adjustment 
 1,035 
 13,305 
 9,915 
 9,551 
 12,668 
 Tax-equivalent adjustment 
 417 
 456 
 470 
 492 
 557 
 Income tax expense 
 (777) 
 2,503 
 1,406 
 1,605 
 2,370 
 Net earnings 
 $ 
 1,395 
 10,346 
 8,039 
 7,454 
 9,741 
 Per share data: 
 Basic and diluted net earnings 

 $ 
 0.40 
 2.95 
 2.27 
 2.09 
 2.72 
 Cash dividends declared 
 $ 
 1.08 
 1.06 
 1.04 
 1.02 
 1.00 
 Weighted average shares outstanding 
 Basic and diluted 
 3,498,030 
 3,510,869 
 3,545,310 
 3,566,207 
 3,581,476 
 Shares outstanding 
 3,493,614 
 3,503,452 
 3,520,485 
 3,566,276 
 3,566,146 
 Stockholders' equity (book value) 
 $ 
 21.90 
 19.42 
 29.46 
 30.20 
 27.57 
 Common stock price 
 High 
 $ 
 24.50 
 34.49 
 48.00 
 63.40 
 53.90 
 Low 
 18.80 
 22.07 
 31.32 
 24.11 
 30.61 
 Period-end 
 $ 
 21.28 
 23.00 
 32.30 
 42.29 
 53.00 
 To earnings ratio 

 53.20 
 x 
 7.80 
 14.23 
 20.23 
 19.49 
 To book value 
 97 
 % 
 118 
 110 
 140 
 192 
 Performance ratios: 
 Return on average equity 

 2.05 
 % 
 12.48 
 7.54 
 7.12 
 10.35 
 Return on average assets 

 0.14 
 % 
 0.96 
 0.78 
 0.83 
 1.18 
 Dividend payout ratio 
 270.00 
 % 
 35.93 
 45.81 
 48.80 
 36.76 
 Average equity to average assets 
 6.66 
 % 
 7.72 
 10.39 
 11.63 
 11.39 
 Asset Quality: 
 Allowance for credit losses as a % of: 
 Loans 
 1.23 
 % 
 1.14 
 1.08 
 1.22 
 0.95 
 Nonperforming loans 
 753 
 % 
 211 
 1,112 
 1,052 
 2,345 
 Nonperforming assets as a % of: 
 Loans and other real estate owned 
 0.16 
 % 
 0.54 
 0.18 
 0.12 
 0.04 
 Total assets 
 0.09 
 % 
 0.27 
 0.07 
 0.06 
 0.02 
 Nonperforming loans as % of loans 
 0.16 
 % 
 0.54 
 0.10 
 0.12 
 0.04 
 Net charge-offs (recoveries) as a % of average loans 
 0.01 
 % 
 0.04 
 0.02 
 (0.03) 
 0.03 
 Capital Adequacy (c): 
 CET 1 risk-based capital ratio 
 14.52 
 % 
 15.39 
 16.23 
 17.27 
 17.28 
 Tier 1 risk-based capital ratio 
 14.52 
 % 
 15.39 
 16.23 
 17.27 
 17.28 
 Total risk-based capital ratio 
 15.52 
 % 
 16.25 
 17.06 
 18.31 
 18.12 
 Tier 1 leverage ratio 
 9.72 
 % 
 10.01 
 9.35 
 10.32 
 11.23 
 Other financial data: 
 Net interest margin (a) 
 2.89 
 % 
 2.81 
 2.55 
 2.92 
 3.43 
 Effective income tax rate 
 (125.73) 
 % 
 19.48 
 14.89 
 17.72 
 19.57 
 Efficiency ratio (b) 
 95.08 
 % 
 58.08 
 67.60 
 64.74 
 61.33 
 Selected period end balances: 
 Securities 
 $ 
 270,910 
 405,304 
 421,891 
 335,177 
 235,902 
 Loans, net of unearned income 
 557,294 
 504,458 
 458,364 
 461,700 
 460,901 
 Allowance for credit losses 
 6,863 
 5,765 
 4,939 
 5,618 
 4,386 
 Total assets 
 975,255 
 1,023,888 
 1,105,150 
 956,597 
 828,570 
 Total deposits 
 896,243 
 950,337 
 994,243 
 839,792 
 724,152 
 Total stockholders’ equity 
 76,507 
 68,041 
 103,726 
 107,689 
 98,328 
 (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 
 75 
 Table 3 
- Average Balance 
and Net Interest Income Analysis 
 Year ended December 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) 
 $ 
 523,838 
 $ 
 24,925 
 4.76% 

 $ 
 454,604 
 $ 
 20,241 
 4.45% 

 Securities - taxable 
 335,366 
 7,208 
 2.15% 

 364,006 
 6,576 
 1.81% 

 Securities - tax-exempt (2) 
 52,122 
 1,985 
 3.81% 

 61,614 
 2,172 
 3.53% 

 Total securities 

 387,488 
 9,193 
 2.37% 

 425,620 
 8,748 
 2.06% 

 Federal funds sold 
 5,221 
 250 
 4.79% 

 43,766 
 435 
 1.00% 

 Interest bearing bank deposits 
 8,593 
 423 
 4.92% 

 58,141 
 577 
 0.99% 

 Total interest-earning assets 
 925,140 
 34,791 
 3.76% 

 982,131 
 30,001 
 3.05% 

 Cash and due from banks 
 15,230 
 15,108 
 Other assets 
 81,438 
 77,496 
 Total assets 
 $ 
 1,021,808 
 $ 
 1,074,735 
 Interest-bearing liabilities: 
 Deposits: 
 

 

 NOW 
 $ 
 193,451 
 1,907 
 0.99% 

 $ 
 197,177 
 370 
 0.19% 

 Savings and money market 
 289,235 
 2,132 
 0.74% 

 327,139 
 649 
 0.20% 

 Certificates of deposits 

 175,085 
 3,935 
 2.25% 

 154,273 
 1,300 
 0.84% 

 Total interest-bearing deposits 
 657,771 
 7,974 
 1.21% 

 678,589 
 2,319 
 0.34% 

 Short-term borrowings 
 3,255 
 72 
 2.21% 

 4,516 
 60 
 1.33% 

 Total interest-bearing liabilities 
 661,026 
 8,046 
 1.22% 

 683,105 
 2,379 
 0.35% 

 Noninterest-bearing deposits 
 289,019 
 

 306,772 
 

 Other liabilities 
 3,697 
 1,933 
 Stockholders' equity 
 68,066 
 

 82,925 
 

 Total liabilities and 
 and stockholders' equity 
 $ 
 1,021,808 
 $ 
 1,074,735 
 Net interest income and margin 
 $ 
 26,745 
 2.89% 
 $ 
 27,622 
 2.81% 
 

 

 

 (1) Average loan balances are 
shown net of unearned income and 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 an income tax rate 
 of 21%. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 76 
 Table 4 
- Volume and 
Rate Variance 
Analysis 
 Year ended December 31, 2023 vs. 2022 
 Year ended December 31, 2022 vs. 2021 
 Net 
 Due to change in 
 Net 
 Due to change in 
 (Dollars in thousands) 
 Change 
 Rate (2) 
 Volume (2) 
 Change 
 Rate (2) 
 Volume (2) 
 Interest income: 
 

 

 

 

 

 

 Loans and loans held for sale 

 $ 
 4,684 
 1,390 
 3,294 
 $ 
 (232) 
 (5) 
 (227) 
 Securities - taxable 
 632 
 1,247 
 (615) 
 2,469 
 1,687 
 782 
 Securities - tax-exempt (1) 
 (187) 
 174 
 (361) 
 (70) 
 (30) 
 (40) 
 Total securities 

 445 
 1,421 
 (976) 
 2,399 
 1,657 
 742 
 Federal funds sold 
 (185) 
 1,661 
 (1,846) 
 380 
 329 
 51 
 Interest bearing bank deposits 
 (154) 
 2,285 
 (2,439) 
 477 
 666 
 (189) 
 Total interest income 
 $ 
 4,790 
 6,757 
 (1,967) 
 $ 
 3,024 
 2,647 
 377 
 Interest expense: 
 Deposits: 
 NOW 
 $ 
 1,537 
 1,574 
 (37) 
 $ 
 158 
 122 
 36 
 Savings and money market 
 1,483 
 1,762 
 (279) 
 (6) 
 (66) 
 60 
 Certificates of deposits 
 2,635 
 2,167 
 468 
 (333) 
 (292) 
 (41) 
 Total interest-bearing deposits 
 5,655 
 5,503 
 152 
 (181) 
 (236) 
 55 
 Short-term borrowings 
 12 
 40 
 (28) 
 43 
 8 
 35 
 Total interest expense 
 5,667 
 5,543 
 124 
 (138) 
 (228) 
 90 
 Net interest income 
 $ 
 (877) 
 1,214 
 (2,091) 
 $ 
 3,162 
 2,875 
 287 
 

 (1) Yields on tax-exempt securities have been 
computed on a tax-equivalent basis using an income 

 tax rate of 21%. 
 (2) Changes that are not solely a result of volume or rate have been allocated to volume. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 77 
 Table 5 
- Net Charge-Offs (Recoveries) to Average 
Loans 
 2023 
 2022 
 Net 
 Net 
 Net 
 (recovery) 
 Net 
 charge-off 
 (recoveries) 
 Average 
 charge-off 
 charge-offs 
 Average 
 (recovery) 
 (Dollars in thousands) 
 charge-off 
 Loans (2) 
 ratio 
 (recoveries) 
 Loans (2) 
 ratio 
 Commercial and industrial (1) 
 $ 
 (40) 
 64,565 
 (0.06) 
 % 
 $ 
 215 
 69,973 
 0.31 
 % 
 Construction and land development 
 — 

 66,492 
 — 

 — 

 44,177 
 — 

 Commercial real estate 
 — 

 274,779 
 — 

 (23) 
 247,374 
 (0.01) 
 Residential real estate 
 (14) 
 108,891 
 (0.01) 
 (26) 
 85,223 
 (0.03) 
 Consumer installment 
 100 
 9,638 
 1.04 
 8 
 7,915 
 0.10 
 Total 
 $ 
 46 
 524,365 
 0.01 
 % 
 $ 
 174 
 454,662 
 0.04 
 % 
 (1) Excludes PPP loans, which are guaranteed by the SBA. 
 (2) Gross loan balances. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 78 
 Table 6 
- Loan Maturities 
 December 31, 2023 
 1 year 

 1 to 5 
 5 to 15 

 After 15 
 (Dollars in thousands) 
 or less 
 years 
 years 
 years 
 Total 
 Commercial and industrial 
 $ 
 15,455 
 22,999 
 33,269 
 1,651 
 73,374 
 Construction and land development 
 37,684 
 27,105 
 3,540 
 
— 

 68,329 
 Commercial real estate 
 23,139 
 111,988 
 148,200 
 3,980 
 287,307 
 Residential real estate 
 5,250 
 24,880 
 37,391 
 49,936 
 117,457 
 Consumer installment 
 4,159 
 5,536 
 1,132 
 — 

 10,827 
 Total loans 
 $ 
 85,687 
 192,508 
 223,532 
 55,567 
 557,294 

 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 79 
 Table 7 
- Sensitivities to Changes in Interest Rates on Loans Maturing in More 
Than One Year 

 December 31, 2023 
 Variable 
 Fixed 
 (Dollars in thousands) 
 Rate 
 Rate 
 Total 
 Commercial and industrial 
 $ 
 84 
 57,835 
 57,919 
 Construction and land development 
 6,548 
 24,097 
 30,645 
 Commercial real estate 
 161 
 264,007 
 264,168 
 Residential real estate 
 49,561 
 62,646 
 112,207 
 Consumer installment 
 135 
 6,533 
 6,668 
 Total loans 
 $ 
 56,489 
 415,118 
 471,607 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 80 
 Table 8 
- Allocation of Allowance for Credit Losses 
 2023 
 2022 
 (Dollars in thousands) 
 Amount 
 %* 
 Amount 
 %* 
 Commercial and industrial 
 $ 
 1,288 
 13.2 
 $ 
 747 
 13.1 
 Construction and land development 
 960 
 12.3 
 949 
 13.2 
 Commercial real estate 
 3,921 
 51.5 
 3,109 
 52.4 
 Residential real estate 
 546 
 21.1 
 828 
 19.4 
 Consumer installment 
 148 
 1.9 
 132 
 1.9 
 

 Total allowance for credit 
losses 
 $ 
 6,863 
 $ 
 5,765 
 * Loan balance in each category expressed as a percentage of total loans. 

 
 
 
 
 
 
 
 
 
 
 
 Table of Contents 
 81 
 Table 9 
- Estimated Uninsured Time Deposits by Maturity 
 (Dollars in thousands) 
 December 31, 2023 
 Maturity of: 
 3 months or less 
 $ 
 12,503 
 Over 3 months through 6 months 
 21,940 
 Over 6 months through 12 months 
 50,384 
 Over 12 months 
 12,816 
 Total estimated uninsured 
time deposits 
 $ 
 97,643 

 
 
 
 Table of Contents 
 82 
 ITEM 7A. 
QUANTITATIVE 
AND QUALITATIVE 
DISCLOSURES ABOUT MARKET RISK 
 The information called for by ITEM 7A is set forth in ITEM 7 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-K

Item 7. Management’s Discussion and Analysis
