What changed in this filing

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Item 1. Financial Statements

2024-11-01 compared with 2024-08-02 · 424 added, 391 removed, 652 unchanged (56% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

September 30,

(Dollars in thousands, except share data)

22 unchanged sentences

Less treasury stock, at cost -

at June 30, 2024

at September 30, 2024

and December 31, 2023, respectively

Total stockholders’ equity

Total stockholders’

Total liabilities and stockholders’

4 unchanged sentences

Consolidated Statements of Earnings

Quarter ended June 30,

Six months ended June 30,

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands, except share and per share data)

30 unchanged sentences

Consolidated Statements of Comprehensive Income

Quarter ended June 30,

Six months ended June 30,

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

Other comprehensive (loss) gain:

Unrealized (loss) gain on securities

Related tax benefit (expense)

Other comprehensive (loss) gain, net of tax

Other comprehensive income (loss):

Unrealized gain (loss) on securities

Related tax (expense) benefit

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

6 unchanged sentences

(Dollars in thousands, except share data)

(loss) income

Quarter ended June 30, 2024

Balance, March 31, 2024

Other comprehensive loss

income (loss)

Quarter ended September 30, 2024

Balance, June 30, 2024

Other comprehensive income

Cash dividends paid ($

Sale of treasury stock

Balance, September 30, 2024

Quarter ended September 30, 2023

Balance, June 30, 2023

Quarter ended June 30, 2023

Balance, March 31, 2023

Other comprehensive loss

2 unchanged sentences

Sale of treasury stock

Balance, June 30, 2023

Six months ended June 30, 2024

Balance, September 30, 2023

Nine months ended September 30, 2024

Balance, December 31, 2023

Cumulative effect of change in accounting

Other comprehensive loss

standard ASC 326

Other comprehensive income

Cash dividends paid ($

Sale of treasury stock

Balance, June 30, 2024

Six months ended June 30, 2023

Balance, September 30, 2024

Nine months ended September 30, 2023

Balance, December 31, 2022

Cumulative effect of change in accounting

Other comprehensive income

standard ASU 2023-12

Other comprehensive loss

Cash dividends paid ($

1 unchanged sentence

Sale of treasury stock

Balance, June 30, 2023

Balance, September 30, 2023

See accompanying notes to consolidated financial statements

3 unchanged sentences

Consolidated Statements of Cash Flows

Six months ended June 30,

Nine months ended September 30,

(Dollars in thousands)

11 unchanged sentences

Net (increase) decrease in other assets

Net increase (decrease) in accrued expenses and other liabilities

Net increase in accrued expenses and other liabilities

Net cash provided by operating activities

4 unchanged sentences

Proceeds from bank-owned life insurance death benefit

Decrease in FHLB stock

Net cash used in investing activities

Proceeds from surrender of bank-owned life insurance

Decrease (increase) in FHLB stock

Net cash provided by (used in) investing activities

Cash flows from financing activities:

5 unchanged sentences

Dividends paid

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

8 unchanged sentences

Notes to Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING

Auburn National Bancorporation, Inc.

(the “Company”) provides a full range of banking services

to individuals and

(the “Company”) provides a full range

of banking services to individuals

commercial customers in Lee County,

1 unchanged sentence

(the “Bank”).

The Company does not have any segments other than banking that are considered

The Company does not have any segments other than banking

that are considered material.

Basis of Presentation and Use of Estimates

The unaudited consolidated financial statements in this report have been prepared

in accordance with U.S.

The unaudited consolidated financial statements in this report have

been prepared in accordance with U.S.

accepted accounting principles (“GAAP”) for interim financial information.

1 unchanged sentence

include all of the information and footnotes required by U.S.

GAAP for complete financial

GAAP for complete

financial statements.

The unaudited

consolidated financial statements include, in the opinion of management, all adjustments

necessary to present a fair

statement of the financial position and the results of operations for all periods

consolidated financial statements include, in the opinion of management,

all adjustments necessary to present a fair

statement of the financial position and the results of operations for all periods presented.

All such adjustments are of a

normal recurring nature.

The results of operations in the interim statements are not necessarily

indicative of the results of

operations that the Company and its subsidiaries may achieve for future interim periods

or the entire year.

information, refer to the consolidated financial statements and footnotes included in the Company's

Annual Report on Form

The results of operations in the interim statements are not

necessarily indicative of the results of

operations that the Company and its subsidiaries may achieve for future interim

periods or the entire year.

information, refer to the consolidated financial statements and footnotes included

in the Company's Annual Report on Form

10-K for the year ended December 31, 2023.

The unaudited consolidated financial statements include the accounts of the

Company and its wholly-owned subsidiaries.

Significant intercompany transactions and accounts are eliminated in consolidation.

The unaudited consolidated financial statements include the accounts

of the Company and its wholly-owned subsidiaries.

Significant intercompany transactions and accounts are eliminated in

consolidation.

The preparation of financial statements in conformity with U.S.

3 unchanged sentences

of contingent assets and liabilities as of

the balance sheet date and the reported amounts of revenues and expenses during the reporting period.

the balance sheet date and the reported amounts of revenues and expenses during

the reporting period.

Actual results could

differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term

include the determination of allowance for credit losses on loans and investment securities,

fair value of financial

instruments, and the valuation of deferred tax assets and other real estate owned (“OREO”).

Material estimates that are particularly susceptible to significant change in

the near term

include the determination of allowance for credit losses on loans and

investment securities, fair value of financial

instruments, and the valuation of deferred tax assets and other real estate owned

Revenue Recognition

The Company’s sources of income that

fall within the scope of ASC 606 include service charges on deposits,

interchange fees and gains and losses on sales of other real estate, all of which are presented

as components of noninterest

The following is a summary of the revenue streams that fall within the scope

The Company’s sources of

income that fall within the scope of ASC 606 include service charges on

deposits, ATM

interchange fees and gains and losses on sales of other real estate, all of which

are presented as components of noninterest

The following is a summary of the revenue streams that fall within

the scope of ASC 606:

Service charges on deposits, investment services, ATM

and interchange fees – Fees from these services are either

(i) transaction-based, for which the performance obligations are satisfied

when the individual transaction is

(i) transaction-based, for which the performance obligations are satisfied when the

individual transaction is

processed, or (ii) set periodic service charges, for which the performance

8 unchanged sentences

ASC 606 lists several criteria required to conclude that a contract for sale

exists, including a determination that the institution will collect substantially all of the consideration

to which it is

In addition to the loan-to-value ratio, where the seller provides

the purchaser with financing, the analysis

is based on various other factors,

including the credit quality of the purchaser,

the structure of the loan, and any

exists, including a determination that the institution will collect substantially all of the

consideration to which it is

In addition to the loan-to-value ratio, where the seller provides the purchaser

with financing, the analysis

is based on various other factors, including the credit quality of the

purchaser, the structure of the loan, and any

other factors that we believe may affect collectability.

Subsequent Events

The Company has evaluated the effects of events and transactions through

the date of this filing that have occurred

subsequent to June 30, 2024.

The Company does not believe there were any material subsequent events during this

that would have required further recognition or disclosure in the unaudited

consolidated financial statements included in

The Company has evaluated the effects of events and

transactions through the date of this filing that have occurred

subsequent to September 30, 2024.

The Company does not believe there were any material subsequent events during

period that would have required further recognition or disclosure in the

unaudited consolidated financial statements

included in this report.

Correction of Error

The disclosure of loans by vintage in Note 5 – Loans and Allowance for Credit

Losses in the Company’s Annual Report on

Form 10-K for year ended December 31, 2023 contained incorrect information as it pertains

to loans originated by vintage

Losses in the Company’s Annual

Form 10-K for year ended December 31, 2023 contained incorrect

information as it pertains to loans originated by vintage

and revolving loans.

All current period gross charge-off data, total loans by segment and total loans by credit

All current period gross charge-off data, total loans by segment

and total loans by credit quality

indicator were correctly reported.

The loans originated by vintage and revolving loans as of December 31, 2023

corrected in the comparative presentation in Note 5 – Loans and Allowance for Credit Losses

in the Notes herein.

The loans originated by vintage and revolving loans as of December 31, 2023 have been

corrected in the comparative presentation in Note 5 – Loans and Allowance

for Credit Losses in the Notes herein.

Reclassifications

Certain amounts reported in prior periods have been reclassified to conform to the current

-period presentation.

Certain amounts reported in prior periods have been reclassified to

conform to the current-period presentation.

reclassifications had no effect on the Company’s

7 unchanged sentences

ASU 2023-02 now

permits reporting entities to elect to account for their equity investments made primarily to

receive income tax credits and

other income tax benefits,

regardless of the program from which the income tax credits or benefits are received,

permits reporting entities to elect to account for their equity investments made

primarily to receive income tax credits and

other income tax benefits, regardless of the program from which the income

tax credits or benefits are received, using the

proportional amortization method if certain conditions are met.

5 unchanged sentences

retained earnings by $0.3 million.

The Company, beginning

January 1, 2024, accounts

The Company, beginning January

1, 2024, accounts

for its investments in New Markets

Tax Credits (“NMTCs”)

using the proportional amortization method through charges to the

provision for income taxes.

Tax Credits (“NMTCs”) using

the proportional amortization method through charges to

the provision for income taxes.

Note 3, Variable

1 unchanged sentence

BASIC AND DILUTED NET EARNINGS PER SHARE

Basic net earnings per share is computed by dividing net earnings by the weighted average

common shares outstanding for

Basic net earnings per share is computed by dividing net earnings by the weighted

average common shares outstanding for

the respective period.

Diluted net earnings per share reflect the potential dilution that could occur

upon exercise of

securities or other rights for, or convertible into, shares of the

Company’s common stock.

At June 30, 2024 and 2023,

respectively, the Company

had no such securities or rights issued or outstanding, and therefore, no dilutive

Diluted net earnings per share reflect the potential dilution that could occur upon

securities or other rights for, or convertible into,

shares of the Company’s common stock.

At September 30, 2024 and

2023, respectively,

the Company had no such securities or rights issued or outstanding, and therefore, no dilutive

consider for the diluted net earnings per share calculation.

The basic and diluted net earnings per share computations for the respective periods are

presented below

Quarter ended June 30,

Six months ended June 30,

The basic and diluted net earnings per share computations for the respective

periods are presented below

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands, except share and per share data)

Basic and diluted:

Weighted average common

shares outstanding

Weighted average

common shares outstanding

Net earnings per share

INTEREST ENTITIES

Generally, a variable interest entity (“VIE”)

is a corporation, partnership, trust or other legal structure that does not have

equity investors with substantive or proportional voting rights or has equity investors

that do not provide sufficient financial

Generally, a variable interest

entity (“VIE”) is a corporation, partnership, trust or other legal structure that

does not have

equity investors with substantive or proportional voting rights or has equity

investors that do not provide sufficient financial

resources for the entity to support its activities.

At June 30, 2024, the Company did not have any consolidated VIEs but did have one nonconsolidated

VIE, discussed

At September 30, 2024, the Company did not have any consolidated VIEs but did

have one nonconsolidated VIE, discussed

New Markets Tax

Credit Investment

available to investors

years and are

subject to recapture

if certain events

respectively,

September 30,

2024 and December

31, 2023, respectively,

investment of $1.0

million and $1.7

million, respectively,

which was included in other assets in the Company’s

consolidated balance sheets as a VIE.

investment exceeds

2 unchanged sentences

not consolidate

activities of

and therefore

primary beneficiary

direct the activities

not a primary

beneficiary of

On March 29, 2023, the FASB

issued ASU 2023-02, which was effective beginning in 2024 for

public business entities.

issued ASU 2023-02, which was effective beginning in 2024

for public business entities.

proportional amortization

method results in

credit investment

method results

tax credit investment

being amortized

in proportion

allocation of

credits and other tax

benefits in each

to the allocation

credits and other

tax benefits in each

net presentation within

1 unchanged sentence

The cumulative effects

million pre-tax

January 1, 2024.

Summary of Significant Accounting Policies – Accounting

Standards Adopted in 2024.

Summary of Significant Accounting Policies – Accounting Standards

Adopted in 2024.

(Dollars in thousands)

2 unchanged sentences

Classification

New Markets Tax Credit investment

At June 30, 2024 and December 31, 2023, respectively,

New Markets Tax Credit

At September 30, 2024 and December 31, 2023, respectively,

all securities within the scope of ASC 320,

Investments – Debt and

Equity Securities,

Investments –

Debt and Equity Securities,

were classified as available-for-sale.

The fair value and amortized cost for securities available-for-sale

by contractual maturity at June 30, 2024 and December 31, 2023, respectively,

The fair value and amortized cost for securities available-

for-sale by contractual maturity at September 30, 2024

and December 31, 2023, respectively,

are presented below.

1 unchanged sentence

(Dollars in thousands)

June 30, 2024

September 30, 2024

Agency obligations (a)

8 unchanged sentences

(a) Includes securities issued by U.S.

government agencies or government-sponsored

government agencies or government

-sponsored entities.

Expected lives of these

securities may differ from contractual maturities because (i)

issuers may have the right to call or repay such securities

obligations with or without prepayment penalties and (ii) loans incuded in Agency MBS

generally have the right to

securities may differ from contractual maturities because (i) issuers may

have the right to call or repay such securities

obligations with or without prepayment penalties and (ii) loans incuded in Agency

MBS generally have the right to

prepay such loan in whole or in part at any time.

1 unchanged sentence

million and $

at June 30, 2024 and December 31, 2023, respectively,

were pledged to secure public deposits, securities sold under agreements to repurchase,

Federal Home Loan Bank of

Atlanta (“FHLB of Atlanta”) advances, and for other purposes required or

permitted by law.

Included in other assets on the accompanying consolidated balance sheets include non-marketable

equity investments.

at September 30, 2024 and December 31, 2023,

respectively, were

pledged to secure public deposits, securities sold under agreements to repurchase,

Federal Home Loan

Bank of Atlanta (“FHLB of Atlanta”) advances, and for other purposes required

or permitted by law.

Included in other assets on the accompanying consolidated balance sheets include

non-marketable equity investments.

carrying amounts of non-marketable equity investments were $

million at June 30, 2024 and December 31, 2023,

million at September 30, 2024 and December 31, 2023,

respectively.

Non-marketable equity investments include FHLB of Atlanta stock,

Federal Reserve Bank of Atlanta

Non-marketable equity investments include FHLB of Atlanta stock, Federal Reserve

Bank of Atlanta

(“FRB”) stock, and stock in a privately held financial institution.

Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at June 30, 2024

and December 31, 2023, respectively, segregated

by those securities that have been in an unrealized loss position for less than 12

months and 12 months or longer, are

presented below.

The fair values and gross unrealized losses on securities at September

30, 2024 and December 31, 2023, respectively,

segregated by those securities that have been in an unrealized loss position

for less than 12 months and 12 months or

longer, are presented below.

Less than 12 Months

1 unchanged sentence

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Agency obligations

3 unchanged sentences

State and political subdivisions

For the securities in the previous table, the Company considers the severity of the unrealized

loss as well as the Company’s

For the securities in the previous table, the Company considers the severity of

the unrealized loss as well as the Company’s

intent to hold the securities to maturity or the recovery of the cost basis.

Unrealized losses have not been recognized into

income as the decline in fair value is largely due to changes in interest rates and other

market conditions.

income as the decline in fair value is largely due to changes in interest rates

and other market conditions.

For the securities

held as of June 30, 2024 in the table immediately above, management does not intend to sell

and it is likely that

held as of September 30, 2024 in the table immediately above, management

does not intend to sell and it is likely that

management will not be required to sell the securities prior to their recovery.

Agency Obligations

Investments in agency obligations are guaranteed as to full and timely payment of principal

and interest by the issuing

Based on management's analysis and judgement, there

were no credit losses attributable to the Company’s

investments in agency obligations at June 30, 2024.

Investments in agency mortgage-backed securities (“MBS”) are MBS

issued by Ginnie Mae, Fannie Mae, and Freddie

Each of these agencies provide a guarantee of full and timely payments of principal and interest

on their respective

Investments in agency obligations are guaranteed as to full and timely

payment of principal and interest by the issuing

Based on management's analysis and judgement, there were no credit losses attributable

to the Company’s

investments in agency obligations at September 30, 2024.

Investments in agency mortgage-backed securities (“MBS”) are MBS issued by

Ginnie Mae, Fannie Mae, and Freddie

Each of these agencies provide a guarantee of full and timely payments of principal and

interest on their respective

MBS by the issuing agency.

Based on management's analysis and judgement, there were no credit

losses attributable to the

Company’s investments in agency MBS at June

Based on management's analysis and judgement, there were no

credit losses attributable to the

Company’s investments

in agency MBS at September 30, 2024.

State and Political Subdivisions

Investments in state and political subdivisions are securities issued by various

municipalities in the United States.

Investments in state and political subdivisions are securities issued by

various municipalities in the United States.

majority of these securities were rated AA or higher,

with no securities rated below investment grade at June 30, 2024.

with no securities rated below investment grade at September 30,

Based on management's analysis and judgement, there were no credit losses attributable

to the Company’s investments

state and political subdivisions at June 30, 2024.

to the Company’s

investments in state and political subdivisions at September 30, 2024.

Realized Gains and Losses

The Company had no realized gains or losses on sale of securities during the quarters and six

months ended June 30, 2024

and 2023, respectively.

The Company had no realized gains or losses on sale of securities during the nine

months ended September 30, 2024 and

2023, respectively.

LOANS AND ALLOWANCE

FOR CREDIT LOSSES

September 30,

(Dollars in thousands)

3 unchanged sentences

Owner occupied

Total commercial real estate

Total commercial

Residential real estate:

1 unchanged sentence

Investment property

Total residential real estate

Total residential real

Consumer installment

Loans secured by real estate were approximately 87.4% of the Company’s

total loan portfolio at June 30, 2024.

2024, the Company’s geographic

loan distribution was concentrated primarily in Lee County,

Alabama, and surrounding

The loan portfolio segment is defined as the level at which an entity develops and documents a

systematic method for

total loan portfolio at September 30, 2024.

September 30, 2024, the Company’s

geographic loan distribution was concentrated primarily in Lee County,

surrounding areas.

The loan portfolio segment is defined as the level at which an entity develops

and documents a systematic method for

determining its allowance for credit losses.

2 unchanged sentences

portfolio included the following portfolio segments:

commercial and industrial,

construction and land development,

commercial and

industrial, construction and land development,

commercial real estate, residential real estate, and consumer installment.

2 unchanged sentences

segments are further disaggregated into classes.

A class is generally determined based

on the initial measurement attribute,

A class is generally determined

based on the initial measurement attribute,

risk characteristics of the loan, and an entity’s

1 unchanged sentence

The following describes

the risk characteristics relevant to each of the portfolio segments

the risk characteristics relevant to each of the portfolio segments and classes.

Commercial and industrial (“C&I”) —

1 unchanged sentence

for small and medium-sized commercial customers.

Also included

in this category are loans to finance agricultural

the primary source of repayment is the cash flow from business operations and activities

included in this category are loans to finance agricultural

Generally, the primary source of repayment

is the cash flow from business operations and activities of the

Construction and land development (“C&D”) —

9 unchanged sentences

Owner occupied

– includes loans secured by business facilities to finance business operations, equipment and

– includes loans secured by business facilities to finance business operations, equipment

owner-occupied facilities primarily for small and medium-sized

commercial customers.

source of repayment is the cash flow from business operations and activities of the borrower,

Generally, the primary

source of repayment is the cash flow from business operations and activities of

the borrower, who owns the

– includes loans for hotels and motels.

Generally, the primary source of repayment

is dependent upon

Generally, the primary source

of repayment is dependent upon

income generated from the hotel/motel securing the loan.

1 unchanged sentence

the occupancy and rental rates, as well as the financial health of the borrower.

– primarily includes loans to finance income-producing multi-family properties

– primarily includes loans to finance income-producing

multi-family properties.

These include loans

2 unchanged sentences

repayment is dependent upon income generated from the real estate collateral.

The underwriting of these loans

takes into consideration the occupancy and rental rates,

as well as the financial health of the respective borrowers.

– primarily includes loans to finance income-producing commercial properties

other than hotels/motels and

underwriting of these loans

takes into consideration the occupancy and rental rates, as well as the financial

health of the respective borrowers.

– primarily includes loans to finance income-producing commercial

properties other than hotels/motels and

multi-family properties, and which

1 unchanged sentence

Loans in this class include loans for neighborhood

retail centers, medical and professional offices, single retail stores,

industrial buildings, and warehouses leased to

retail centers,

medical and professional offices, single retail stores, industrial

buildings, and warehouses leased to

local and other businesses.

the primary source of repayment is dependent upon income generated

the primary source of repayment is dependent upon income generated from

the real estate collateral.

5 unchanged sentences

Consumer mortgage

– primarily includes first or second lien mortgages and home equity lines of credit

– primarily includes

first or second lien mortgages and home equity lines of credit to

consumers that are secured by a primary residence or second home.

These loans are underwritten in

These loans are underwritten

in accordance

with the Bank’s general loan policies and

procedures which require, among other things, proper documentation of

each borrower’s financial condition, satisfactory credit history

each borrower’s financial condition, satisfactory credit

and property value.

Investment property

– primarily includes loans to finance income-producing 1-4 family residential properties.

the primary source of repayment is dependent upon income generated

from leasing the property

– primarily includes loans to finance income-producing 1-4 family residential

the primary source of repayment is dependent upon income generated from

leasing the property

securing the loan.

The underwriting of these loans takes into consideration the rental rates and

property values, as

The underwriting of these loans takes into consideration

the rental rates and property values, as

well as the financial health of the borrowers.

4 unchanged sentences

These loans are underwritten in accordance with

the Bank’s general loan policies and procedures

which require, among other things, proper documentation of each

the Bank’s general loan policies and

procedures which require, among other things, proper documentation

borrower’s financial condition, satisfactory credit history,

and, if applicable, property values.

The following is a summary of current, accruing past due, and nonaccrual loans by portfolio

segment and class as of June

30, 2024 and December 31, 2023.

The following is a summary of current, accruing past due, and nonaccrual

loans by portfolio segment and class as of

September 30, 2024 and December 31, 2023.

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Commercial and industrial

2 unchanged sentences

Owner occupied

Total commercial real estate

Total commercial

Residential real estate:

1 unchanged sentence

Investment property

Total residential real estate

Total residential real

Consumer installment

4 unchanged sentences

Owner occupied

Total commercial real estate

Total commercial

Residential real estate:

1 unchanged sentence

Investment property

Total residential real estate

Total residential real

Consumer installment

Credit Quality Indicators

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories

similar to the

The credit quality of the loan portfolio is summarized no less frequently than

quarterly using categories similar to the

standard asset classification system used by the federal banking agencies.

These categories are utilized to develop the

associated allowance for credit losses using historical losses adjusted

for qualitative and environmental factors and are

associated allowance for credit losses using historical losses adjusted for

qualitative and environmental factors and are

defined as follows:

4 unchanged sentences

if not reversed or corrected, weaken the credit or

inadequately protect the Company’s position

at some future date.

inadequately protect the Company’s

position at some future date.

These loans are not adversely classified and do

not expose an institution to sufficient risk to warrant an adverse classification.

Substandard Accruing – loans that exhibit a well-defined weakness which presently

jeopardizes debt repayment,

not expose an institution to sufficient risk to warrant an

adverse classification.

Substandard Accruing – loans that exhibit a well-defined weakness which

presently jeopardizes debt repayment,

even though they are currently performing.

These loans are characterized by the distinct possibility

These loans are characterized

by the distinct possibility that the

Company may incur a loss in the future if these weaknesses are not corrected.

1 unchanged sentence

full payment of principal and interest is not

Substandard accrual and nonaccrual loans are often collectively referred to as “classified.”

The following tables presents credit quality indicators for the loan portfolio segments and

classes by year of origination as

of June 30, 2024 and December 31, 2023.

The December 31, 2023 table has been revised to correct revolving loans and

properly allocate loans by year of origination.

Summary of Significant Accounting Policies – Correction of

Substandard accrual and nonaccrual loans are often collectively referred

to as “classified.”

The following tables presents credit quality indicators for the loan portfolio

segments and classes by year of origination as

of September 30, 2024 and December 31, 2023.

The December 31, 2023 table has been revised to correct revolving loans

and properly allocate loans by year of origination.

Summary of Significant Accounting Policies – Correction

Year of Origination

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Commercial and industrial

16 unchanged sentences

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Special mention

66 unchanged sentences

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

The composition of the provision for (reversal of) credit losses for the respective periods

is presented below.

Quarter ended June 30,

Six months ended June 30,

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.

The composition of the provision for (reversal of) credit losses for the respective

periods is presented below.

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

1 unchanged sentence

Reserve for unfunded commitments

Total provision for (reversal of)

credit losses

The following table details the changes in the allowance for credit losses for loans, by portfolio

segment, for the respective

Total provision for (reversal

of) credit losses

The following table details the changes in the allowance for credit losses for loans,

by portfolio segment, for the respective

(Dollars in thousands)

1 unchanged sentence

Quarter ended:

June 30, 2024

September 30, 2024

Beginning balance

2 unchanged sentences

Ending balance

Six months ended:

June 30, 2024

Nine months ended:

September 30, 2024

Beginning balance

5 unchanged sentences

Quarter ended:

June 30, 2023

September 30, 2023

Beginning balance

2 unchanged sentences

Ending balance

Six months ended:

June 30, 2023

Nine months ended:

September 30, 2023

Beginning balance

3 unchanged sentences

Ending balance

The following table presents the amortized cost basis of collateral dependent loans, which

are individually evaluated to

determine expected credit losses as of March 31, 2024 and December 31, 2023:

The following table presents the amortized cost basis of collateral dependent loans,

which are individually evaluated to

determine expected credit losses as of September 30, 2024 and December

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Commercial real estate

1 unchanged sentence

Commercial real estate

The following table is a summary of the Company’s

nonaccrual loans by major categories as of March 31, 2024 and

The following table summarizes the Company’s

nonaccrual loans by major categories as of September 30, 2024 and

December 31, 2023.

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Nonaccrual Loans

June 30, 2024

September 30, 2024

Commercial real estate

4 unchanged sentences

MORTGAGE SERVICING

Mortgage servicing rights (“MSRs”) are recognized based on the fair value of the

servicing rights on the date the

Mortgage servicing rights (“MSRs”) are recognized based on the fair

value of the servicing rights on the date the

corresponding mortgage loans are sold.

An estimate of the fair value of the Company’s MSRs is

determined using

assumptions that market participants would use in estimating future net servicing

income, including estimates of

prepayment speeds, discount rates, default rates, costs to service, escrow account earnings,

contractual servicing fee

An estimate of the fair value of the Company’s

MSRs is determined using

assumptions that market participants would use in estimating future net

servicing income, including estimates of

prepayment speeds, discount rates, default rates, costs to service, escrow account

earnings, contractual servicing fee

income, ancillary income, and late fees.

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of, estimated net servicing income.

The Company generally sells, without recourse, conforming, fixed-rate, closed-end, residential

mortgages to Fannie Mae,

The Company generally sells, without recourse, conforming, fixed-rate, closed-end,

residential mortgages to Fannie Mae,

where the Company services the mortgages sold and records MSRs.

3 unchanged sentences

Impairment is determined by stratifying MSRs into

groupings based on predominant risk characteristics, such as interest rate and loan type.

groupings based on predominant risk characteristics, such as interest rate and

If, by individual stratum, the

4 unchanged sentences

lending income.

The following table details the changes in amortized MSRs and the related valuation allowance for

the respective periods.

Quarter ended June 30,

Six months ended June 30,

The following table details the changes in amortized MSRs and the related valuation

allowance for the respective periods.

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

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occurring in the principal

market (or most advantageous market in the absence of a principal

market) for an asset or liability at the measurement date.

market (or most advantageous market in the absence of a principal market)

for an asset or liability at the measurement date.

GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority

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The fair value hierarchy is as

Level 1—inputs to the valuation methodology are quoted prices, unadjusted, for identical

assets or liabilities in active

Level 1—inputs to the valuation methodology are quoted prices, unadjusted,

for identical assets or liabilities in active

Level 2—inputs to the valuation methodology include quoted prices for similar assets and

liabilities in active markets,

quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that

are observable for the

asset or liability, either directly or

Level 3—inputs to the valuation methodology are unobservable and reflect the

Company’s own assumptions about the

quoted prices for identical or similar assets or liabilities in markets that are not

active, or inputs that are observable for the

asset or liability, either directly

or indirectly.

Level 3—inputs to the valuation methodology are unobservable and reflect

the Company’s own assumptions about

inputs market participants would use in pricing the asset or liability.

Level changes in fair value measurements

Transfers between levels of the fair value hierarchy are generally

recognized at the end of each reporting period.

Company monitors the valuation techniques utilized for each category of

financial assets and liabilities to ascertain when

Transfers between levels of the fair value hierarchy

are generally recognized at the end of each reporting period.

Company monitors the valuation techniques utilized for each category

of financial assets and liabilities to ascertain when

transfers between levels have been affected.

The nature of the Company’s financial assets

and liabilities generally is such

The nature of the Company’s financial

assets and liabilities generally is such

that transfers in and out of any level are expected to be infrequent.

For the six months

ended June 30, 2024, there were no

transfers between levels and no changes in valuation techniques for the Company’s

financial assets and liabilities.

For the nine months ended September 30, 2024, there

were no transfers between levels and no changes in valuation techniques for

the Company’s financial assets and liabilities.

Assets and liabilities measured at fair value on a recurring

Securities available-for-sale

Fair values of securities available for sale were primarily measured using

Level 2 inputs.

Fair values of securities available for sale were primarily measured

using Level 2 inputs.

For these securities, the Company

obtains pricing data from third party pricing services.

These third party pricing services consider observable data that

include broker/dealer quotes, market spreads, cash flows, benchmark yields, reported

trades for similar securities, market

consensus prepayment speeds, credit information, and the securities’ terms and

These third party pricing services consider observable data that may

include broker/dealer quotes, market spreads, cash flows, benchmark yields,

reported trades for similar securities, market

consensus prepayment speeds, credit information, and the securities’ terms

and conditions.

On a quarterly basis,

management reviews the pricing data received from the third party pricing services

for reasonableness given current market

As part of its review, management

may obtain non-binding third party broker/dealer quotes to validate the fair

management reviews the pricing data received from the third party pricing

services for reasonableness given current market

As part of its review, management may

obtain non-binding third party broker/dealer quotes to validate

value measurements.

6 unchanged sentences

valuation methodologies used with management.

The following table presents the balances of the assets and liabilities measured at fair value

on a recurring basis as of June

30, 2024 and December 31, 2023, respectively,

by caption, on the accompanying consolidated balance sheets by ASC 820

valuation hierarchy (as described above).

The following table presents the balances of the assets and liabilities measured at fair

value on a recurring basis as of

September 30, 2024 and December 31, 2023, respectively,

by caption, on the accompanying consolidated balance sheets by

ASC 820 valuation hierarchy (as described above).

Quoted Prices in

2 unchanged sentences

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Securities available-for-sale:

1 unchanged sentence

State and political subdivisions

Total securities available-for-sale

Total securities available

assets at fair value

3 unchanged sentences

State and political subdivisions

Total securities available-for-sale

Total securities available

assets at fair value

Assets and liabilities measured at fair value on a nonrecurring

Loans held for sale

Loans held for sale are carried at the lower of cost or fair value.

Fair values of loans

held for sale are determined using

quoted secondary market prices for similar loans.

Loans held for sale are classified within Level 2 of the fair value

Collateral dependent loans

Collateral dependent loans are measured at the fair value of the collateral securing the loan

less estimated selling costs.

fair value of real estate collateral is determined based on real estate appraisals

which are generally based on recent sales of

Collateral dependent loans are measured at the fair value of the collateral securing

the loan less estimated selling costs.

fair value of real estate collateral is determined based on real estate appraisals which

are generally based on recent sales of

comparable properties which are then adjusted for property specific factors.

3 unchanged sentences

depreciation and other judgmentally determined discount factors.

dependent loans are classified within Level 3 of

the hierarchy due to the unobservable inputs used in determining their fair value such as collateral

values and the borrower's

Collateral dependent

loans are classified within Level 3 of

the hierarchy due to the unobservable inputs used in determining their fair

value such as collateral values and the borrower's

underlying financial condition.

Mortgage servicing rights, net

MSRs, net, included in other assets on the accompanying consolidated balance sheets,

are carried at the lower of cost or

MSRs, net, included in other assets on the accompanying consolidated balance

sheets, are carried at the lower of cost or

estimated fair value.

2 unchanged sentences

MSRs, the Company engages an independent third party.

The independent third party’s

valuation model calculates the

The independent third party’s valuation

model calculates the

present value of estimated future net servicing income using assumptions that

market participants would use in estimating

future net servicing income, including estimates of mortgage prepayment speeds,

discount rates, default rates, costs to

service, escrow account earnings, contractual servicing fee income, ancillary

income, and late fees.

future net servicing income, including estimates of mortgage prepayment

speeds, discount rates, default rates, costs to

service, escrow account earnings, contractual servicing fee income,

ancillary income, and late fees.

Periodically, the

Company will review broker surveys and other market research to validate

significant assumptions used in the model.

significant unobservable inputs include mortgage prepayment speeds or

the constant prepayment rate (“CPR”) and the

Company will review broker surveys and other market research

to validate significant assumptions used in the model.

significant unobservable inputs include mortgage prepayment speeds

or the constant prepayment rate (“CPR”) and the

weighted average discount rate.

Because the valuation of MSRs requires the use of significant unobservable inputs, all of

the Company’s MSRs are classified

within Level 3 of the valuation hierarchy.

The following table presents the balances of the assets and liabilities measured at fair value

on a nonrecurring basis as of

June 30, 2024 and December 31, 2023, respectively,

by caption, on the accompanying consolidated balance sheets and by

FASB ASC 820 valuation

hierarchy (as described above):

Because the valuation of MSRs requires the use of significant unobservable inputs,

the Company’s MSRs are classified within

Level 3 of the valuation hierarchy.

The following table presents the balances of the assets and liabilities measured at fair

value on a nonrecurring basis as of

September 30, 2024 and December 31, 2023, respectively,

by caption, on the accompanying consolidated balance sheets

and by FASB ASC 820

valuation hierarchy (as described above):

Quoted Prices in

2 unchanged sentences

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Loans held for sale

3 unchanged sentences

Loans considered collateral dependent under ASC 326.

Represents MSRs, net, carried at lower of cost or

estimated fair value.

Represents MSRs, net, carried at lower of cost or estimated

Quantitative Disclosures for Level 3 Fair Value

At June 30, 2024 and December 31, 2023, the Company had no Level 3 assets measured

at fair value on a recurring basis.

For Level 3 assets measured at fair value on a non-recurring basis at June 30, 2024

and December 31, 2023, the significant

unobservable inputs used in the fair value measurements and the range of such inputs

with respect to such assets are

presented below.

At September 30, 2024 and December 31, 2023, the Company had no Level

3 assets measured at fair value on a recurring

For Level 3 assets measured at fair value on a non-recurring basis at September

30, 2024 and December 31, 2023,

the significant unobservable inputs used in the fair value measurements

and the range of such inputs with respect to such

assets are presented below.

(Dollars in thousands)

1 unchanged sentence

Unobservable Input

June 30, 2024:

September 30, 2024:

Collateral dependent loans

21 unchanged sentences

Where quoted market prices are

not available, fair values are based on estimates using discounted cash flow analyses.

not available, fair values are based on estimates using discounted cash flow

Discounted cash flows can be

significantly affected by the assumptions used, including the discount rate

and estimates of future cash flows.

following fair value estimates cannot be substantiated by comparison to independent

markets and should not be considered

significantly affected by the assumptions used, including

the discount rate and estimates of future cash flows.

following fair value estimates cannot be substantiated by comparison to

independent markets and should not be considered

representative of the liquidation value of the Company’s

financial instruments, but rather are good-faith estimates

financial instruments, but rather are good-faith estimates of the fair

value of financial instruments held by the Company.

1 unchanged sentence

instruments from its disclosure requirements.

The following methods and assumptions were used by the Company in estimating the fair

value of its financial instruments:

The following methods and assumptions were used by the Company in estimating

the fair value of its financial instruments:

Fair values for loans were calculated using discounted cash flows.

The discount rates reflected

current rates at which similar

rates reflected current rates at which similar

loans would be made for the same remaining maturities.

Expected future cash

flows were projected based on contractual

future cash flows were projected based on contractual

cash flows, adjusted for estimated prepayments.

1 unchanged sentence

Loans held for sale

Fair values of loans held for sale are determined using quoted secondary market

prices for similar loans.

Fair values of loans held for sale are determined using quoted secondary

market prices for similar loans.

Time Deposits

Fair values for time deposits were estimated using discounted cash flows.

discount rates were based on rates currently

Fair values for time deposits were estimated using discounted cash

The discount rates were based on rates currently

offered for deposits with similar remaining maturities.

The carrying value,

related estimated fair value, and placement in the fair value hierarchy of the Company’s

instruments at June 30, 2024 and December 31, 2023 are presented below.

This table excludes financial instruments for

which the carrying amount approximates fair value.

assets for which fair value approximates carrying value

The carrying value, related estimated fair value,

and placement in the fair value hierarchy of the Company’s

instruments at September 30, 2024 and December 31, 2023 are presented

This table excludes financial instruments

for which the carrying amount approximates fair value.

Financial assets for which fair value approximates carrying value

included cash and cash equivalents.

Financial liabilities for which fair value approximates carrying value included

noninterest-bearing demand deposits,

interest-bearing demand deposits, and savings deposits.

noninterest-bearing demand deposits, interest-bearing demand deposits, and

savings deposits.

Fair value approximates

carrying value in these financial liabilities due to these products having no stated

carrying value in these financial liabilities due to these products having

no stated maturity.

Additionally, financial

5 unchanged sentences

(Dollars in thousands)

June 30, 2024:

September 30, 2024:

Financial Assets:

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements