What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-14 · 960 added, 1042 removed, 1084 unchanged (65% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

To the Stockholders

and Board of Directors of

Auburn National Bancorporation, Inc.

1 unchanged sentence

Opinion on the Financial Statements

accompanying consolidated

balance sheets

Auburn National

Bancorporation, Inc.

Subsidiary (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of earnings,

comprehensive income,

stockholders’ equity

related notes

(collectively,

Bancorporation,

comprehensive

stockholders'

statements (collectively,

the “financial

statements”).

2022, and the

results of its

operations and its

cash flows for

the years then

ended, in conformity

accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit

Standards Codification

Instruments –

new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted

The adoption of the new credit loss

standard and its subsequent applications is also communicated as

a critical audit matter below.

the financial

statements present

respects, the financial

position of the

Company as of

December 31, 2024

and 2023, and

the results of

its operations

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

responsibility is to express

registered with

the Public Company Accounting

Oversight Board

(United States) (PCAOB) and

are required to

be independent

with respect to

the Company in

accordance with U.S.

federal securities laws

and the applicable

rules and regulations of the Securities and Exchange Commission and

conducted our audits in accordance

with the standards of

Those standards

require that we plan

and perform the

audit to obtain reasonable

assurance about whether the

financial statements are free

These financial statements are

the responsibility of the

Company’s management.

Our responsibility is to express

Exchange Commission and the PCAOB.

obtain reasonable

assurance about

financial statements

misstatement,

perform, an audit

of its internal

control over financial

of our audits

required to obtain

an understanding of internal control over financial

reporting but not for the

purpose of expressing an opinion on

effectiveness of

internal control over financial reporting.

our audits, we are required to obtain an understanding of

internal control

over financial

procedures included examining, on

a test basis,

evidence regarding the

amounts and disclosures

in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by

audits provide a reasonable basis for our opinion.

effectiveness

control over financial reporting.

we express no such opinion.

Our audits included

performing procedures to

assess the risks of

material misstatement of

the financial statements,

due to error or

fraud, and performing

procedures that respond

to those risks.

procedures included examining,

basis, evidence

regarding the

disclosures in

the financial

accounting principles used

and significant estimates made

by management, as well

as evaluating the

overall presentation of

the financial statements.

believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit

matters communicated below are

matters arising from the

current period audit

of the financial

statements that

were communicated

communicated to

committee and

challenging, subjective or complex judgments.

The communication of critical audit

matters does not alter in any

matters communicated

below are matters

the current period

financial statements

disclosures that

financial statements

especially challenging,

subjective or

communication of

critical audit

the financial

statements, taken

by communicating

audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to

which they relate.

matters below,

critical audit matters or on the accounts or disclosures to which they

Allowance for Credit Losses

portfolio of $557.3

million and related

allowance for credit

losses of $6.9

million as of

December 31, 2023.

described by the Company in Note

1, the allowance for credit

losses is estimated by management using relevant

information, from

external sources,

As described in Note 5 to the Company’s

consolidated financial statements, the Company has a gross

loan portfolio of $564

related allowance

Note 1, the allowance

for credit losses is estimated

by management using

relevant available information, from

both internal

sources, relating

events, current

conditions, and

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supportable forecasts.

Company’s credit

loss assumptions

are estimated

("DCF") model

loan segment,

The Company’s

credit loss assumptions

are estimated using a discounted

cash flow ("DCF") model

for each loan segment,

except consumer

weighted average

remaining life

estimate credit loss

assumptions for consumer

calculates an

probability that

relevant forecasted

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macroeconomic

Projections of

macroeconomic factors

quarterly rates

the statistical

weighted average remaining

several vintages

credit losses.

macroeconomic

an independent

based on the statistical PD models.

The weighted average remaining

life method uses an annual charge

-off rate over several

estimate credit

Additionally,

the allowance

estimated credit losses to differ from historical experience.

identified the Company’s

estimate of the

allowance for credit losses

(“ACL”) as a critical

audit matter.

principal considerations for our

determination of the allowance for

credit losses as a

critical audit matter related

subjectivity in

determining the

macroeconomic data

reasonable and

supportable forecasts,

qualitative factors.

Auditing these

complex judgments

losses calculation

includes subjective

for qualitative risk factors that are believed likely to cause estimated credit

losses to differ from historical experience.

identified the

the allowance

losses (“ACL”)

critical audit

The principal

considerations for our determination

of the allowance for credit

losses as a critical audit

matter related to the high

macroeconomic

forecasts, as

the qualitative

these complex

judgments and

assumptions by

involves especially

challenging auditor

knowledge needed.

The primary procedures we performed to address this critical audit matter

included the following:

especially challenging

auditor judgment

effort required

matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included

the following:

understanding

qualitative factor components of the ACL.

effectiveness

determination of the ACL, including controls over:

factors of the ACL.

Management’s process

to review the

reasonableness of the forecasts

and the qualitative

including any adjustments.

evaluated the

reasonableness of

application of

qualitative factor

adjustments to

ACL, including

the comparison

considered by

management to

as well as evaluated the appropriateness and level of the qualitative factor adjustments.

comparing the overall allowance for credit losses to those recorded by

the Company’s peer institutions.

contradicted the Company’s conclusion.

application of forecasts and the basis

for development and related adjustments

of the qualitative factor components

reasonableness

evaluated the appropriateness and level of the qualitative factor adjustments.

assessed the overall

trends in credit

including adjustments for

the qualitative factors

by comparing the

overall allowance for credit losses to those recorded by the Company’s

peer institutions.

Company’s conclusion.

Elliott Davis, LLC

We have served as the Company's auditor since 2015.

We have served

as the Company's auditor since 2015.

Greenville, South Carolina

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at December 31, 2024 and 2023, respectively

Total stockholders’ equity

Total stockholders’

Total liabilities and stockholders’

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Bank-owned life insurance

Gain on sale of premises and equipment

Securities (losses) gains, net

Securities losses, net

Total noninterest income

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Salaries and benefits

Employee retention credit

Net occupancy and equipment

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Earnings before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Net earnings per share:

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(Dollars in thousands)

Other comprehensive gain (loss), net of tax:

Unrealized net holding gain (loss) on securities

Reclassification adjustment for net loss (gain) on securities

recognized in net earnings

Other comprehensive income (loss)

Comprehensive income (loss)

Other comprehensive (loss) income, net of tax:

Unrealized net holding (loss) gain on securities, net of

tax benefit of $

and tax expense of $

for the years

ended December 31, 2024 and 2023, respectively

Reclassification adjustment for net loss on securities

recognized in net earnings, net of tax benefit of none and $

for the years ended December 31, 2024 and 2023, respectively

Other comprehensive (loss) income

Comprehensive income

See accompanying notes to consolidated financial statements

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Balance, December 31, 2022

Other comprehensive loss

Cumulative effect of change in

accounting standard

Other comprehensive income

Cash dividends paid ($

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accounting standard

Other comprehensive income

Other comprehensive loss

Cash dividends paid ($

Stock repurchases

Sale of treasury stock

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Premium amortization and discount accretion, net

Deferred tax (benefit) expense

Net loss (gain) on securities available for sale

Deferred tax expense (benefit)

Net loss on sale of securities available for sale

Net gain on sale of loans held for sale

Net gain on other real estate owned

Loans originated for sale

Proceeds from sale of loans

Net loss (gain) on disposition of premises and equipment

Decrease (increase) in cash surrender value of bank owned life insurance

Increase in cash surrender value of bank owned life insurance

Income recognized from death benefit on bank-owned life insurance

Net decrease (increase) in other assets

Net decrease in accrued expenses and other liabilities

Net (increase) decrease in other assets

Net increase (decrease) in accrued expenses and other liabilities

Net cash provided by operating activities

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Proceeds from sales of securities available-for-sale

Proceeds from maturities, paydowns and calls of securities available-for-sale

Purchase of securities available-for-sale

Proceeds from maturities, paydowns and calls of securities available-for

Increase in loans, net

Net purchases of premises and equipment

Increase in FHLB stock

Decrease (increase) in FHLB stock

Proceeds from bank-owned life insurance death benefit

Proceeds from surrender of bank-owned like insurance death benefit

Proceeds from sale of premises and equipment

Proceeds from sale of other real estate owned

Net cash provided by (used in) investing activities

Proceeds from surrender of bank-owned life insurance

Net cash provided by investing activities

Cash flows from financing activities:

Net decrease in noninterest-bearing deposits

Net decrease in interest-bearing deposits

Net increase (decrease) in interest-bearing deposits

Net decrease in federal funds purchased and securities sold

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AuburnBank (the “Bank”).

AuburnBank is a commercial bank located in Auburn,

The Bank provides a full range of banking services in its primary market area,

Lee County, which includes the

AuburnBank is a commercial bank located in

The Bank provides a full range of banking services in its primary

market area, Lee County,

which includes the

Auburn-Opelika Metropolitan Statistical Area.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries, which are

The consolidated financial statements include the accounts of the Company

and its wholly-owned subsidiaries, which are

managed as a single business segment.

Significant intercompany transactions and

accounts are eliminated in consolidation.

Significant intercompany

transactions and accounts are eliminated in consolidation.

Revenue Recognition

The Company’s sources of income that fall

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

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

presented as components of

The Company’s sources of

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

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

all of which are presented as components of

noninterest income.

The following is a summary of the revenue streams that fall

within the scope of ASC 606:

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

transaction-based, for which the performance obligations are satisfied

when the individual transaction is processed, or set

periodic service charges, for which the performance obligations

are satisfied over the period the service is provided.

Transaction-based fees are recognized at the time the transaction

is processed, and periodic service charges are recognized

transaction-based, for which the performance obligations are satisfied when the individual transaction

is processed, or set

periodic service charges, for which the performance

obligations are satisfied over the period the service is provided.

Transaction-based fees are recognized at

the time the transaction is processed, and periodic service charges are recognized

over the service period.

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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 entitled.

addition to the loan-to-value, the analysis is based on various other factors, including the credit

quality of the borrower, the

including a determination that the institution will collect substantially all of

the consideration to which it is entitled.

addition to the loan-to-value, the analysis is based on various other factors, including the credit quality

of the borrower, the

structure of the loan, and any other factors that may affect collectability.

1 unchanged sentence

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

generally accepted

accounting principles requires

management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and the disclosure

accepted accounting principles requires

management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities as of the balance sheet date and the reported

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Actual results could differ from those estimates.

Material estimates

that are particularly susceptible to

significant change in the near term include the determination of the allowance

for credit losses, fair value measurements,

estimates that are particularly susceptible to

significant change in the near term include the determination of

the allowance for credit losses, fair value measurements,

valuation of other real estate owned, and valuation of deferred tax assets.

Reclassifications

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

-period presentation.

Certain amounts reported in the prior period have been reclassified to conform

to the current-period presentation.

reclassifications had no impact on the Company’s

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Subsequent Events

The Company has evaluated the effects of events or transactions through

the date of this filing that have occurred

The Company has evaluated the effects of events or transactions

through the date of this filing that have occurred

subsequent to December 31, 2024.

The Company does not believe there are

any material subsequent events that would

The Company does not believe there

are any material subsequent events that would

require further recognition or disclosure.

Correction of Error

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

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 quality

indicator were correctly reported.

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.

Accounting Standards Adopted in 2024

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit

Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASC 326).

This standard

replaced the incurred loss methodology

with an expected loss methodology that is referred to as the current expected credit loss (“CECL”)

requires an estimate of credit losses for the remaining estimated life of the financial asset using

historical experience,

current conditions, and reasonable and supportable forecasts and generally applies to

financial assets measured at amortized

cost, including loan receivables and held-to-maturity debt securities, and some off

-balance sheet credit exposures such as

unfunded commitments to extend credit.

Financial assets measured at amortized

cost will be presented at the net amount

expected to be collected by using an allowance for credit losses.

In addition, CECL made changes to the accounting for available for sale debt

One such change is to require

credit losses to be presented as an allowance rather than as a write-down on available for sale debt

securities if management

does not intend to sell and does not believe that it is more likely than not, they will be required

The Company adopted ASC 326 and all related subsequent amendments thereto

effective January 1, 2023 using the

modified retrospective approach for all financial assets measured at amortized

cost and off-balance sheet credit

exposures.The transition adjustment upon the adoption of CECL on January 1, 2023

included an increase in the allowance

for credit losses on loans of $

million, which is presented as a reduction to net loans outstanding, and an increase in the

allowance for credit losses on unfunded loan commitments of $

million, which is recorded within other liabilities.

Company recorded a net decrease to retained earnings of $

million as of January 1, 2023 for the cumulative effect of

adopting CECL, which reflects the transition adjustments noted above, net of the applicable

deferred tax assets recorded.

Results for reporting periods beginning after January 1, 2023 are presented under CECL

while prior period amounts

continue to be reported in accordance with previously applicable accounting

The Company adopted ASC 326 using the prospective transition approach for debt

securities for which other-than-

temporary impairment had been recognized prior to January 1, 2023.

As of December 31, 2022, the Company did not have

any other-than-temporarily impaired investment securities.

upon adoption of ASC 326, the Company determined

that an allowance for credit losses on available for sale securities was not deemed

The Company elected not to measure an allowance for credit losses for accrued interest recei

vable and instead elected to

reverse interest income on loans or securities that are placed on nonaccrual status,

which is generally when the instrument is

90 days past due, or earlier if the Company believes the collection of interest is doubtful.

has concluded that

this policy results in the timely reversal of uncollectible interest.

The Company also adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic

Troubled Debt

Restructurings and Vintage Disclosures”

on January 1, 2023, the effective date of the guidance, on a prospective basis.

ASU 2022-02 eliminated the accounting guidance for TDRs, while enhancing disclosure

requirements for certain loan

refinancings and restructurings by creditors when a borrower is experiencing

financial difficulty.

Specifically, rather than

applying the recognition and measurement guidance for TDRs, an entity

must apply the loan refinancing and restructuring

guidance to determine whether a modification results in a new loan or a

continuation of an existing loan.

Additionally,

ASU 2022-02 requires an entity to disclose current-period gross write-offs

by year of origination for financing receivables

within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured

at Amortized Cost.

did not have a material impact on the Company’s

consolidated financial statements.

Issued not yet effective accounting standards

Investments – Equity Method and Joint Ventures

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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

The new standard is effective for fiscal

years, and interim periods within those fiscal years, beginning after December

The Company does not expect the

new standard to have a material impact on the Company’s

consolidated financial statements.

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,

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 adopted ASU 2023-02 effective January 1, 2024 and

recorded a cumulative effect

of change in accounting standard adjustment which reduced beginning

retained earnings by $0.3 million and reduced our

investment in New Markets Tax

Credits (“NMTCs”) by $0.4 million.

The Company, beginning January

1, 2024, accounts

for its investments in NMTCs using the proportional amortization method through

charges to the provision for income

See Note 3, Variable

Interest Entities.

Segment Reporting (Topic

280) - Improvement to Reportable Segment

The amendments in

ASU 2023-07 improve financial reporting by requiring disclosure of incremental

segment information on an annual basis to

enable investors to develop more decisions-useful financial analyses.

ASU 2023-07 is effective for fiscal years beginning

after December 31, 2023.

The Company has adopted ASU 2023-07 as of January 1, 2024 and has determined that

banking services and branch locations meet the aggregation criteria of ASC 280,

Segment Reporting

, since each of its

banking services and branch locations offer similar products and

services, operate in a similar manner, have similar

customers and report to the same regulatory authority,

and therefore operate one line of business located in a single

geographic area.

The Company's Chief Executive Officer has been identified as the

chief operating decision maker

The CODM regularly assesses performance of the aggregated single

operating and reporting segment and decides how to

allocate resources based on the net income calculated on the same basis as the net income

reported in the Company's

consolidated statements of earnings and other comprehensive earnings

and total assets calculated on the same basis as the

total assets reported in the Company’s

consolidated balance sheets.

The CODM is also regularly provided with expense

information at a level that is consistent with that disclosed in the Company's consolidated

statements of earnings and other

comprehensive earnings.

Issued not yet effective accounting standards

Improvements to Income Tax

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The Company does not expect the new standard to have

a material impact on the Company’s consolidated

financial statements.

a material impact on the Company’s

consolidated financial statements.

Cash Equivalents

Cash equivalents include cash on hand, cash items in process of collection, amounts due

from banks, including interest

Cash equivalents include cash on hand, cash items in process of collection,

amounts due from banks, including interest

bearing deposits with other banks, and federal funds sold.

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as available-for-sale.

Securities available-for-sale are

used as part of the Company’s

Securities available-for-sale are used

as part of the Company’s

interest rate risk and liquidity management strategy,

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in prepayment risks or other factors.

All securities classified as available-for-sale

are recorded at fair value with any

unrealized gains and losses reported in accumulated other comprehensive income (loss),

net of the deferred income tax

Interest and dividends on securities, including the amortization

of premiums and accretion of discounts are

recognized in interest income using the effective interest method.

All securities classified as available-for-sale are recorded

at fair value with any

unrealized gains and losses reported in accumulated other comprehensive income

(loss), net of the deferred income tax

Interest and dividends on securities, including

the amortization of premiums and accretion of discounts are

recognized in interest income using the effective interest

Premiums are amortized to the earliest call date while

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determined using the specific identification method.

For any securities classified as available-for-sale that are in an unrealized

loss position at the balance sheet date, the

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,

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before recovery of its amortized cost basis.

If either of these criteria are met, the security's

amortized cost basis is written

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

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

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

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

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

Any impairment

not recognized in the allowance for credit

losses is recognized in other comprehensive income.

Loans held for sale

The Company originates

residential mortgage loans for sale.

The Company originates residential mortgage loans for sale.

Such loans are carried at the lower of cost or estimated fair

value in the aggregate.

Loan sales are recognized when the transaction closes, the proceeds

are collected, and ownership is

Continuing involvement, through the sales agreement, consists of the right to service the

loan for a fee for the

Loan sales are recognized when the transaction closes, the proceeds are collected,

and ownership is

Continuing involvement, through the sales agreement, consists of the right to service

the loan for a fee for the

life of the loan, if applicable.

Gains on the sale of loans held for sale are recorded net of related costs, such as

commissions, and reflected as a component of mortgage lending income in the consolidated

statements of earnings.

The Bank makes various representations and warranties to the purchaser of the

residential mortgage loans they originated

commissions, and reflected as a component of mortgage lending income in

the consolidated statements of earnings.

The Bank makes various representations and warranties to the purchaser

of the residential mortgage loans they originated

and sells, primarily to Fannie Mae.

Every loan closed by the Bank’s mortgage center is run

through Fannie Mea or other

purchasing government sponsored enterprise (“GSE”) automated underwriting

Every loan closed by the Bank’s mortgage

center is run through Fannie Mae or other

purchasing government sponsored enterprise (“GSE”) automated

underwriting system.

Any exceptions noted during this

process are remedied prior to sale.

These representations and warranties also apply to underwriting the real estate appraisal

These representations and warranties also apply to underwriting the real

estate appraisal

opinion of value for the collateral securing these loans.

Failure by the Company to comply with the underwriting and/or

appraisal standards could result in the Company being required to repurchase the

mortgage loan or to reimburse the investor

for losses incurred (make whole requests) if the Company cannot cure such

failure within the specified period following

appraisal standards could result in the Company being required to repurchase

the mortgage loan or to reimburse the investor

for losses incurred (make whole requests) if the Company cannot cure

such failure within the specified period following

Loans that management has the intent and ability to hold for the foreseeable

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at amortized cost.

Amortized cost is the principal balance outstanding, net of purchase premiums

and discounts and

Amortized cost is the principal balance outstanding,

net of purchase premiums and discounts and

deferred fees and costs.

Accrued interest receivable related to loans is recorded

in other assets on the consolidated balance

Accrued interest receivable related to loans

is recorded in other assets on the consolidated balance

Interest income is accrued on the unpaid principal balance.

2 unchanged sentences

a level yield without anticipating

The accrual of interest is generally discontinued when a loan becomes 90 days past due and

is not well collateralized and in

the process of collection, or when management believes, after considering economic and

business conditions and collection

efforts, that the principal or interest will not be collectible in the normal

course of business.

The accrual of interest is generally discontinued when a loan becomes 90 days

past due and is not well collateralized and in

the process of collection, or when management believes, after considering economic

and business conditions and collection

efforts, that the principal or interest will not be collectible in the

normal course of business.

Past due status is based on

contractual terms of the loan.

A loan is considered to be past due when a scheduled payment has

not been received 30 days

A loan is considered to be past due when a scheduled

payment has not been received 30 days

after the contractual due date.

All accrued but unpaid interest is reversed against interest income when a loan is placed on nonaccrual

All accrued but unpaid interest is reversed against interest income when a loan is placed

on nonaccrual status.

received on such loans is accounted for using the cost-recovery method,

until the loan qualifies for return to accrual.

are returned to accrual status when all the principal and interest amounts contractually due

are brought current, there is a

sustained period of repayment performance, and future payments are reasonably assured.

are returned to accrual status when all the principal and interest amounts contractually

due are brought current, there is a

sustained period of repayment performance, and future payments are

reasonably assured.

Otherwise, under the cost

recovery method, interest income is not recognized until the loan balance is reduced

recovery method, interest income is not recognized until the loan balance

is reduced to zero.

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

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

Loans are charged off against the allowance

when management confirms the

loan balance is uncollectible.

5 unchanged sentences

balance sheet date.

The allowance for credit losses is estimated by management using relevant

available information, from

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

The Company’s loan loss estimation

process includes procedures to appropriately consider the unique characteristics of

respective loan segments (commercial and industrial, construction and land development,

3 unchanged sentences

credit quality is monitored.

See Note 5, Loans and Allowance for Credit Losses, for additional information about our loan

See Note 5, Loans and Allowance for Credit Losses, for additional information

about our loan

Credit loss assumptions are estimated using a discounted cash flow ("DCF") model

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for consumer loans.

The DCF model calculates an expected life-of-loan loss percentage by considering the

forecasted probability that a

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

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This model utilizes historical correlations between

default experience and certain macroeconomic factors as determined through

a statistical regression analysis.

default experience and certain macroeconomic factors as determined

through a statistical regression analysis.

forecasted Alabama unemployment rate is considered in the model for commercial

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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

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;

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multifamily loans.

Projections of these macroeconomic factors, obtained from an independent

third party, are utilized to

Projections of these macroeconomic factors, obtained from an independent third party,

are utilized to

predict quarterly rates of default based on the statistical PD models.

Expected credit losses are estimated over the contractual term of the loan, adjusted for

expected prepayments and principal

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

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

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

Company reverts, on a straight-line basis back to the historical rates over

an 8-quarter reversion period.

During the first quarter of 2024, as part of the Company’s

ongoing model monitoring procedures, the annual loss driver

analysis and prepayment, curtailment and funding studies were performed.

The analysis and studies resulted in changes for

all DCF models.

The changes were a result of updating the Company’s

peer group and incorporating data through 2022.

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.

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.

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

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.

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

These qualitative adjustments may

increase 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 secured by real estate with balances equal to or greater than $500 thousand and loans

not secured by real estate with

balances equal to or greater than $250 thousand that do not share risk characteristics are

evaluated on an individual basis.

increase 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

external factors and economic conditions not already captured.

Loans secured by real estate with balances equal to or greater than $500 thousand and

loans not secured by real estate with

balances equal to or greater than $250 thousand 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,

expected credit losses are based on the estimated fair value of collateral held at the reporting date,

adjusted for selling costs

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

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.

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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

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

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

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,

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

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consolidated balance sheets.

On January 1, 2023, the Company recorded an adjustment for unfunded commitments

of $77 thousand upon the adoption of

At December 31, 2023, the liability for credit losses on off-balance-sheet credit

exposures included in other

liabilities was $

Provision for Credit Losses

The composition of the provision for credit losses for the respective periods

is presented below.

Years ended December 31,

(Dollars in thousands)

Provision for credit losses:

Unfunded commitments (1)

Total provision for credit

Reserve requirements for unfunded commitments were reported

as a component of other noninterest expense prior

to the adoption of ASC 326.

Premises and Equipment

Land is carried at cost.

Land improvements, buildings and improvements, and furniture,

fixtures, and equipment are carried

at cost, less accumulated depreciation computed on a straight-line method over the estimated

useful lives of the assets or the

Land improvements, buildings and improvements,

and furniture, fixtures, and equipment are carried

at cost, less accumulated depreciation computed on a straight-line metho

over the estimated useful lives of the assets or the

expected terms of the leases, if shorter.

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Nonmarketable equity investments

Nonmarketable equity investments include equity securities that are not publicly traded

and securities acquired for various

The Bank is required to maintain certain minimum levels of equity investments

in (i) Federal Reserve Bank of

Atlanta based on the Bank’s capital stock and surplus,

and the (ii) Federal Home Bank of Atlanta (“FHLB – Atlanta”)

Nonmarketable equity investments include equity securities that are not

publicly traded and securities acquired for various

The Bank is required to maintain certain minimum levels of equity

investments in (i) Federal Reserve Bank of

Atlanta based on the Bank’s capital stock

and surplus, and the (ii) Federal Home Bank of Atlanta (“FHLB – Atlanta”)

based on various factors including, the Bank’s

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at cost which equals par or redemption value.

These securities do not have a readily determinable

fair value as their

These securities do not have

a readily determinable fair value as their

ownership is restricted and there is no market for these securities.

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be redeemed or sold at their par

value by the respective issuer bank or, in the case of FHLB

– Atlanta stock upon FHLB – Atlanta approval sale to another

value by the respective issuer bank or,

in the case of FHLB – Atlanta stock upon FHLB – Atlanta approval sale to another

member of FHLB – Atlanta and law applicable to the member.

The Company records these nonmarketable equity securities

as a component of other assets, which are periodically evaluated for impairment.

considers these

as a component of other assets, which are periodically evaluated for

Management considers these

nonmarketable equity securities to be long-term investments.

when evaluating these securities for impairment,

management considers the ultimate recoverability of the par value rather than by recognizing

temporary declines in value.

management considers the ultimate recoverability of the par value

rather than by recognizing temporary declines in value.

Transfers of Financial Assets

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the assets have been isolated from the Company,

(2) the transferee obtains the right (free of conditions that constrain it from taking that right)

to pledge or exchange the

(2) the transferee obtains the right (free of conditions that constrain it from

taking that right) to pledge or exchange the

transferred assets, and (3) the Company does not maintain effective

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agreement to repurchase them before their maturity.

Mortgage Servicings Rights

The Company recognizes as assets the rights to service mortgage loans which it originates

and sells to others, principally

Mortgage Servicing Rights

The Company recognizes as assets the rights to service mortgage loans

which it originates and sells to others, principally

These servicing rights are called “MSRs”.

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using assumptions that market

participants would use in estimating future net servicing income, including estimates

of prepayment speeds, discount rate,

participants would use in estimating future net servicing income, including

estimates of prepayment speeds, discount rate,

default rates, cost to service, escrow account earnings, contractual servicing

fee income, ancillary income, and late fees.

Subsequent to the date of sale of the residential mortgage loans, the Company has elected

to measure its MSRs on such sold

Subsequent to the date of sale of the residential mortgage loans, the Company

has elected to measure its MSRs on such sold

mortgage loans under the amortization method.

Under the amortization method, MSRs are amortized in proportion

Under the amortization method, MSRs are amortized in proportion to, and

over the period of, estimated net servicing income.

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of those assets.

Impairment is determined by stratifying MSRs into groupings based on predominant

risk characteristics,

Impairment is determined by stratifying MSRs into groupings based

on predominant risk characteristics,

such as interest rate and loan type.

If, by individual stratum, the carrying amount of the MSRs exceeds fair value,

If, by individual stratum, the carrying amount of the MSRs exceeds fair value, a

valuation allowance is established through a charge to earnings.

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at the amount of cash received in connection with each transaction.

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences

between carrying

amounts and tax bases of assets and liabilities, computed using enacted tax rates.

valuation allowance, if needed, reduces

Deferred tax assets and liabilities are the expected future tax amounts

for the temporary differences between carrying

amounts and tax bases of assets and liabilities, computed using enacted tax

A valuation allowance, if needed, reduces

deferred tax assets to the amount expected to be realized.

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assets in the accompanying consolidated balance sheets.

Income tax expense or benefit for the year is allocated among continuing operations and other

comprehensive income

Income tax expense or benefit for the year is allocated among continuing operations

and other comprehensive income

(loss), as applicable.

The amount allocated to continuing operations is the income tax effect

of the pretax income or loss

The amount allocated to continuing operations is the income

tax effect of the pretax income or loss

from continuing operations that occurred during the year,

plus or minus income tax effects of (1) changes in certain

circumstances that cause a change in judgment about the realization of deferred tax assets in future

years, (2) changes in

income tax laws or rates, and (3) changes in income tax status, subject to certain exceptions.

circumstances that cause a change in judgment about the realization of deferred

tax assets in future years, (2) changes in

income tax laws or rates, and (3) changes in income tax status, subject to certain

The amount allocated to other

comprehensive income (loss) is related solely to changes in the valuation allowance on items

that are normally accounted

for in other comprehensive income (loss) such as unrealized gains or losses on available

-for-sale securities.

comprehensive income (loss) is related solely to changes in the valuation allowance

on items that are normally accounted

for in other comprehensive income (loss) such as unrealized gains or losses on

available-for-sale securities.

In accordance with ASC 740,

, a tax position is recognized as a benefit only if it is “more likely than not” that

the tax position would be sustained in a tax examination, with a tax examination being presumed

recognized is the largest amount of tax benefit that is greater than 50% likely of

being realized on examination.

the tax position would be sustained in a tax examination, with a tax examination being

presumed to occur.

recognized is the largest amount of tax benefit that is greater than

50% likely of being realized on examination.

positions not meeting the “more likely than not” test, no tax benefit is recorded.

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interest and penalties related to income tax matters in income tax expense.

The Company and

its wholly-owned subsidiaries

Company and its wholly-owned subsidiaries

file consolidated Federal and State of Alabama income tax returns.

Fair Value Measurements

Measurements,

which defines fair value, establishes a framework for measuring fair value in U.S.

generally accepted accounting principles and expands disclosures about fair value

measurements.

which defines fair value, establishes a framework for measuring fair value

generally accepted accounting principles and expands disclosures about

fair value measurements.

ASC 820 applies only to

fair-value measurements that are already required or

permitted by other accounting standards.

fair-value measurements that are already required

or permitted by other accounting standards.

The definition of fair value

focuses on the exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability

in an orderly

focuses on the exit price, i.e., the price that would be received to sell an asset or paid to transfer a

liability in an orderly

transaction between market participants at the measurement date,

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acquire the asset or received to assume the liability at the measurement date.

The statement

emphasizes that fair value is a

The statement emphasizes that fair value is a

market-based measurement;

not an entity-specific measurement.

the fair value measurement should be

determined based on the assumptions that market participants

would use in pricing the asset or liability.

Therefore, the fair value measurement should be

determined based on the assumptions that market participants would

use in pricing the asset or liability.

information related to fair value measurements, please refer to Note 13, Fair

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

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.

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

average common shares outstanding for

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.

As of December 31, 2024 and 2023, respectively,

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

no dilutive effect to consider for

the Company had no such securities or other rights issued or outstanding,

and therefore, no dilutive effect to consider for

the diluted net earnings per share calculation.

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

presented below.

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

years are presented below.

Year ended December 31

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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

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.

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Credit Investment

The New Markets Tax Credit

(“NMTC”) program provides federal tax incentives to investors to make investments in

distressed communities and promotes economic improvement through the development

of successful businesses in these

The NMTC is available to investors over seven years and is subject to recapture if certain events occur

The New Markets Tax

Credit (“NMTC”) program provides federal tax incentives to investors to make

investments in

distressed communities and promotes economic improvement through

the development of successful businesses in these

The NMTCs are available to investors over seven years and is subject to recapture if

certain events occur

during such period.

The Company had one NMTC investment with a balance of

$1.7 million and $

December 31, 2023 and 2022, respectively,

The Company had one NMTC investment with a balance of $0.9 million and $

million at December

31, 2024 and 2023, respectively,

which is included in other assets in the Company’s

consolidated balance sheets

consolidated balance sheets as a VIE.

While the Company’s investment

exceeds 50% of the outstanding equity interests in this VIE, the Company does

not consolidate the VIE because the Company lacks the power to direct the activities of the

VIE, and therefore is not a

primary beneficiary of the VIE.

exceeds 50% of the outstanding equity interests in this VIE, the Company

consolidate the VIE because the Company lacks the power to direct the activities of

the VIE, and therefore is not a primary

beneficiary of the VIE.

The Company adopted ASU 2023-02 as of January 1, 2024 which allows us to account

for our NMTC investment using the

proportional amortization method.

The following table presents a summary of our NMTC investment at December

2024, and the related tax credit and amortization expense for 2024.

(Dollars in thousands)

Loss Exposure

Asset Recognized

Classification

New Markets Tax Credit investment

Balance Sheet Location

New Markets Tax Credit

(Dollars in thousands)

Income Statement Location

Income tax credits and other income tax benefits

Income tax expense

Amortization expense

Income tax expense

At December 31, 2024 and 2023, respectively,

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(a) Includes securities issued by U.S.

government agencies or government sponsored

government agencies or government

sponsored entities.

Expected lives of

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issuers may have the right to call or repay such securities

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

generally have the right to prepay

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

MBS generally have the right to prepay

such loans in whole or in part at any time.

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million at December 31, 2024 and 2023, respectively,

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

FHLB advances, and for other

were pledged to secure public deposits, securities sold under agreements

to repurchase, FHLB advances, and for other

purposes required or permitted by law.

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carrying amounts of nonmarketable equity investments were $

million and $

million at December 31, 2023 and 2022,

million at both December 31, 2024 and 2023,

respectively.

Nonmarketable equity investments include FHLB-Atlanta

stock, Federal Reserve Bank stock, and stock in a

Nonmarketable equity investments include FHLB-Atlanta stock, Federal

Reserve Bank stock, and stock in a

privately held financial institution.

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The fair values and gross unrealized losses on securities at December

2023 and 2022, respectively, segregated

31, 2024 and 2023, respectively,

segregated by those

securities that have been in an unrealized loss position for less than 12 months and

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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

securities to

securities in

Company assesses

before recovery

amortized cost

Unrealized losses

been recognized

as the decline in

fair value is largely

due to changes in

interest rates and other

market conditions.

For the securities

previous table,

2023, management

management will

not be required to sell the securities prior to their anticipated recovery.

as of December

management does

not intend to

likely that management will not be required to sell the securities prior to their anticipated

Agency Obligations

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these agencies

guarantee of full and timely

payments of principal and

interest by the issuing agency.

guarantee of full and

timely payments of principal

and interest by the issuing

Based on management's analysis

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The following table presents the gross realized gains and losses on sales related to securities.

Year ended December 31

(Dollars in thousands)

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Gross realized losses

Realized gains, net

Realized losses, net

LOANS AND ALLOWANCE

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Owner occupied

Total commercial real estate

Total commercial

Residential real estate:

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Investment property

Total residential real estate

Total residential real

Consumer installment

Total loans, net of unearned income

Total loans, net of unearned

Loans secured by real estate were approximately

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At December 31,

2023, the Company’s geographic loan

distribution was concentrated primarily in Lee County,

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

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.

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

appropriate, the Company’s

Where appropriate, the Company’s

loan portfolio segments are further disaggregated into classes.

A class is generally determined

based on the initial

A class is generally

determined based on the initial

measurement attribute, risk characteristics of the loan, and an entity’s

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for small and medium-sized commercial customers.

Also included

in this category are loans to finance agricultural

included in this category are loans to finance agricultural

Generally, the primary source of repayment

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includes both loans and credit lines for the purpose of purchasing,

carrying and developing land into commercial developments or residential subdivisions.

carrying and developing land into commercial developments or residential

subdivisions.

Also included are loans and lines

for construction of residential, multi-family and commercial buildings.

Generally the primary

source of repayment is

Generally the primary source of repayment is

dependent upon the sale or refinance of the real estate collateral.

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Owner occupied

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

owner-occupied facilities primarily for small and medium-sized commercial customers.

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

owner-occupied facilities primarily for small and medium-sized

commercial customers.

Generally the primary source

of loan repayment are the cash flows from the business operations and activities of the

borrower, who owns the

of loan repayment are the cash flows from the business operations and activities of the borrower,

– 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 real estate collateral.

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

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

Loans in this class

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

Loans in this class include

loans for 5 or more unit residential property and apartments leased to residents.

the primary source of

Generally, the primary source

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

underwriting of these loans takes

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

– primarily includes loans to finance income-producing commercial properties.

into consideration the occupancy and rental rates, as well as the financial health of

the borrower.

– primarily includes loans to finance income-producing commercial

Loans in this class include loans

for neighborhood retail centers, medical and professional offices, single retail

stores, industrial buildings, and

for neighborhood retail centers,

medical and professional offices, single retail stores, industrial

buildings, and

warehouses leased generally to local businesses and residents.

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upon income generated from the real estate collateral.

The underwriting of these loans takes into consideration

The underwriting of these

loans takes into consideration the

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

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Consumer mortgage

– primarily includes first or second lien mortgages and home equity lines to consumers

– primarily includes

first or second lien mortgages and home equity lines to consumers that are

secured by a primary residence or second home.

1 unchanged sentence

with the Bank’s general

loan policies and procedures which require, among other things, proper documentation of each borrower’s

loan policies and procedures which require, among other things, proper documentation

of each borrower’s financial

condition, satisfactory credit history and property value.

Investment property

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

Generally, the primary source of repayment is dependent

upon income generated from leasing the property securing the

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

Generally, the primary source of repayment

is dependent upon income generated from leasing the property securing the

The underwriting of these loans takes into consideration the rental rates as well as

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Bank’s general loan policies and procedures

which require, among other things, proper documentation of each borrower’s

which require, among other things, proper documentation of

each borrower’s

financial condition, satisfactory credit history,

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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

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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.

The following table presents credit quality

indicators for the loan portfolio segments and classes by year of origination as of December

These categories are

utilized to develop the associated allowance for credit losses using historical losses adjusted

for qualitative and

environmental factors and are defined as follows:

Pass – loans which are well protected by the current net worth and paying capacity of the

obligor (or guarantors, if

These categories are utilized to develop the

associated allowance for credit losses using historical losses adjusted for

qualitative and environmental factors and are

defined as follows:

Pass – loans which are well protected by the current net worth and paying capacity

of the obligor (or guarantors, if

any) or by the fair value, less cost to acquire and sell, of any underlying collateral.

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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,

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.

Nonaccrual – includes loans where management has determined that full payment

of principal and interest is not

of principal and interest is not expected.

The following tables presents credit quality indicators for the loan portfolio

segments and classes by year of origination as

of December 31, 2024 and 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 Error.

(Dollars in thousands)

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Total current period gross charge-offs

(In thousands)

Year of Origination

(Dollars in thousands)

December 31, 2023:

Commercial and industrial

Special mention

Total commercial and industrial

Current period gross charge-offs

Construction and land development

Special mention

Total construction and land development

Current period gross charge-offs

Commercial real estate:

Owner occupied

Total commercial real estate

Special mention

Total owner occupied

Current period gross charge-offs

Special mention

Total hotel/motel

Current period gross charge-offs

Year of Origination

(Dollars in thousands)

December 31, 2023:

Special mention

Total multi-family

Current period gross charge-offs

Special mention

Current period gross charge-offs

Residential real estate:

Consumer mortgage

Special mention

Total consumer mortgage

Current period gross charge-offs

Investment property

Total residential real estate

Special mention

Total investment property

Current period gross charge-offs

Consumer installment

The following table is a summary of the Company’s

nonaccrual loans by major categories as of December 31, 2023 and

Incurred Loss

December 31, 2023

December 31, 2022

Loans with an

Special mention

Total consumer installment

Current period gross charge-offs

Special mention

Total current period gross charge-offs

Allowance for Credit Losses

The Company adopted ASC 326 on January 1, 2023, which introduced

the Current Expected Credit Losses (“CECL”)

methodology for estimating all expected losses over the life of a financial asset.

Under the CECL methodology,

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.

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

periods is presented below.

Year ended December 31,

(Dollars in thousands)

Commercial and industrial

Commercial real estate

Residential real estate

The Company did not recognize any interest income on nonaccrual loans during 2023.

Provision for credit losses:

Reserve for unfunded commitments

Total provision for (reversal

of) credit losses

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

segment for the years ended

December 31, 2024 and 2023.

(in thousands)

and industrial

Balance, December 31, 2022

Impact of adopting ASC 326

Net (charge-offs) recoveries

Balance, December 31, 2023

Net recoveries (charge-offs)

Balance, December 31, 2024

The Company did not recognize any interest income on nonaccrual loans

during 2024 and 2023.

The Company designates individually evaluated loans on nonaccrual status as collateral

2 unchanged sentences

Collateral-dependent loans are loans for which

the repayment is expected to be provided substantially through the operation or

sale of the collateral and the borrower is

the repayment is expected to be provided substantially through the operation

or sale of the collateral and the borrower is

experiencing financial difficulty.

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on the shortfall between the fair

value of the loan’s collateral, which is adjusted for

liquidation costs/discounts, and amortized costs.

value of the loan’s collateral, which

is adjusted for liquidation costs/discounts, and amortized costs.

If the fair value of the

collateral exceeds the amortized cost, no allowance is required.

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

are individually evaluated to

determine expected credit losses:

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

which are individually evaluated to

determine expected credit losses for the years ended December 31, 2024 and 2023:

(Dollars in thousands)

Business Assets

December 31, 2024:

Commercial and industrial

Construction and land development

December 31, 2023:

Commercial real estate

The gross interest income which would have been recorded under the original terms of

those nonaccrual loans had they

The gross interest income which would have been recorded under the original terms

of those nonaccrual loans had they

been accruing interest, amounted to approximately $

2 unchanged sentences

and 2023, respectively.

Allowance for Credit Losses

The Company adopted ASC 326 on January 1, 2023, which introduced the CECL

methodology for estimating all expected

losses over the life of a financial asset.

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

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

segment for the years ended

December 31, 2023 and 2022.

(in thousands)

and industrial

Balance, December 31, 2021

Net (charge-offs) recoveries

Balance, December 31, 2022

Impact of adopting ASC 326

Net recoveries (charge-offs)

Balance, December 31, 2023

The following table presents an analysis of the allowance for loan losses and recorded

investment in loans by portfolio

segment and impairment methodology as of December 31, 2022, as determined, prior

to adoption of ASC 326.

Collectively evaluated (1)

Individually evaluated (2)

(In thousands)

The following table summarizes the Company’s

nonaccrual loan by major categories as of December 31, 2024 and 2023.

Nonaccrual loans

(Dollars in thousands)

with no Allowance

with an Allowance

Nonaccrual Loans

December 31, 2024

Commercial and industrial

Construction and land

Commercial real estate

Residential real estate

Consumer installment

(1) Represents loans collectively evaluated for impairment

prior to the adoption of ASC 326, in accordance with

Contingencies,

and pursuant to amendments by ASU 2010-20 regards allowance

for non-impaired loans.

(2) Represents loans individually evaluated for impairment,

prior to adoption of ASC 326,

in accordance with ASC 310-30,

pursuant to amendments by ASU 2010-20 regarding allowance

for impaired loans.

Impaired loans

The following tables present impaired loans at December 31, 2022 as determined under

ASC 310 prior to the adoption of

Loans that have been fully charged-off are not included in the following

The related allowance generally

represents the following components which correspond to impaired loans:

Individually evaluated impaired loans equal to or greater than $500 thousand secured

by real estate (nonaccrual

construction and land development, commercial real estate, and residential real estate).

Individually evaluated impaired loans equal to or greater than $250 thousand not secured

by real estate

(nonaccrual commercial and industrial and consumer loans).

The following table sets forth certain information regarding the Company’s

impaired loans that were individually evaluated

for impairment at December 31, 2022.

Construction and land development

December 31, 2023

(In thousands)

investment (3)

With no allowance recorded:

Commercial and industrial

Commercial real estate

Owner occupied

Total commercial real estate

With allowance recorded:

Commercial and industrial

Commercial real estate:

Owner occupied

Total commercial real estate

impaired loans

(1) Unpaid principal balance represents the contractual obligation

due from the customer.

(2) Charge-offs and payments applied represents cumulative charge-offs taken, as well

as interest payments that have been

applied against the outstanding principal balance subsequent

to the loans being placed on nonaccrual status.

(3) Recorded investment represents the unpaid principal balance

less charge-offs and payments applied;

it is shown before

any related allowance for loan losses.

Pursuant to the adoption of ASU 2022-02, effective January 1, 2023,

the Company prospectively discontinued the

recognition and measurement guidance previously required for

troubled debt restructurings (TDRs).

As of December 31,

2023, the Company had no loans that would have previously required disclosure

The following table provides the average recorded investment in impaired loans, if

any, by portfolio

segment, and the

amount of interest income recognized on impaired loans after impairment by portfolio

segment and class for the year ended

December 31, 2022 as determined under ASC 310 prior to adoption of ASC 326.

Year ended December 31, 2022

Average recorded

Total interest

(In thousands)

income recognized

Impaired loans:

Commercial and industrial

Commercial real estate:

Owner occupied

Total commercial real estate

Residential real estate

Investment property

Total residential real estate

The Company had no modifications to loans made to borrowers experiencing

financial difficulty at December 31, 2024 and

PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2023 and 2022 is presented below.

Premises and equipment at December 31, 2024 and 2023 is presented

(Dollars in thousands)

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Construction in progress

Total premises and equipment

Total premises and

accumulated depreciation

3 unchanged sentences

million for the years ended December 31, 2024 and 2023,

respectively, and is a component of

net occupancy and equipment expense in the consolidated statements of earnings.

respectively, and is a component

of net occupancy and equipment expense in the consolidated statements of earnings.

MORTGAGE SERVICING

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fee income is

related amortization expense and recognized in earnings as part of mortgage lending

The Company has recorded MSRs related to loans sold without recourse

to Fannie Mae.

related amortization expense and recognized in earnings as part of mortgage

lending income.

The Company has recorded MSRs related to loans sold without recourse to

The Company generally sells

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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 loan

If, by individual stratum, the

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lending income.

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

the years ended

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

allowance for the years ended

December 31, 2024 and 2023.

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Unpaid principal balance

Weighted average prepayment

Weighted average

prepayment speed (CPR)

Discount rate (annual percentage)

Weighted average coupon

interest rate

Weighted average remaining

maturity (months)

Weighted average servicing

fee (basis points)

Weighted average

coupon interest rate

Weighted average

remaining maturity (months)

Weighted average

servicing fee (basis points)

At December 31, 2024, the weighted average amortization period

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December 31, 2024

At December 31, 2023, the scheduled maturities of certificates of deposit and other time

deposits are presented below.

At December 31, 2024, the scheduled maturities of certificates of deposit

and other time deposits are presented below.

(Dollars in thousands)

December 31, 2024

Total certificates of deposit and

other time deposits

Total certificates of

deposit and other time deposits

Additionally, at December

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million, respectively, of certificates

of deposit and other time deposits were issued in denominations greater than $250

At December 31, 2023 and 2022, the amount of deposit accounts in overdraft status that were

reclassified to loans on the

of deposit and other time deposits were issued in denominations greater

than $250 thousand.

At December 31, 2024 and 2023, the amount of deposit accounts in overdraft

status that were reclassified to loans on the

accompanying consolidated balance sheets was not material.

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facilities and equipment under operating leases.

Rent expense for all

operating leases totaled $

million for both years ended December 31, 2023 and 2022.

Aggregate lease right of use assets were $

thousand at December 31, 2023 and 2022, respectively.

Rent expense for all operating

leases totaled $

million and $

million for the years ended December 31, 2024 and 2023, respectively.

Aggregate lease right of use assets

million and $

million at December 31, 2024 and 2023, respectively.

Aggregate lease liabilities were $0.2

thousand and $

thousand at December 31, 2023 and 2022, respectively.

Rent expense includes amounts related to items that are not

included in the determination of lease right of use assets including expenses related

to short-term leases totaling $

million and $

million at December 31, 2024 and 2023, respectively.

Rent expense includes amounts related to items that

are not included in the determination of lease right of use assets including expenses

related to short-term leases totaling

million for the year ended December 31, 2024.

Lease payments under operating leases that were applied to our operating lease liability totaled

thousand during the

year ended December 31, 2023.

Lease payments under operating leases that were applied to our operating lease

liability totaled $

million during the year

ended December 31, 2024.

The following table reconciles future undiscounted

lease payments due under non-

cancelable operating leases (those amounts subject to recognition) to the aggregate operating lease

liability as of December

lease payments due under non-cancelable

operating leases (those amounts subject to recognition) to the aggregate

operating lease liability as of December 31, 2024.

(Dollars in thousands)

Total undiscounted operating

lease liabilities

Total undiscounted

operating lease liabilities

Imputed interest

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included in the accompanying consolidated balance sheets

Weighted-average lease terms

Weighted-average discount rate

OTHER COMPREHENSIVE LOSS

Comprehensive income

all transactions

stockholders,

includes net earnings and other

comprehensive loss.

Other comprehensive loss

for the years ended

December 31, 2023 and

2022, is presented below.

(Dollars in thousands)

Unrealized net holding gain on securities

Reclassification adjustment for net loss on securities recognized in net earnings

Other comprehensive income

Unrealized net holding loss on securities

Reclassification adjustment for net gain on securities recognized in net earnings

Other comprehensive loss

For the years ended December 31, 2023 and 2022 the components of income tax expense

from continuing operations are

Weighted-average

lease terms in years

Weighted-average

discount rate

For the years ended December 31, 2024 and 2023 the components of

income tax expense from continuing operations are

presented below.

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(Dollars in thousands)

Current income tax (benefit) expense:

Total current income tax (benefit) expense

Deferred income tax (benefit) expense:

Total deferred

income tax (benefit) expense

Total income tax (benefit) expense

Total income tax expense differs

from the amounts computed by applying the statutory federal income tax rate of 21%

Current income tax expense (benefit):

Total current

income tax expense (benefit)

Deferred income tax expense (benefit):

Total deferred income

tax expense (benefit)

tax expense differs from the amounts computed by applying the

statutory federal income tax rate of 21% to

earnings before income taxes.

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Bank-owned life insurance

Total income tax (benefit) expense

At December 31, 2023 and 2022, the Company had a net deferred tax asset of $10.3

million and $13.8 million, respectively,

tax expense (benefit)

At December 31, 2024 and 2023, the Company had a net deferred tax

asset of $10.2 million and $10.3 million, respectively,

included in other assets on the consolidated balance sheet.

The tax effects of temporary differences that

The tax effects of temporary differences that give rise to

significant portions of the deferred tax assets and deferred tax liabilities at December

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Right of use liability

Total deferred

Total deferred tax

Deferred tax liabilities:

2 unchanged sentences

Right of use asset

New Markets Tax Credit investment

Total deferred

tax liabilities

New Markets Tax Credit

Total deferred tax

Net deferred tax asset

A valuation allowance is recognized for a deferred tax asset if, based on the weight of available

evidence, it is more-likely-

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 of 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

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

Management considers the scheduled reversal of deferred tax liabilities, projected

future taxable

income and tax planning strategies in making this assessment.

Based upon the level of historical

taxable income and

projection for future taxable income over the periods which the temporary differences

resulting in the remaining deferred

tax assets are deductible, management believes it is more-likely-than

-not that the Company will realize the benefits of these

the level of historical taxable income and

projection for future taxable income over the periods which the temporary

differences resulting in the remaining deferred

tax assets are deductible, management believes it is more-likely-than-not

that the Company will realize the benefits of these

deductible differences at December 31, 2024.

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Cumulative effect of change in accounting standard

Deferred tax expense related to continuing operations

Stockholders' equity, for accumulated

other comprehensive income

Deferred tax expense (benefit) related to continuing operations

Stockholders' equity,

for accumulated other comprehensive income

Balance, end of year

Income Taxes,

defines the threshold for recognizing the benefits of tax return positions in the financial statements

defines the threshold for recognizing the benefits of tax return positions in the financial

as “more-likely-than-not” to be sustained by the taxing authority.

This section also provides guidance on the de-

recognition, measurement, and classification of income tax uncertainties in interim

recognition, measurement, and classification of income tax uncertainties

in interim periods.

As of December 31, 2024, the

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December 31, 2024.

As of December 31, 2023, the Company has accrued no interest and no penalties related to uncertain

As of December 31, 2024, the Company has accrued no interest and no penalties related to

tax positions.

It is the Company’s policy to recognize interest

and penalties related to income tax matters in income tax

It is the Company’s policy to recognize

interest and penalties related to income tax matters in income tax

The Company and its subsidiaries file consolidated U.S.

federal and State of Alabama income

State of Alabama income tax returns.

The Company is

currently open to audit under the statute of limitations by the Internal Revenue Service and the State of

Alabama for the

currently open to audit under the statute of limitations by the Internal Revenue Service

and the State of Alabama for the

years ended December 31, 2021 through 2024.

EMPLOYEE BENEFIT PLAN

The Company sponsors a qualified defined contribution retirement plan, the Auburn National

Bancorporation, Inc.

The Company sponsors a qualified defined contribution retirement plan,

the Auburn National Bancorporation, Inc.

Plan (the "Plan").

Eligible employees may contribute up to 100% of eligible compensation, subject to statutory

Eligible employees may contribute up to 100% of eligible compensation, subject to

statutory limits upon

completion of 2 months of service.

Furthermore, the Company allows employer Safe Harbor contributions.

Participants are

immediately vested in employer Safe Harbor contributions.

Company's matching contributions on behalf of

participants were equal to $1.00 for each $1.00 contributed by participants, up to 3% of

each participant's

compensation, and $0.50 for every $1.00 contributed by participants, above 3% up to 5%

of each participant's

The Company's matching

contributions on behalf of

participants were equal to $1.00 for each $1.00 contributed by participants, up

to 3% of each participant's

compensation, and $0.50 for every $1.00 contributed by participants, above

3% up to 5% of each participant's

compensation, for a maximum matching contribution of 4% of the participants' eligible

2 unchanged sentences

contributions to the Plan were approximately $

million for the years ended December 31, 2023 and 2022, respectively,

and are included in salaries and benefits expense.

million for both of the years ended December 31, 2024 and 2023,

respectively, and are

included in salaries and benefits expense.

COMMITMENTS AND CONTINGENT LIABILITIES

5 unchanged sentences

letters of credit.

Such commitments involve, to varying degrees, elements of credit and interest rate

risk in excess of the

Such commitments involve, to varying degrees, elements of credit and interest rate risk in

excess of the

amount recognized in the consolidated balance sheets.

The Company’s exposure to credit

loss is represented by the contractual amount of these commitments.

follows the same credit policies in making commitments as it does for on-balance sheet

At December 31, 2023 and 2022, the following financial instruments were outstanding

whose contract amount represents

The Company’s exposure

to credit loss is represented by the contractual amount of these commitments.

follows the same credit policies in making commitments as it does for on-balance

sheet instruments.

At December 31, 2024 and 2023, the following financial instruments were

outstanding whose contract amount represents

(Dollars in thousands)

1 unchanged sentence

Standby letters of credit

Commitments to extend credit are agreements to lend to a customer provided there is no violation

of any condition

established in the commitment agreement and provided the commitments are

not otherwise cancelable by the Bank.

Commitments generally have fixed expiration dates or other termination clauses

and may require payment of a fee.

Commitments to extend credit are agreements to lend to a customer provided

there is no violation of any condition

established in the commitment agreement and provided the commitments

are not otherwise cancelable by the Bank.

Commitments generally have fixed expiration dates or other termination

clauses and may require payment of a fee.

commitments for lines of credit may expire without being drawn upon.

2 unchanged sentences

The amount of collateral obtained, if it is deemed necessary by the

Company, is based on management’s

credit evaluation of the customer.

Company, is based on

management’s credit evaluation of the customer.

The Company records an allowance for credit

losses on off-balance sheet exposures, unless the commitments to extend credit

are unconditionally cancelable, through a

losses on off-balance sheet exposures, unless the commitments to

extend credit are unconditionally cancelable, through a

charge to provision for credit losses in the Company’s

Consolidated Statement of Earnings, prior to the adoption of ASC

326, changes in the allowance were recorded as a component of other noninterest expense.

Consolidated Statement of Earnings.

The allowance for credit losses

related to unfunded commitments was $

million and $

million at December 31, 2023 and 2022, respectively,

included in other liabilities on the Company’s

million at both December 31, 2024 and 2023, respectively,

and is included in

other liabilities on the Company’s

Consolidated Balance Sheet.

Summary of Significant

Accounting Policies – Allowanace for credit losses –

Unfunded commitments.”

Standby letters of credit are conditional commitments issued by the Company to

guarantee the performance of a customer

Summary of Significant Accounting Policies –

Allowance for credit losses – Unfunded

commitments.”

Standby letters of credit are conditional commitments issued by the

Company to guarantee the performance of a customer

to a third party.

The credit risk involved in issuing letters of credit is essentially the same

as that involved in extending loan

The credit risk involved in issuing letters of credit is essentially the same as that involved

in extending loan

facilities to customers.

2 unchanged sentences

for which collateral is deemed necessary.

The Company has a recorded a liability for the estimated fair value of these standby letters

of credit in the amount of $

The Company has a recorded a liability for the estimated fair value of these

standby letters of credit in the amount of $

thousand and $

1 unchanged sentence

Contingent Liabilities

The Company and the Bank are involved in various legal proceedings, arising in connection

with their business.

opinion of management, based upon consultation with legal counsel, the ultimate resolution

of these proceedings will not

have a material adverse effect upon the consolidated financial

condition or results of operations of the Company and the

The Company and the Bank are involved in various legal proceedings, arising

in connection with their business.

opinion of management, based upon consultation with legal counsel, the

ultimate resolution of these proceedings will not

have a material adverse effect upon the consolidated

financial condition or results of operations of the Company and the

“Fair value” is defined by ASC 820,

1 unchanged sentence

, as the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction 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.

an asset or paid to transfer a liability in an orderly transaction occurring in the principal

market (or most advantageous

market in the absence of a principal market) for an asset or liability at the measurement

GAAP establishes a fair

value hierarchy for valuation inputs that gives the highest priority to quoted prices

in active markets for identical assets or

value hierarchy for valuation inputs that gives the highest priority to

quoted prices in active markets for identical assets or

liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

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

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 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 the 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 the 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 years ended December

31, 2023 and 2022, there

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

financial assets and liabilities.

For the years ended

December 31, 2024 and 2023, 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 from third party pricing services.

These third-party pricing services consider observable data

include broker/dealer quotes, market spreads, cash flows, market consensus prepayment

speeds, benchmark yields, reported

These third-party pricing services consider observable data that may

include broker/dealer quotes, market spreads, cash flows, market consensus

prepayment speeds, benchmark yields, reported

trades for similar securities, credit information and the securities’ terms and conditions.

On a quarterly basis, management

reviews the pricing

received from the third-party pricing services for reasonableness given

current market conditions.

reviews the pricing received from the third-party pricing services for

reasonableness given current market conditions.

part of its review, management

may obtain non-binding third party broker quotes to validate the fair value measurements.

In addition, management will periodically submit pricing provided by the third-party

pricing services to another

In addition, management will periodically submit pricing provided by

the third-party pricing services to another

independent valuation firm on a sample basis.

This independent valuation firm will compare the price provided

This independent valuation firm will compare the price provided by

third-party pricing service with its own price and will review the significant assumptions

1 unchanged sentence

with management.

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

on a recurring as of December

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

value on a recurring as of December

31, 2024 and 2023, respectively,

9 unchanged sentences

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

1 unchanged sentence

Collateral Dependent Loans

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

estimated selling costs.

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

loan less estimated selling costs.

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

6 unchanged sentences

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

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.

5 unchanged sentences

the fair value of MSRs, the Company engages an independent third party.

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 prepayment speeds, discount

rate, default rates, cost to

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

income, and late fees.

The independent third party’s valuation

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 prepayment

speeds, discount rate, default rates, cost 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.

Company will review broker surveys and other market research to validate

significant assumptions used in the model.

significant unobservable inputs include prepayment speeds or the constant prepayment

4 unchanged sentences

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

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

value on a nonrecurring basis as of

December 31, 2024 and 2023, respectively,

by caption, on the accompanying consolidated balance sheets and by

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

valuation hierarchy (as described above):

9 unchanged sentences

Represents MSRs, net carried at lower of cost or estimated fair value.

Loans considered impaired under ASC 310-10-35 Receivables, prior to the adoption

This amount reflects

the recorded investment in impaired loans, net of any related allowance for loan losses.

Quantitative Disclosures for Level 3 Fair Value

At December 31, 2023 and 2022, the Company had no Level 3 assets measured at fair value on a

recurring basis.

At December 31, 2024 and 2023, the Company had no Level 3 assets measured at fair value

on a recurring basis.

3 assets measured at fair value on a non-recurring basis as of December 31, 2024

12 unchanged sentences

December 31, 2023:

Impaired loans

Collateral dependent loans

Appraisal discounts

7 unchanged sentences

whether or not

recognized on the face of the balance sheet, for which it is practicable to estimate that

recognized on the face of the balance sheet, for which it is practicable to estimate

The assumptions used in the

2 unchanged sentences

Where quoted market prices are

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

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

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

representative of the liquidation value of the Company’s

3 unchanged sentences

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.

future cash flows were projected based on contractual

Expected future cash flows were projected based on contractual

cash flows, adjusted for estimated prepayments.

1 unchanged sentence

Time Deposits

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

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.

11 unchanged sentences

financial liabilities due to these products having no stated maturity.

Additionally, financial liabilities

for which fair value

approximates carrying value included overnight borrowings

such as federal funds purchased and securities sold under

Additionally, financial liabilities for which

approximates carrying value included overnight borrowings such

as federal funds purchased and securities sold under

agreements to repurchase.

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(1) Represents loans, net and the allowance for credit losses.

The fair value of loans was measured using

an exit price notion.

The fair value of loans was measured using an

exit price notion.

RELATED PARTY

The Bank has made, and expects in the future to continue to make in the ordinary course

of business, loans to directors and

The Bank has made, and expects in the future to continue to make in the

ordinary course of business, loans to directors and

executive officers of the Company,

1 unchanged sentence

These persons, corporations, and

firms have had transactions in the ordinary course of business with the Company and

Bank, including borrowings, all of

which management believes were on substantially the same terms, including interest

rates and collateral, as those prevailing

at the time of comparable tranactions with unaffiliated persons and did

not involve more than the normal risk of

firms have had transactions in the ordinary course of business with the Company

and Bank, including borrowings, all of

which management believes were on substantially the same terms, including

interest rates and collateral, as those prevailing

at the time of comparable transactions with unaffiliated persons and

did not involve more than the normal risk of

collectability or present other unfavorable features.

17 unchanged sentences

small bank holding company policy statement (the “Small BHC

Policy Statement”) and has been added as Appendix C to Federal Reserve Regulation Y.

Policy Statement”) and has been added as Appendix C to Federal Reserve Regulation

These increased the Small BHC

5 unchanged sentences

significant off-balance sheet activities;

and (3) does not have a material amount of

debt or equity securities, other than trust-

and (3) does not have a materi

al amount of debt or equity securities, other than trust-

preferred securities, outstanding that are registered with the SEC.

final rule provides that, if warranted for

supervisory purposes, the Federal Reserve may exclude a company from this asset

level increase.

supervisory purposes, the Federal Reserve may exclude a company from

this asset level increase.

The Federal Reserve has

treated the Company as a small bank holding company for purposes of the Small BHC Policy Statement

and therefore has

considered only the Bank’s capital and not the

Company’s consolidated capital.

The Bank remains subject to regulatory capital requirements of the Alabama

Banking Department and the Federal Reserve.

treated the Company as a small bank holding company for purposes of

the Small BHC Policy Statement and therefore has

considered only the Bank’s capital and

not the Company’s consolidated capital.

The Bank remains subject to regulatory capital requirements of

the Alabama Banking Department and the Federal Reserve.

Failure to meet minimum capital requirements can initiate certain mandatory

1 unchanged sentence

actions by regulators that, if undertaken, could have a direct material effect

on the Company’s financial

capital adequacy guidelines and the regulatory framework for prompt corrective action, the

Bank must meet specific capital

guidelines that involve quantitative measures of their assets, liabilities and certain off

-balance sheet items as calculated

on the Company’s financial statements.

capital adequacy guidelines and the regulatory framework for prompt corrective

action, the Bank must meet specific capital

guidelines that involve quantitative measures of their assets, liabilities and certain

off-balance sheet items as calculated

under regulatory accounting practices.

The capital amounts and classification are

also subject to qualitative judgments by

The capital amounts and classification

are also subject to qualitative judgments by

the regulators about components, risk weightings, necessary capital to support

3 unchanged sentences

-regulated institution must

maintain capital commensurate with the level and nature of all risks to which such institution

Federal Reserve Regulation Q limits “distributions” and discretionary bonus

payments from eligible retained income” by

sate member banks, such as the Bank, unless its capital conservation buffer

of common equity Tier 1 capital (“CET1”)

maintain capital commensurate with the level and nature of all risks to which such

institution is exposed.

Federal Reserve Regulation Q limits “distributions” and discretionary

bonus payments from eligible retained income” by

sate member banks, such as the Bank, unless its capital conservation

buffer of common equity Tier 1 capital (“CET1”)

exceeds 2.5%.

“Distributions” include dividends declared or paid on common stock, and stock

repurchases, redemptions or

repurchases of Tier 2 capital instruments (unless replaced

by a capital instrument in the same quarter).

“Distributions” include dividends declared or paid on common

stock, and stock repurchases, redemptions or

repurchases of Tier 2 capital instruments (unless

replaced by a capital instrument in the same quarter).

“Eligible retained

1 unchanged sentence

(A) The Board-regulated institution's net income, calculated in accordance

with the instructions to the institution’s FR Y–

9C or Call Report, for the four calendar quarters preceding the current calendar quarter,

net of any distributions and

with the instructions to the institution’s

9C or Call Report, for the four calendar quarters preceding the current calendar

quarter, net of any distributions and

associated tax effects not already reflected in net income;

1 unchanged sentence

net income, calculated in accordance with the instructions to the

institutions’ FR Y–9C or Call Report, as applicable, for the four calendar quarters

preceding the current calendar quarter.

The Bank’s Call Report is used for its calculation

of “eligible retained income”.

institutions’ FR Y–9C or Call Report, as applicable, for the four calendar

quarters preceding the current calendar quarter.

The Bank’s Call Report is used for

its calculation of “eligible retained income”.

As of December 31, 2024, the Bank is “well capitalized” under the regulatory framework

for prompt corrective action.

be categorized as “well capitalized,” the Bank must maintain minimum common equity Tier

1, total risk-based, Tier 1 risk-

be categorized as “well capitalized,” the Bank must maintain minimum common

equity Tier 1, total risk-based, Tier

based, and Tier 1 leverage ratios as set forth in the

1 unchanged sentence

Management has not received any notification from the

Bank's regulators that changes the Bank’s regulatory

capital status.

The actual capital amounts and ratios for the Bank and the aforementioned minimums as

of December 31, 2023 and 2022

Bank's regulators that changes the Bank’s

regulatory capital status.

The actual capital amounts and ratios for the Bank and the aforementioned

minimums as of December 31, 2024 and 2023

are presented below.

6 unchanged sentences

Tier 1 Leverage Capital

Common Equity Tier 1 Capital

CET1 Risk-Based Capital

Tier 1 Risk-Based Capital

2 unchanged sentences

Tier 1 Leverage Capital

Common Equity Tier 1 Capital

CET1 Risk-Based Capital

Tier 1 Risk-Based Capital

Total Risk-Based Capital

Dividends paid by the Bank are a principal source of funds available to the Company for

payment of dividends to its

stockholders and for other needs which are restricted by Alabama and Federal law and regulations

as described above.

Dividends paid by the Bank are a principal source of funds available to the Company

for payment of dividends to its

stockholders and for other needs which are restricted by Alabama and Federal law and

regulations as described above.

Capital adequacy considerations could further limit the availability of dividends

4 unchanged sentences

As a result of this limitation, approximately $

million of the Company’s investment in the Bank

million of the Company’s investment in

restricted from transfer in the form of dividends.

2 unchanged sentences

(PARENT COMPANY)

The Parent Company’s condensed balance sheets

and related condensed statements of earnings and cash flows are as

The Parent Company’s condensed

balance sheets and related condensed statements of earnings and

cash flows are as

CONDENSED BALANCE SHEETS

14 unchanged sentences

Earnings before income tax expense and equity

in undistributed earnings of bank subsidiary

in undistributed (distributed) earnings of bank subsidiary

Income tax benefit

Earnings before equity in undistributed earnings

Earnings before equity in undistributed (distributed) earnings

of bank subsidiary

Equity in (distributed) undistributed earnings of bank subsidiary

Equity in undistributed (distributed) earnings of bank subsidiary

CONDENSED STATEMENTS

5 unchanged sentences

provided by operating activities:

Net (increase) decrease in other assets

Net increase (decrease) in other liabilities

Equity in (distributed) undistributed earnings of bank subsidiary

Net increase in other assets

Net (decrease) increase in other liabilities

Equity in (undistributed) distributed earnings of bank subsidiary

Net cash provided by operating activities

11 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-K

Item 8. Financial Statements and Supplementary Data