What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-17 compared with 2025-03-11 · 662 added, 491 removed, 1553 unchanged (43% of the section changed)

12 unchanged sentences

Auburn National Bancorporation, Inc.

and Subsidiary

and Subsidiaries

Opinion on the Financial Statements

Bancorporation,

the accompanying

consolidated balance

Auburn National

Bancorporation, Inc.

and Subsidiaries

comprehensive

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its operations

generally accepted in the United States of America.

Basis for Opinion

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internal control over financial reporting.

our audits, we are required to obtain an understanding of

internal control

our audits, we are required to obtain an understanding of internal

effectiveness

12 unchanged sentences

basis, evidence

regarding the

disclosures in

the financial

and disclosures

financial statements.

also included

accounting principles used

1 unchanged sentence

by management, as well

as evaluating the

overall presentation of

as evaluating the overall

presentation of

the financial statements.

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by management using

relevant available information, from

both internal

relevant available information,

from both internal

sources, relating

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based on the statistical PD models.

The weighted average remaining

life method uses an annual charge

The weighted average remaining life

method uses an annual charge

-off rate over several

4 unchanged sentences

includes subjective

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

losses to differ from historical experience.

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

from historical experience.

identified the

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Greenville, South Carolina

March 11, 2025

arch 17, 2026

AUBURN NATIONAL

8 unchanged sentences

Securities available-for-sale

Loans held for sale

Loans, net of unearned income

5 unchanged sentences

Total deposits

Federal funds purchased and securities sold under agreements to repurchase

Accrued expenses and other liabilities

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Less treasury stock, at cost -

at December 31, 2024 and 2023, respectively

shares at both

December 31, 2025 and 2024

Total stockholders’

Total liabilities and stockholders’

See accompanying notes to consolidated financial statements

ee accompanying notes to consolidated financial statements

AUBURN NATIONAL

18 unchanged sentences

Bank-owned life insurance

Securities losses, net

Total noninterest income

6 unchanged sentences

Earnings before income taxes

Income tax expense (benefit)

Income tax expense

Net earnings per share:

1 unchanged sentence

Weighted average shares

Basic and diluted

See accompanying notes to consolidated financial statements

ee accompanying notes to consolidated financial statements

AUBURN NATIONAL

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(Dollars in thousands)

Other comprehensive (loss) income, net of tax:

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

tax benefit of $

and tax expense of $

Other comprehensive income (loss), net of tax:

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

tax expense of $

and tax benefit of $

for the years

ended December 31, 2025 and 2024, 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

Other comprehensive income (loss)

Comprehensive income

See accompanying notes to consolidated financial statements

ee accompanying notes to consolidated financial statements

AUBURN NATIONAL

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accounting standard

Other comprehensive income

Other comprehensive loss

Cash dividends paid ($

Stock repurchases

Sale of treasury stock

Balance, December 31, 2024

Cumulative effect of change in

accounting standard

Other comprehensive loss

Other comprehensive income

Cash dividends paid ($

Sale of treasury stock

Stock-based compensation

Balance, December 31, 2025

See accompanying notes to consolidated financial statements

ee accompanying notes to consolidated financial statements

AUBURN NATIONAL

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Premium amortization and discount accretion, net

Deferred tax expense (benefit)

Net loss on sale of securities available for sale

Deferred tax (benefit) expense

Net gain on sale of loans held for sale

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Increase in cash surrender value of bank owned life insurance

Income recognized from death benefit on bank-owned life insurance

Net (increase) decrease in other assets

Net increase (decrease) in accrued expenses and other liabilities

Stock-based compensation

Net decrease (increase) in other assets

Net increase in accrued expenses and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from sales of securities available-for-sale

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

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Net purchases of premises and equipment

Decrease (increase) in FHLB stock

Proceeds from bank-owned life insurance death benefit

Proceeds from surrender of bank-owned life insurance

Decrease in FHLB stock

Net cash provided by investing activities

Cash flows from financing activities:

Net decrease in noninterest-bearing deposits

Net increase (decrease) in interest-bearing deposits

Net increase (decrease) in noninterest-bearing deposits

Net increase in interest-bearing deposits

Net decrease in federal funds purchased and securities sold

under agreements to repurchase

Stock repurchases

Dividends paid

Net cash used in financing activities

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

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Cash paid during the period for:

See accompanying notes to consolidated financial statements

ee accompanying notes to consolidated financial statements

AUBURN NATIONAL

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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

noninterest income.

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

over the service period.

income that fall within the scope of Accounting Standards Codification (“ASC”) 606,

from Contracts with Customers,

include service charges on deposits, interchange fees and

gains, and losses on sales of

other real estate, all of which are presented as components of noninterest income.

The following is a summary of the

revenue streams that fall within the scope of ASC 606:

Service charges on deposits and 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

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

charges are recognized over the service period.

Gains on sales of other real estate

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of the borrower, the

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

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

collectability.

Use of Estimates

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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 2025

Investments – Equity Method and Joint Ventures

Accounting for Investments in Tax

Structures Using the Proportional

Amortization Method

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

Accounting Standards Update (“ASU”) 2023-09,

Improvements to Income Tax

The amendments in this Update

enhance the transparency and decision usefulness of income tax disclosures.

For public business entities, the new standard

is effective for annual periods beginning after December

The Company does not expect the new standard to have

a material impact on the Company’s

amendments in this Update enhance the transparency and decision usefulness of

income tax disclosures.

business entities, the new standard was effective for annual periods

beginning after December 15, 2024.

The Company has

adopted ASU 2023-09.

Issued not yet effective accounting standards

The following ASUs have been issued by the Financial Accounting Standards

Board (“FASB”) but are

not yet effective.

Income Statement Reporting Comprehensive Income

- Expense Disaggregation Disclosures

(Subtopic 220-

Clarifying the Effective Date,

clarifies the effective date of ASU 2024-03,

Income Statement Reporting Comprehensive

Income - Expense Disaggregation Disclosures

(Subtopic 220-40):

Disaggregation of

Income Statement Expenses

stipulate that ASU 2024-03 is effective for public business entities for

annual reporting periods beginning after December

15, 2026 and interim reporting periods beginning after December 15,

2027, with early adoption permitted.

will be effective for the Company beginning January 1, 2027

for the Company’s annual consolidated

financial statements

on Form 10-K and January 1, 2028 for the Company’s

quarterly consolidated financial statements on Form 10-Q

expected to have a significant impact on the Company’s

consolidated financial statements.

Intangibles - Goodwill and Other - Internal-Use Software

(Subtopic 350-40),

removes all references to

prescriptive and sequential software development stages and clarifies that the

threshold for when an entity is required to

start capitalizing software costs is when (1) management has authorized

and committed to funding the software project and

(2) it is probable that the project will be completed and the software will be used to perform

the function intended.

2025-06 will be effective for the Company beginning

January 1, 2028, with early adoption permitted, and is not expected to

have a significant impact on the Company’s

consolidated financial statements.

Interim Reporting (Topic

Narrow-Scope Improvements,

is intended to provide clarity about the current

interim reporting requirements, provides a list of the interim disclosures required

by all other Codification topics and

establishes a disclosure principle that requires entities to disclose events since the

end of the last annual reporting period

that have a material impact on the entity.

ASC 2025-11 will be effective

for the Company beginning January 1, 2028, with

early adoption permitted, and is not expected to have a significant impact on the Company’s

consolidated financial

Cash Equivalents

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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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the amortization of premiums and accretion of discounts are

recognized in interest income using the effective interest

recognized in interest income using the effective interest method.

Premiums are amortized to the earliest call date while

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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.

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in fair value is the result of credit deterioration.

Such evaluations consider

the extent to which the amortized cost of the

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

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the amount by

which the amortized cost basis of the security exceeds the present value of

cash flows expected to be collected, limited 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.

The Company has elected to exclude accrued interest receivable on

investment securities from the estimate of credit losses.

Accrued interest receivable is written off through interest income

when deemed uncollectible.

Accrued interest receivable totaled $0.8 million and $0.9 million at December

2024, respectively.

Loans held for sale

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and ownership is

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

the loan for a fee for the

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.

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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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Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination

Loan origination

fees, net of certain direct origination

costs, are deferred and recognized in interest income using methods that approximate

a level yield without anticipating

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

past due and is not well collateralized and in

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

and business conditions and collection

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

normal course of business.

Past due status is based on

contractual terms of the loan.

A loan is considered to be past due when a scheduled

payment has not been received 30 days

after the contractual due date.

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

on nonaccrual status.

The Company discontinues the accrual of interest income when (1) there

is a significant deterioration in the financial

condition of the borrower and full repayment of principal and interest is not

expected or (2) the principal or interest is more

than 90 days past due, unless the loan is both well-secured and in the process

of collection.

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,

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Otherwise, under the cost

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

is reduced to zero.

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 confirms the

Loans are charged off against the allowance when management

loan balance is uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged

Expected recoveries do not exceed the aggregate

of amounts previously charged-off and

expected to be charged-off.

Accrued interest receivable is excluded from the estimate of credit losses.

The Company has elected to exclude accrued interest receivable on loans from the estimate of

credit losses.

Accrued interest receivable is written off through interest

income when deemed uncollectible.

interest receivable totaled $2.0 million at both December 31, 2025

The allowance for credit losses represents management’s

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using relevant available information, from

both internal and external sources, relating to past events, current conditions, and reasonable and

supportable forecasts.

both internal and external sources, relating to past events, current conditions,

and reasonable and supportable forecasts.

The Company’s loan loss estimation

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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.

all DCF models, which were incorporated in the calculation.

The Company performs a refresh of the inputs in the

calculation on an annual basis.

The weighted average remaining life method was deemed most appropriate

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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

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risk factors that are

believed likely to cause estimated credit losses to differ from historical

believed likely to cause estimated credit losses to differ from

historical experience.

These qualitative adjustments may

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industry concentrations, trends in underlying

external factors and economic conditions not already captured.

collateral, external factors and economic conditions not already captured.

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

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characteristics are evaluated on an individual basis.

When management determines that foreclosure is probable and the borrower

is experiencing financial difficulty,

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

1 unchanged sentence

as appropriate.

For loans evaluated on an individual basis that are not collateral dependent, the allowance

using the present value of expected future cash flows, discounted at the loan’s

effective interest rate.

Expected cash flows

are developed using probability of default

and loss given default assumptions specific to the borrower.

Allowance for Credit Losses – Unfunded Commitments

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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

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.

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and furniture, fixtures, and equipment are carried

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

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

over the estimated useful lives of the assets or the

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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

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

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based on various factors including, the Bank’s

total assets, its borrowings and outstanding letters of credit from the FHLB -

total assets, its borrowings and outstanding letters of credit from the

Atlanta and its “acquired member asset” sales to FHLB - Atlanta.

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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 approved 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

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

Management considers these

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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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Mortgage Servicing Rights

The Company recognizes as assets the rights to service mortgage loans

which it originates and sells to others, principally

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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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.

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

valuation allowance is established through a charge to earnings.

valuation allowance is established through a charge to

The valuation allowance is adjusted as the fair value

MSRs are included in the other assets category in the accompanying consolidated

balance sheets at the lower of

MSRs are included in the other assets category in the accompanying consolidated balance

sheets at the lower of

cost or fair value.

See Note 14 “Fair Value”

Securities sold under agreements to repurchase

Securities sold under agreements to repurchase generally mature less than one

year from the transaction date.

sold under agreements to repurchase are reflected as a secured borrowing in the accompanying

consolidated balance sheets

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

Derivatives as Part of Designated Accounting Hedges

The Company applies hedge accounting to certain derivative instruments

used for risk management purposes, primarily

interest rate risk.

qualify for hedge accounting, a derivative instrument must be highly effective

at reducing the risk

associated with the hedged exposure, and the hedging relationship must be formally

documented at its inception.

Company uses regression analysis to assess the effectiveness of each hedging

relationship, unless the hedge qualifies for

other methods of assessing effectiveness (e.g., shortcut or

critical terms match), both at inception and throughout the life of

the hedge transaction.

The Company has a derivative instrument designated as part of a fair value

accounting hedge.

This derivative consists of a

pay-fixed, receive-floating interest rate swap, and was entered into

to hedge changes in the fair value of a fixed-rate loan for

interest rate risk resulting from changes in a benchmark interest rate.

In a qualifying

fair value hedge, the Company records

periodic changes in the fair value of the derivative instrument in current period

Simultaneously,

periodic changes

in the fair value of the hedged risk are also recorded in current period

these periodic changes in the fair

value of the derivative instrument and the fair value of the hedged risk are included

in the same line item of the

consolidated statements of earning associated with the hedged item,

and offset each other.

Interest accruals

derivative instrument and the hedged item are also recorded in the same line item,

which effectively converts the designated

fixed-rate asset to a floating-rate asset.

The Company structures interest rate

swaps associated with fair value hedges to

match the critical terms of the hedged items, thereby maximizing the economic

and accounting effectiveness of the hedging

relationships, resulting in the expectation that the hedging relationship will be highly

If a fair value hedging

relationship ceases to qualify for hedge accounting, hedge accounting is discontinued

and future changes in the fair value of

the derivative instrument are recognized in current period earnings, until the

derivative is settled with the counterparty.

addition, all remaining basis adjustments resulting from periodic changes

in the fair value of the hedged risk, previously

recorded as a component of the carrying amount of the hedged item, are

amortized or accreted into interest income using

the interest method over the remaining life of the hedged item.

Deferred tax assets and liabilities are the expected future tax amounts

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on items that are normally accounted

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

available-for-sale securities.

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

losses on available-for-sale securities.

In accordance with ASC 740,

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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.

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 diluted net earnings per share calculation.

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

the weighted average common shares outstanding for

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

of securities or other

rights for, or convertible into, shares of the

Company’s common stock.

During 2025, the Company granted 3,030 restricted

stock units (“RSUs”), which represent potential common shares.

These RSUs are included in the computation of diluted

net earnings per share using the treasury stock method.

No such securities were outstanding during the year ended

December 31, 2024.

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

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

Basic and diluted:

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

equity investors with substantive or proportional voting rights or has

equity investors that do not provide sufficient financial

resources for the entity to support its activities.

At December 31, 2024, the Company did not have any consolidated VIEs and

had one nonconsolidated VIE, which is

discussed below.

New Markets Tax

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 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 $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 as a VIE.

While the Company’s investment

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)

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

Basic net earnings per share

Weighted average

common shares outstanding

Dilutive effect of restricted stock units

Weighted average

common shares outstanding, diluted

Diluted net earnings per share

At December 31, 2025 and 2024, respectively,

60 unchanged sentences

Unrealized losses

For the securities

previous table,

as of December

management does

not intend to

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

recognized into income

as the decline

in fair value

is largely due

to changes in

interest rates and

not credit quality.

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

Agency Obligations

14 unchanged sentences

Realized Gains and Losses

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

Year ended December 31

(Dollars in thousands)

Gross realized gains

Gross realized losses

Realized losses, net

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

ended December 31, 2025 and 2024,

respectively.

LOANS AND ALLOWANCE

12 unchanged sentences

Total loans, net of unearned

income before basis adjustment

Basis adjustment associated with fair value hedge (1)

Total loans, net of unearned

(1) Represent the basis adjustment associated with application of hedge accounting

on certain loans.

The basis adjustment

will be allocated to the amortized cost of associated loans within the portfolio if

the hedge accounting is discontinued.

Note 12 Derivative Instruments

for additional information.

Loans secured by real estate were approximately

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

Generally the primary source of repayment is

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

Generally, the primary source

of repayment is

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

Commercial real estate

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commercial customers.

Generally the primary source

the primary source

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

– primarily includes loans to finance income-producing multifamily

Loans in this class include

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

Generally, the primary source

the primary source of

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.

The 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

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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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defined as follows:

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

of the obligor (or guarantors, if

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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These loans are not adversely classified and do

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

not expose an institution to sufficient risk to warrant an

adverse classification.

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

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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.

The following tables present credit quality indicators for the loan portfolio

segments and classes by year of origination as of

December 31, 2025 and 2024.

(Dollars in thousands)

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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.

The allowance for credit losses is estimated under the Current Expected

Credit Losses (“CECL”) methodology set forth in

FASB ASC 326,

Financial Instruments – Credit Losses.

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.

the allowance for credit losses is

measured on a collective basis for pools of loans with similar risk characteristics,

and for loans that do not share similar risk

characteristics with the collectively evaluated pools, evaluations are

performed on an individual basis.

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

is presented below.

Year ended December 31,

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Reserve for unfunded commitments

Total provision for (reversal

of) credit losses

Total provision for credit

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

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Balance, December 31, 2023

Impact of adopting ASC 326

Net (charge-offs) recoveries

Balance, December 31, 2023

Net recoveries (charge-offs)

Provision for credit losses

Balance, December 31, 2024

The Company did not recognize any interest income on nonaccrual loans

during 2024 and 2023.

Net (charge-offs) recoveries

Provision for credit losses

Balance, December 31, 2025

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

2025 and 2024.

The Company designates individually evaluated loans on nonaccrual status as collateral

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These loans do not share common risk characteristics and are not included within the

collectively evaluated loans for determining the allowance for credit losses.

collectively evaluated loans for determining the allowance for credit

Under CECL, for collateral-dependent loans,

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December 31, 2025:

Commercial real estate

December 31, 2024:

Commercial and industrial

Construction and land development

December 31, 2023:

Commercial real estate

At December 31, 2025, the Company had one additional individually

evaluated commercial real estate loan in the amount

million that was not considered collateral dependent and was accruing in accordance with

its contractual terms.

This loan had a calculated allowance of $

million at December 31, 2025.

The allowance for this loan was measured

using the present value of expected future cash flows, discounted at the loan’s

effective interest rate.

Expected cash flows

were developed using probability of default and loss given default assumptions

specific to the borrower.

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

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The following table summarizes the Company’s

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

nonaccrual loans by major categories as of December 31, 2025 and 2024.

Nonaccrual loans

5 unchanged sentences

December 31, 2025

Commercial and industrial

Construction and land development

December 31, 2023

Commercial real estate

Residential real estate

December 31, 2024

Commercial and industrial

Construction and land development

The Company had no modifications to loans made to borrowers experiencing

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

The Company leases excess retail and office space

in its headquarters building to third-party tenants under noncancelable

operating lease agreements.

These leases generally include fixed rental

payments with scheduled escalation provisions over

the respective lease terms.

The Company accounts for these arrangements as operating leases in accordance

with Accounting Standards Codification

(“ASC”) Topic 842,

Lease income is recognized on a straight-line basis over the terms of the

collectability is probable.

Differences between contractual

rental payments and lease income recognized are recorded as

deferred rent within other assets or other liabilities in the consolidated balance

Tenant leases also require

reimbursement of the tenants’ allocated portion of operating expenses associated with the

building, including utilities, maintenance, property taxes, insurance

and other common area costs.

These reimbursements

represent variable lease payments and are recognized as income when received

Certain tenant leases include the right to use parking spaces within the Company’s

parking deck located on the same

property as the headquarters building.

These parking arrangements are considered

part of the overall lease arrangement and

are included in the lease consideration.

Lease income is recorded as a reduction of net occupancy and equipment

expense in the consolidated statements of

For the years ended December 31, 2025 and 2024, total lease income

million and $

respectively.

Future minimum lease payments to be received under noncancelable operating

leases as of December 31, 2025 were as

(Dollars in thousands)

Minimum lease

payments to be

Total minimum

lease payments to be received

MORTGAGE SERVICING

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loans are sold.

servicing income,

including estimates

of prepayment

speeds, discount

rate, default

future net servicing

income, including estimates

of prepayment speeds,

discount rates,

default rates, cost

to service, escrow

account earnings,

6 unchanged sentences

fee income is

recorded net of

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 has recorded MSRs related to loans sold without recourse

to Fannie Mae.

The Company generally sells

4 unchanged sentences

Impairment is determined by stratifying MSRs into

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

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

If, by individual stratum, the

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accompanying consolidated balance sheets was not material.

LEASE COMMITMENTS

We lease certain office

facilities and equipment under operating leases.

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

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 $

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 31, 2024.

(Dollars in thousands)

Total undiscounted

operating lease liabilities

Imputed interest

Total operating lease liabilities

included in the accompanying consolidated balance sheets

Weighted-average

lease terms in years

Weighted-average

discount rate

For the years ended December 31, 2025 and 2024 the components of

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(Dollars in thousands)

Current income tax expense (benefit):

Current income tax expense

Total current

income tax expense (benefit)

Deferred income tax expense (benefit):

income tax expense

Deferred income tax (benefit) expense:

Total deferred income

tax expense (benefit)

tax expense differs from the amounts computed by applying the

statutory federal income tax rate of 21% to

tax (benefit) expense

Cash paid for income taxes, net of refunds, consists of the following:

Year ended December 31

(Dollars in thousands)

State - Alabama

tax expense differs from the amounts computed by applying the statutory

federal income tax rate of 21% to

earnings before income taxes.

A reconciliation of the differences for the years ended December

31, 2024 and 2023, is

A reconciliation of the differences for the years ended

December 31, 2025 and 2024, is

presented below.

1 unchanged sentence

Earnings before income taxes

Income taxes at statutory rate

Tax-exempt interest

State income taxes, net of

federal tax effect

Income taxes at U.S.

federal statutory rate

State income taxes, net of federal tax effect (1)

New Markets Tax Credit

Nontaxable or nondeductible items:

Tax-exempt interest

Bank-owned life insurance

tax expense (benefit)

Return-to-provision adjustment

(1) State taxes in Alabama made up the majority (greater than 50 percent) of

the tax effect in this category.

(2) Tax credit investments

includes tax credits and the amortization of and projected tax losses from tax

credit investments.

At December 31, 2025 and 2024, the Company had a net deferred tax

8 unchanged sentences

Unrealized loss on securities

Net operating loss carry-forwards

Tax credit carry-forwards

Accrued bonus

5 unchanged sentences

Right of use asset

New Markets Tax Credit

Total deferred tax

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Stockholders' equity,

for accumulated other comprehensive income

for accumulated other comprehensive (income) loss

Balance, end of year

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December 31, 2025.

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

As of December 31, 2025, the Company has accrued no interest and no penalties related to uncertain

tax positions.

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immediately vested in employer Safe Harbor contributions.

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

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

4 unchanged sentences

contributions to the Plan were approximately $

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

respectively, and are

included in salaries and benefits expense.

million for the years ended December 31, 2025 and 2024, respectively,

and are included in salaries and benefits expense.

STOCK-BASED COMPENSATI

The Company maintains an equity incentive plan (the “Plan”) pursuant to

which restricted stock units (“RSUs”) may be

granted to executive officers and key employees.

RSU represents the right to receive one share of the Company’s

common stock upon vesting.

RSUs do not represent an ownership interest

in the Company’s common

stock and do not

provide voting rights prior to vesting.

are evidenced by individual award agreements and are subject to the terms of

On July 24, 2025, the Company granted

RSUs with a grant-date fair value of $

per unit, based on the closing

market price of the Company’s common

stock on Nasdaq on the date of grant, for aggregate grant-date fair value of $

The RSUs vest in full on March 10, 2026 (the “Vesting

Date”), subject to continued employment through the

The award agreement provides for dividend equivalents.

Dividend equivalents

are additional RSUs credited upon the

payment of cash dividends on the Company’s

common stock.

The number of RSUs issued as dividend equivalents is

determined based on the number of RSUs held on the dividend payment

date multiplied by the cash dividend per share,

divided by the closing price of the Company’s

common stock on the dividend payment date.

RSUs issued as dividend

equivalents vest on the same terms and conditions as the underlying RSUs.

The incremental compensation cost associated

with such dividend equivalents was not material to the Company’s

consolidated financial statements.

The vesting of RSUs, including any dividend equivalents, may be

accelerated upon certain events, including death or

disability (100% vesting), retirement (pro rata vesting), termination without

cause (pro rata vesting), or a change in control

in which the awards are not assumed by the surviving entity.

Except as provided in the award agreement, unvested RSUs

are forfeited upon termination of employment.

In the event of termination

for cause, the Compensation Committee may

require the return of shares or other amounts received in respect of RSUs that vested

during the period constituting cause.

RSUs are nontransferable and are subject to the Company’s

insider trading policy and other restrictive covenants contained

in the applicable

award agreement.

Compensation cost for RSUs is recognized on a straight-line basis over the

requisite service period.

The Company accounts

for forfeitures as they occur.

were no forfeitures related to these RSUs during the year ended December 31, 2025.

For the year ended December 31, 2025, the Company recognized $

thousand of stock-based compensation expense

related to these RSUs.

Such expense is included in salaries and benefits expense

in the Consolidated Statements of

Earnings, with a corresponding increase to additional paid-in capital.

As of December 31, 2025, unrecognized compensation cost related to these RSUs totaled $

thousand, which is expected

to be recognized through the vesting date of March 10, 2026.

From time to time, the Company may enter into interest rate swaps to facilitate customer transactions

and manage the

Company’s exposure to interest rate risk associated

with changes in the Secured Overnight Financing Rate (“SOFR”).

Company does not enter into derivative instruments for speculative or

trading purposes.

In December 2025, the Company entered into a pay-fixed, receive-variable

interest rate swap with a notional amount of

approximately $10.0 million.

The swap was designated as a fair value hedge

of changes in the fair value of a specified loan

attributable to changes in the benchmark interest rate (SOFR).

Under the terms of the swap, the Company pays a fixed rate of interest and receives

a variable rate based on SOFR.

hedge was designated as a fair value hedge under ASC 815,

Derivatives and Hedging

, and qualified for the shortcut

the Company assumes no hedge ineffectiveness, and changes in the fair

value of the derivative are

recognized in earnings in the same income statement line item as the changes

in the fair value of the hedged loan

attributable to the hedged risk.

The following table presents the fair value of derivative instruments designated

as hedging instruments as of December 31,

Balance Sheet

(Dollars in thousands)

December 31, 2025:

Interest rate swap (fair value hedge)

Other Liabilities

Total interest rate swap

Accrued interest receivable related to the interest rate swap of $

million is included in Other Assets as of December 31,

The Company had no derivative instruments not designated as hedging

instruments at December 31, 2025.

The following table presents the effect of fair value hedge accounting

on the Consolidated Statements of Earnings for the

year ended December 31, 2025:

Amount of Gain

(Loss) Recognized

Location of Gain

(Loss) Recognized

in Income on Hedged

(Loss) Recognized

in Income on Hedged

Item Attributable

(Dollars in thousands)

to Hedged Risk

ended December 31, 2025:

Interest rate swap (fair value hedge)

Interest Income (Loans)

Total interest rate swap

The carrying amount of the loan designated as the hedged item in the fair value hedge

is included in Loans, net of unearned

income on the Consolidated Balance Sheet and includes a cumulative basis adjustment

for changes in fair value attributable

to the hedged risk.

As of December 31, 2025, the carrying amount of the hedged loan was $

million, which included a

cumulative fair value hedge basis adjustment of $22 thousand.

Because the hedge qualified for the shortcut method, the hedge relationship

was assumed to be perfectly effective, and

therefore no hedge ineffectiveness was recognized

during the year ended December 31, 2025.

The Company is exposed to credit risk in the event of nonperformance by

the counterparty to the interest rate swap.

Company manages this risk by transacting with a counterparty that meets established

credit standards.

The Company does

not anticipate nonperformance by the counterparty.

The derivative is subject to a master netting arrangement;

the Company does not offset derivative assets and

liabilities on the Consolidated Balance Sheets.

COMMITMENTS AND CONTINGENT LIABILITIES

8 unchanged sentences

amount recognized in the consolidated balance sheets.

The Company’s exposure

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

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

7 unchanged sentences

there is no violation of any condition

established in the commitment agreement and provided the commitments

are not otherwise cancelable by the Bank.

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

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Summary of Significant Accounting Policies –

Allowance for credit losses – Unfunded

commitments.”

Allowance for credit losses – Unfunded commitments.”

Standby letters of credit are conditional commitments issued by the

16 unchanged sentences

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

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,

11 unchanged sentences

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,

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

40 unchanged sentences

with management.

Interest Rate Swaps

The fair values of the Company’s interest

rate swaps are estimated using a discounted cash flow model.

considers the present value of expected future cash flows under the

terms of the swap and incorporates observable market

data such as:

relevant interest rate swap curves, benchmark yield curves

SOFR-based or other market-based curves),

and forward interest rate expectations over the contractual term of the instruments.

Because the significant inputs used in

valuing the interest rate swaps are observable in active markets, the Company

classifies these instruments with Level 2 of

the fair value hierarchy.

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,

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

hierarchy (as described above).

value on a recurring basis as of

December 31, 2025 and 2024, respectively,

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

valuation hierarchy (as described above).

Quoted Prices in

8 unchanged sentences

assets at fair value

Other liabilities - interest rate swaps

liabilities at fair value

December 31, 2024:

8 unchanged sentences

loan less estimated selling costs.

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

which are generally based on recent sales of

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

are generally based on recent sales of

comparable properties which are then adjusted for property specific factors.

5 unchanged sentences

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

fair value such as collateral values and the

fair value such as collateral

values and the

borrower’s underlying financial condition.

4 unchanged sentences

MSRs do not trade in an active market with readily observable prices.

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

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

The independent third party’s valuation

calculates the present value of estimated future net servicing income

using assumptions that market participants would use

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

11 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, 2025 and 2024, respectively,

10 unchanged sentences

Loans considered collateral dependent under ASC 326,

Financial Instruments - Credit Losses.

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

Quantitative Disclosures for Level 3 Fair Value

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

on a recurring basis.

At December 31, 2025 and 2024, 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, 2025

46 unchanged sentences

The fair value of loans was measured using an exit price notion.

Loans held for sale

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

Fair values are determined using quoted secondary

market prices for similar loans.

Time Deposits

Fair values for time deposits were estimated using discounted cash

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

The discount rates were based on rates currently

22 unchanged sentences

Loans, net (1)

Loans held for sale

Financial Liabilities:

9 unchanged sentences

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,

10 unchanged sentences

(Dollars in thousands)

Loans outstanding at December 31, 2023

Beginning balance

New loans/advances

Loans outstanding at December 31, 2024

Changes in directors and executive officers

During 2025 and 2024, certain executive officers

7 unchanged sentences

RESTRICTIONS AND CAPITAL

As required by the Economic Growth, Regulatory Relief, and Consumer Protection

Act of 2018, the Federal Reserve Board

issued rule that expanded applicability of the Board’s

small bank holding company policy statement (the “Small BHC

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

These increased the Small BHC

Policy Statement’s asset limit from

$1 billion to $3 billion in total consolidated assets for a bank holding company or

savings and loan holding company that:

(1) is not engaged in significant nonbanking activities;

does not conduct

significant off-balance sheet activities;

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.

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.

The Federal Reserve’s Small Bank

Holding Company Policy Statement (the “Small BHC Policy”) covers

qualifying bank

and thrift holding companies with up to $3 billion of consolidated assets.

The Federal Reserve treats the Company as a

small banking holding company under the Small BHC Policy.

As a result, the Company’s capital adequacy

is evaluated on

a bank only basis.

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

6 unchanged sentences

off-balance sheet items as calculated

under regulatory accounting practices.

The capital amounts and classification

are also subject to qualitative judgments by

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

risks and other factors.

Notwithstanding the

minimum capital requirements, Federal Reserve Regulation Q states that a Federal Reserve

-regulated institution must

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

institution is exposed.

under regulatory accounting and capital rules practices.

The capital amounts

and classification are also subject to qualitative

judgments by the regulators about components, risk weightings, necessary

capital to support risks and other factors.

Notwithstanding the minimum capital requirements, Federal Reserve Regulation

Q states that a Federal Reserve-regulated

institution must 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”)

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

of common equity Tier 1 capital (“CET1”)

exceeds 2.5%.

47 unchanged sentences

regulations as described above.

Capital adequacy considerations could further limit the availability of dividends

from the Bank.

At December 31, 2024, the

Bank could have declared additional dividends of approximately $

million without prior approval of regulatory

Capital adequacy and liquidity considerations could further limit the availability

of dividends from the Bank.

31, 2025, the Bank could have declared additional dividends of approximately

$6.5 million without prior approval of

regulatory authorities.

As a result of this limitation, approximately $

million of the Company’s investment in

restricted from transfer in the form of dividends.

million of the Company’s investment

was restricted from transfer in the form of dividends.

AUBURN NATIONAL

20 unchanged sentences

Earnings before income tax expense and equity

in undistributed (distributed) earnings of bank subsidiary

in undistributed earnings of bank subsidiary

Income tax benefit

Earnings before equity in undistributed (distributed) earnings

Earnings before equity in undistributed earnings

of bank subsidiary

Equity in undistributed (distributed) earnings of bank subsidiary

Equity in undistributed earnings of bank subsidiary

CONDENSED STATEMENTS

6 unchanged sentences

Net increase in other assets

Net (decrease) increase in other liabilities

Equity in (undistributed) distributed earnings of bank subsidiary

Net decrease in other liabilities

Equity in undistributed earnings of bank subsidiary

Net cash provided by operating activities

1 unchanged sentence

Dividends paid

Stock repurchases

Net cash used in financing activities

2 unchanged sentences

Cash and cash equivalents at end of period

Supplemental Disclosure of Noncash Investing Activities

During the year ended December 31, 2025, the Parent Company

recorded $62 thousand of stock-based compensation

related to restricted stock units granted to employees of the Bank.

The transaction was recorded as an increase in additional

paid-in capital with a corresponding intercompany receivable and

represents a noncash capital contribution to the Bank.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

3 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