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What changed in AUBURN NATIONAL BANCORPORATION, INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of AUBURN NATIONAL BANCORPORATION, INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+475 added−722 removedSource: 10-K (2026-03-17) vs 10-K (2025-03-11)

Top changes in AUBURN NATIONAL BANCORPORATION, INC's 2025 10-K

475 paragraphs added · 722 removed · 373 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

152 edited+48 added−167 removed93 unchanged
Biggest changeThese new policies include the following that are applicable to banks: • protecting and promoting fair and open access to banking services for all law-abiding individual citizens and private-sector entities alike; and • providing regulatory clarity and certainty built on technology-neutral regulations, frameworks that account for emerging technologies, transparent decision making, and well-defined jurisdictional regulatory boundaries, all of which are essential to supporting a vibrant and inclusive digital economy and innovation in digital assets, permissionless blockchains, and distributed ledger technologies The Executive Order Reforming the Federal Workforce to Better Serve Americans requires: • Agency Heads to coordinate and consult with DOGE to shrink the size of the federal workforce and limit hiring to essential positions; • The Office of Personnel Management to initiate a rulemaking to ensure federal employees are held to the highest standards of conduct; • Upon expiration of the Day 1 hiring freeze and implementation of the hiring plan, agencies to hire no more than one employee for every four employees that depart from federal service (with appropriate immigration, law enforcement, and public safety exceptions); • Agencies to plan for large-scale reductions in force and determine which agency components (or agencies themselves) may be eliminated or combined because their functions aren’t required by law.
Biggest changeThese new policies include the following that are applicable to banks: ● protecting and promoting fair and open access to banking services for all law-abiding individual citizens and private-sector entities alike; and ● providing regulatory clarity and certainty built on technology-neutral regulations, frameworks that account for emerging technologies, transparent decision making, and well-defined jurisdictional regulatory boundaries, all of which are essential to supporting a vibrant and inclusive digital economy and innovation in digital assets, permissionless blockchains, and distributed ledger technologies The Executive Order “Restoring Democracy and Accountability in Government” (Feb. 11, 2025) requires all agencies to submit draft regulations for White House review with no carveout for so-called independent agencies, except for the monetary policy functions of the Federal Reserve; and consult with the White House on their priorities and strategic plans.
The federal bank regulators stated that this Guidance is expected to generally have less effect on smaller banking organizations, which typically are less complex and make less use of incentive compensation arrangements than larger banking organizations.
The federal bank regulators have stated that this Guidance is expected to generally have less effect on smaller banking organizations, which typically are less complex and make less use of incentive compensation arrangements than larger banking organizations.
Qualified mortgages must have: (1) a term not exceeding 30 years; (2) regular periodic payments that do not result in negative amortization, deferral of principal repayment, or a balloon payment; (3) and be supported with documentation of the borrower and its credit. On December 10, 2020, the CFPB issued final rules related to “qualified mortgage” loans.
Qualified mortgages also must have: (1) a term not exceeding 30 years; (2) regular periodic payments that do not result in negative amortization, deferral of principal repayment, or a balloon payment; (3) and be supported with documentation of the borrower and its credit. On December 10, 2020, the CFPB issued final rules related to “qualified mortgage” loans.
Prior consultation with the Federal Reserve supervisory staff is required before: ● redemptions or repurchases of capital instruments when the bank holding company is experiencing financial weakness; and ● redemptions and purchases of common or perpetual preferred stock which would reduce such Tier 1 capital at end of the period compared to the beginning of the period.
Prior consultation with the Federal Reserve supervisory staff is required before: ● redemptions or repurchases of capital instruments when the bank holding company is experiencing financial weakness; and ● redemptions and purchases of common or perpetual preferred stock which would reduce Tier 1 capital at end of the period compared to the beginning of the period.
Thus, the earnings and growth of the Company and the Bank, as well as the values of, and earnings on, its assets and the costs of its deposits and other liabilities are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve.
The earnings and growth of the Company and the Bank, as well as the values of, and earnings on, its assets and the costs of its deposits and other liabilities are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve.
FDICIA establishes five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.
FDICIA establishes five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors established by regulation.
The payment of interest on excess reserve balances was expected to give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target rate established by the Federal Open Market Committee.
The payment of interest on excess reserve balances was expected to give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target rate established by the Federal Open Market Committee (“FOMC).
Other Laws and Regulations The Company is also required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as related rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board and Nasdaq.
Other Laws and Regulations The Company is required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as related rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board and Nasdaq.
Finally, Section 23A requires that all of a bank’s extensions of credit to its affiliates be appropriately secured by permissible collateral, generally United States government or agency securities.
Section 23A requires that all of a bank’s extensions of credit to its affiliates be appropriately secured by permissible collateral, generally United States government or agency securities.
Under the regulations, a state member bank will be: ● well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common equity tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; ● “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4.0% or greater; ● “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 4.0%; ● “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3.0%; or ● “critically undercapitalized” if its tangible equity is equal to or less than 2.0% to total assets.
Under the regulations, a state member bank will be: ● “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Common equity tier 1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure; ● “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a Common Equity Tier 1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4.0% or greater; ● “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a Common Equity Tier 1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 4.0%; ● “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a Common Equity Tier 1 capital ratio of less than 3%, or a leverage capital ratio of less than 3.0%; or ● “critically undercapitalized” if its tangible equity is equal to or less than 2.0% to total assets.
The Bank also offers commercial, financial, agricultural, real estate construction and consumer loan products, and other financial services. The Bank operates ATM machines in 10 locations in its primary service area. The Bank offers Visa ® Checkcards, which are debit cards with the Visa logo that work like checks and can be used anywhere Visa is accepted, including ATMs.
The Bank also offers commercial, financial, agricultural, real estate construction and consumer loan products, and other financial services. The Bank operates ATM machines in 8 locations in its primary service area. The Bank offers Visa ® Checkcards, which are debit cards with the Visa logo that work like checks and can be used anywhere Visa is accepted, including ATMs.
The Federal Reserve has indicated that paying dividends that deplete a state member bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve has indicated that depository institutions and their holding companies should generally pay dividends only out of current year’s operating earnings.
The Federal Reserve has indicated that paying dividends that deplete a state member bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve also has indicated that banks depository institutions and their holding companies should generally pay dividends only out of current year’s operating earnings.
These special assessments do not apply to the Bank. The minimum FDIC’s DIF reserve ratio is 1.35%, which was set by the Dodd-Frank Act. The FDIC Board of directors is required by the Federal Deposit Insurance Act (the “FDI Act”) to designate a reserve ratio before the beginning of each calendar year.
These special assessments did not apply to the Bank. The FDIC’s minimum DIF reserve ratio is 1.35%, which was set by the Dodd-Frank Act. The FDIC Board of directors is required by the Federal Deposit Insurance Act (the “FDI Act”) to designate a reserve ratio before the beginning of each calendar year.
For example, insurance activities would be subject to supervision and regulation by state insurance authorities and securities broker-dealer and investment advisory activities are regulated by the SEC. The BHC Act permits acquisitions of banks by bank holding companies, subject to various restrictions, including that the acquirer is “well capitalized” and “well managed”.
For example, insurance activities are subject to supervision and regulation by state insurance authorities and securities broker-dealer and investment advisory activities are regulated by the SEC. The BHC Act permits acquisitions of banks by bank holding companies, subject to various restrictions, including that the acquirer is “well capitalized” and “well managed”.
Banks that are less than “adequately capitalized” cannot accept or renew brokered deposits. FDICIA generally prohibits a depository institution from making any capital distribution, including paying dividends or any management fee to its holding company, if the depository institution thereafter would be “undercapitalized”.
Less than “adequately capitalized” banks cannot accept or renew brokered deposits. FDICIA generally prohibits a depository institution from making any capital distribution, including paying dividends or any management fee to its holding company, if the depository institution thereafter would be “undercapitalized”.
It offers checking, savings, transaction deposit accounts and certificates of deposit, and is an active residential mortgage lender in its primary service area. The Bank’s primary service area includes the cities of Auburn and Opelika, Alabama and nearby surrounding areas in East Alabama, primarily in Lee County.
The Bank offers checking, savings, transaction deposit accounts and certificates of deposit, and is an active residential mortgage lender in its primary service area. The Bank’s primary service area includes the cities of Auburn and Opelika, Alabama and nearby surrounding areas in East Alabama, primarily in Lee County.
Table of Contents 35 The current Acting CFPB Director, on February 8, 2025, ordered all CFPB employees to suspend substantially all activities, including all supervision, examination and stakeholder engagement activities, and closed the agency's headquarters for the week of February 10, 2025.
Table of Contents 26 The current Acting CFPB Director on February 8, 2025 ordered all CFPB employees to suspend substantially all activities, including all supervision, examination and stakeholder engagement activities, and closed the agency's headquarters for the week of February 10, 2025.
The USA PATRIOT Act requires financial institutions to establish anti-money laundering programs, and sets forth minimum standards, or “pillars” for these programs, including: ● the development of internal policies, procedures, and controls; ● the designation of a compliance officer; ● an ongoing employee training program; ● an independent audit function to test the programs; and ● ongoing customer due diligence and monitoring.
Table of Contents 14 The USA PATRIOT Act requires financial institutions to establish anti-money laundering programs, and sets forth minimum standards, or “pillars” for these programs, including: ● the development of internal policies, procedures, and controls; ● the designation of a compliance officer; ● an ongoing employee training program; ● an independent audit function to test the programs; and ● ongoing customer due diligence and monitoring.
The SEC maintains an Internet site at www.sec.gov that contains reports, proxy, and other information, where SEC filings are available to the public free of charge. Table of Contents 6 Services The Bank operates its main office and 7 branches in Auburn, Opelika, Notasulga, and Valley, Alabama and a loan production office in Phenix City, Alabama.
The SEC maintains an Internet site at www.sec.gov that contains reports, proxy, and other information, where SEC filings are available to the public free of charge. Services The Bank operates its main office and 7 branches in Auburn, Opelika, Notasulga, and Valley, Alabama and a loan production office in Phenix City, Alabama.
Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and others participating in the affairs of a bank or bank holding company, in the form of fines, penalties, or the recovery, or claw-back, of compensation. Fiscal and Monetary Policies Banking is a business that depends on interest rate differentials.
Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and others participating in the affairs of a bank or bank holding company, in the form of fines, penalties, or the recovery, or claw-back, of compensation. Table of Contents 21 Fiscal and Monetary Policies Banking is a business that depends on interest rate differentials.
Other Legislative and Regulatory Changes Various legislative and regulatory proposals, including substantial changes in banking, and the regulation of banks, thrifts and other financial institutions, compensation, and the regulation of financial markets and their participants, and financial instruments and securities, and the regulators of all of these, as well as the taxation of these entities, are being considered by the executive branch of the federal government, Congress and various state governments, including Alabama.
Table of Contents 25 Other Legislative and Regulatory Changes Various legislative and regulatory proposals, including substantial changes in banking, and the regulation of banks, thrifts and other financial institutions, compensation, and the regulation of financial markets and their participants, and financial instruments and securities, and the regulators of all of these, as well as the taxation of these entities, are being considered by the executive branch of the federal government, Congress and various state governments, including Alabama.
As a result, unless and until the Company fails to qualify under the Small BHC Policy, the Company’s capital adequacy will continue to be evaluated on a bank only basis. See “Capital.” Bank Regulation The Bank is an Alabama state bank that is a member of the Federal Reserve.
As a result, unless and until the Company fails to qualify under the Small BHC Policy, the Company’s capital adequacy will continue to be evaluated on a bank only basis. See “Capital.” Table of Contents 10 Bank Regulation The Bank is an Alabama state bank that is a member of the Federal Reserve.
Table of Contents 17 The International Money Laundering Abatement and Anti-Terrorism Funding Act of 2001 specifies “know your customer” requirements that obligate financial institutions to take actions to verify the identity of the account holders in connection with opening an account at any U.S. financial institution.
The International Money Laundering Abatement and Anti-Terrorism Funding Act of 2001 specifies “know your customer” requirements that obligate financial institutions to take actions to verify the identity of the account holders in connection with opening an account at any U.S. financial institution.
Table of Contents 27 The Federal Reserve’s securities holdings in its System Open Market Account (“SOMA”) increased from $3.9 trillion in early March 2020 to $9.0 trillion at April 11, 2021, largely as a result of securities purchases as the Federal Reserve injected liquidity as a result of the COVID-19 pandemic.
The Federal Reserve’s securities holdings in its System Open Market Account (“SOMA”) increased from $3.9 trillion in early March 2020 to $9.0 trillion at April 11, 2021, largely as a result of securities purchases as the Federal Reserve injected liquidity as a result of the COVID-19 pandemic.
There is no upper limit on the reserve ratio and thus, no statutory limit on the size of the fund. The FDI Act provides for dividends from the fund when the reserve ratio exceeds 1.5 percent, but grants the Board sole discretion in determining whether to suspend or limit the declaration or payment of dividends.
There is no upper limit on the reserve ratio and thus, no statutory limit on the size of the fund. The FDI Act provides for dividends from the fund when the reserve ratio exceeds 1.5%, but grants the Board sole discretion in determining whether to suspend or limit the declaration or payment of dividends to DIF members.
Table of Contents 29 CRE and Leveraged Loans CRE The federal bank regulatory agencies released guidance in 2006 on “Concentrations in Commercial Real Estate Lending” (the “CRE Guidance”).
Table of Contents 23 CRE and Leveraged Loans CRE The federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (2006) (the “CRE Guidance”).
The Company has always had significant exposures to loans secured by commercial real estate due to the nature of its markets and the loan needs of both its retail and commercial customers.
The Company has always had significant exposures to loans secured by commercial real estate due to the nature of its markets and the loan needs of customers.
The Bank’s Visa Checkcards can be used internationally through the Plus ® network. The Bank offers online banking, bill payment and other electronic banking services through its Internet website, www.auburnbank.com . Our online banking services, bill payment and electronic services are subject to certain cybersecurity risks.
The Bank’s Visa Checkcards can be used internationally through the Plus ® network. The Bank offers online banking, bill payment, online consumer account opening, and other electronic banking services through its Internet website, www.auburnbank.com . Our online banking services, bill payment and electronic services are subject to certain cybersecurity risks.
Table of Contents 10 The Company is a legal entity separate and distinct from the Bank. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company. The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W thereunder.
The Company is a legal entity separate and distinct from the Bank. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company. The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W thereunder.
Changes in control of bank holding companies are subject to prior notice to, and nonobjection by the Federal Reserve under the federal Change in Bank Control Act (the “Control Act”) and by the Alabama Superintendent of Banks (the “Alabama Superintendent”) under the Alabama Banking Code.
Changes in control of bank holding companies are subject to prior notice to, and nonobjection by the Federal Reserve under the federal Change in Bank Control Act (the “Control Act”), and in the case of bank holding companies controlling Alabama state banks, by the Alabama Superintendent of Banks (the “Alabama Superintendent”) under the Alabama Banking Code.
Tier 1 and Tier 2 capital equals total capital. In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies not subject to the Small BHC Policy, and state member banks, which provide for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets (“leverage ratio”) equal to 4%.
Tier 1 and Tier 2 capital equals total capital. The Federal Reserve also has minimum leverage ratio guidelines for bank holding companies not subject to the Small BHC Policy, and state member banks, which provide for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets (“leverage ratio”) equal to 4%.
In the case of bank holding company applications to acquire a bank, the Federal Reserve will assess and emphasize CRA records of each subsidiary depository institution of the applicant bank holding company and the target bank in meeting the needs of their entire communities, including LMI neighborhoods, and such records may be the basis for denying the application.
In the case of bank holding company applications to acquire a bank, the Federal Reserve will assess and emphasize CRA records of each subsidiary depository institution of the applicant and the target in meeting the needs of their entire communities, including LMI neighborhoods. Inadequate performance records may be the basis for denying an application.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Balance Sheet Analysis” for concentrations of the various types of CRE loans.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations - Balance Sheet Analysis” for concentrations of the various types of CRE loans.
The Bank’s deposits are insured by the FDIC to the maximum extent provided by law, and the Bank is subject to various FDIC regulations applicable to FDIC-insured banks. See “FDIC Insurance Assessments.” Alabama law permits statewide branching by banks. The Alabama Banking Code has provisions designed to ensure Alabama banks have competitive equality with national banks.
The Bank’s deposits are insured by the FDIC to the maximum extent provided by law, and the Bank is subject to various FDIC regulations applicable to FDIC-insured banks. See “-FDIC Insurance Assessments.” Alabama law permits statewide branching by banks. The Alabama Banking Code has provisions designed to provide Alabama banks competitive equality with national banks.
The Bank has been a member of the Federal Home Loan Bank of Atlanta (the “FHLB-Atlanta”) since 1991. General The Company’s business is conducted primarily through the Bank and its subsidiaries.
The Bank has been a member of the Federal Home Loan Bank of Atlanta (the “FHLB-Atlanta”) since 1991. Table of Contents 5 General The Company’s business is conducted primarily through the Bank and its subsidiaries.
Debit Card Interchange Fees The “Durbin Amendment” to the Dodd-Frank Act and implementing Federal Reserve regulations provide that interchanged transaction fees for electronic debit transactions be “reasonable” and proportional to certain costs associated with processing the transactions. The Durbin Amendment and the Federal Reserve rules thereunder are not applicable to banks with assets less than $10 billion.
Debit Card Interchange Fees The “Durbin Amendment” to the Dodd-Frank Act and Federal Reserve Regulation II provide that interchange transaction fees for electronic debit transactions be “reasonable” and proportional to certain costs associated with processing the transactions. The Durbin Amendment and the Federal Reserve rules thereunder are not applicable to banks with assets less than $10 billion.
In the event an FDIC-insured subsidiary becomes subject to a capital restoration plan with its regulators, the parent bank holding company is required to guarantee performance of such plan up to 5% of the bank’s assets, and such guarantee is given priority in a bankruptcy of the bank holding company.
In the event an FDIC-insured subsidiary becomes subject to a regulatory capital restoration plan, the parent bank holding company is required to guarantee the performance of such plan up to 5% of the bank’s assets, and such guarantee is given priority in a bankruptcy of the bank holding company.
The revised rules establish new standards for determining whether an entity meets the statutory definition of “deposit broker,” and identifies a number of businesses that automatically meet the “primary purpose exception” from a “deposit broker.” The revisions also provide an application process for entities that seek a “primary purpose exception,” but do not meet one of the designated exceptions.” The new rules provide us greater flexibility, but we have limited our brokered deposits.
The revised rules establish new standards for determining whether an entity meets the statutory definition of “deposit broker,” and identifies a number of businesses that automatically meet the “primary purpose exception” from a “deposit broker.” The revisions also provide an application process for entities that seek a “primary purpose exception,” but do not meet one of the designated exceptions.” The new rules provide us greater flexibility.
These guidelines required, beginning December 31, 2019, a minimum ratio of capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) and capital conservation buffer, totaling 10.5%. Tier 1 capital includes common equity and related retained earnings and a limited amount of qualifying preferred stock, less goodwill and certain core deposit intangibles.
These guidelines require a minimum ratio of capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) and capital conservation buffer, totaling 10.5%. Tier 1 capital includes common equity and related retained earnings and a limited amount of qualifying preferred stock, less goodwill and certain core deposit intangibles.
Institutions that are “undercapitalized” are subject to growth limitations and are required to submit a capital restoration plan for approval. A depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan.
Institutions that are “undercapitalized” are subject to growth limitations and are required to submit a capital restoration plan for approval. Table of Contents 19 A depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan.
The Company’s assessment of its financial reporting controls as of December 31, 2024 is included in this report with no material weaknesses reported. Table of Contents 19 Capital The Federal Reserve has risk-based capital guidelines for bank holding companies and state member banks, respectively.
The Company’s assessment of its financial reporting controls as of December 31, 2025 is included in this report with no material weaknesses reported. Capital The Federal Reserve has risk-based capital guidelines for bank holding companies and state member banks, respectively.
The CFPB has the authority to adopt regulations and enforce various laws, including the fair lending laws, the Truth in Lending Act, the Electronic Funds Transfer Act, mortgage lending rules, the Truth in Savings Act, the Fair Credit Reporting Act and Privacy of Consumer Financial Information rules.
The CFPB is authorized to adopt regulations and enforce various laws, including the fair lending laws, the Truth in Lending Act, the Electronic Funds Transfer Act, mortgage lending rules, the Truth in Savings Act, the Fair Credit Reporting Act and Privacy of Consumer Financial Information rules.
While most loans are made within our primary service area, some residential mort gage loans are originated outside the primary service area, and the Bank from time to time has purchased loan participations from outside its primary service area.
While most loans are made within our primary service area, some residential mor tgage loans are originated outside the primary service area, and the Bank from time to time has purchased loan participations from outside its primary service area.
Bills have been introduced in Congress to repeal the CTA, and it is unknown whether these will pass or if the Administration will continue to defend the litigation challenging the CTA.
Table of Contents 15 Bills have been introduced in Congress to repeal the CTA, and it is unknown whether these will pass or if the Administration will continue to defend the litigation challenging the CTA.
We also may make loans to other borrowers outside these areas, especially where we have a relationship with the borrower, or its business or owners. Table of Contents 8 Human Capital At December 31, 2024, the Company and its subsidiaries had 145 full-time equivalent employees, including 39 officers. Our employees have been with us an average of approximately 11 years.
We also may make loans to other borrowers outside these areas, especially where we have a relationship with the borrower, or its business or owners. Table of Contents 7 Human Capital At December 31, 2025, the Company and its subsidiaries had 145 full-time equivalent employees, including 37 officers. Our employees have been with us an average of approximately 12 years.
See “Prompt Corrective Action Rules.” Basel III Capital Rules The Federal Reserve and the other federal bank regulators adopted in June 2013 final capital rules for bank holding companies and banks implementing the Basel Committee on Banking Supervision’s “Basel III: A Global Regulatory Framework for more Resilient Banks and Banking Systems.” These U.S. capital rules are called the “Basel III Capital Rules,” and generally were fully phased-in on January 1, 2019.
See “Prompt Corrective Action Rules.” Federal Reserve Capital Rules General The Federal Reserve and the other federal bank regulators adopted in June 2013 final capital rules for bank holding companies and banks implementing the Basel Committee on Banking Supervision’s “Basel III: A Global Regulatory Framework for more Resilient Banks and Banking Systems.” These “Basel III Capital Rules” in Federal Reserve Regulation Q were fully phased-in, generally, on January 1, 2019.
The Office of Management and Budget will adjust so-called independent agencies’ apportionments of funds. The President and the Attorney General (subject to the President’s supervision and control) will interpret the law for the executive branch, instead of having separate agencies adopt conflicting interpretations.
The White House will set their performance standards. The Office of Management and Budget will adjust so-called independent agencies’ apportionments of funds. The President and the Attorney General (subject to the President’s supervision and control) will interpret the law for the executive branch, instead of having separate agencies adopt conflicting interpretations.
Banks that operate in compliance with applicable law, properly manage customer relationships and effectively mitigate risks by implementing controls commensurate with the type and level of their risks are neither prohibited nor discouraged from providing banking services.
Under this Join Statement, institutions that operate in compliance with applicable law, properly manage customer relationships and effectively mitigate risks by implementing controls commensurate with the type and level of their risks are neither prohibited nor discouraged from providing banking services.
During 2024, the Bank paid total cash dividends of approximately $3.8 million to the Company. At December 31, 2024, the Bank had net profits for the year and retained net profits for the preceding two calendar years, less any required transfers to surplus, of $9.7 million.
During 2025, the Bank paid total cash dividends of approximately $3.8 million to the Company. At December 31, 2025, the Bank had net profits for the year and retained net profits for the preceding two calendar years, less any required transfers to surplus, of $6.5 million.
See “Regulatory Capital Changes” and Note 15 to the Company’s consolidated financial statements. Federal Reserve Supervisory Letter SR-09-4 (February 24, 2009), as revised December 21, 2015, applies to dividend payments, stock redemptions and stock repurchases.
See “Regulatory Capital Changes” and Note 16 to the Company’s consolidated financial statements. Table of Contents 20 Federal Reserve Supervisory Letter SR-09-4 (February 24, 2009), as revised December 21, 2015, applies to dividend payments, stock redemptions and stock repurchases.
Table of Contents 34 Executive Order 14192 seeks to “significantly reduce the private expenditures required to comply with Federal regulations.” For the current fiscal year 2025, for each new regulation, at least 10 existing regulations shall be identified for repeal.
Recent Developments Executive Order 14192 seeks to “significantly reduce the private expenditures required to comply with Federal regulations.” For the current fiscal year 2025, for each new regulation, at least 10 existing regulations shall be identified for repeal.
Table of Contents 23 Prompt Corrective Action Rules All of the federal bank regulatory agencies’ regulations establish risk-adjusted measures and relevant capital levels that implement the “prompt corrective action” standards. The relevant capital measures are the total risk-based capital ratio, Tier 1 risk-based capital ratio, Common equity tier 1 capital ratio, as well as the leverage capital ratio.
Regulatory Capital Changes Prompt Corrective Action Rules All of the federal bank regulatory agencies’ regulations establish risk-adjusted measures and relevant capital levels that implement the “prompt corrective action” standards for depository institutions. The relevant capital measures are the total risk-based capital ratio, Tier 1 risk-based capital ratio, Common equity tier 1 capital ratio, as well as the leverage capital ratio.
The pending Capital One Financial Acquisition of Discover Financial Services includes a community benefit plan with another community organization valued at $265 billion, which is the largest ever. The Bank had a “satisfactory” CRA rating in its latest CRA public evaluation dated February 28, 2022, with satisfactory ratings on both its lending and community development tests.
The Capital One Financial acquisition of Discover Financial Services in 2025 included a community benefit plan with another community organization valued at $265 billion, which is the largest ever. The Bank had a “satisfactory” CRA rating in its latest CRA public evaluation dated March 3, 2025, with satisfactory ratings on both its lending and community development tests.
Any change in applicable law or regulation may have a material effect on the Company’s business, and our results of operations and financial condition. The following discussion is qualified in its entirety by reference to the particular laws and rules referred to below.
Various changes in legislation and regulatory rules and practices occur regularly. Any change in applicable law or regulation may have a material effect on the Company’s business, and our results of operations and financial condition. The following discussion is qualified in its entirety by reference to the particular laws, rules and regulatory proposals referred to below.
Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized”, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.
“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to: (i) sell sufficient voting stock to become “adequately capitalized”; (ii) Reduce total assets; and (iii) Cease receipt of deposits from correspondent banks. “Critically undercapitalized” depository institutions are subject to the appointment of a receiver or conservator.
SUPERVISION AND REGULATION The Company and the Bank are extensively regulated under federal and state laws applicable to bank holding companies and banks.
Table of Contents 8 SUPERVISION AND REGULATION The Company and the Bank are extensively regulated under federal and state laws applicable to bank holding companies and banks.
Table of Contents 30 Leveraged Loans In 2013, the Federal Reserve and other banking regulators issued their “Interagency Guidance on Leveraged Lending” highlighting standards for originating leveraged transactions and managing leveraged portfolios, as well as requiring banks to identify their highly leveraged transactions, or HLTs.
Leveraged Loans The Federal Reserve and other banking regulators issued their “Interagency Guidance on Leveraged Lending” (2006) highlighting standards for originating leveraged transactions and managing leveraged portfolios, as well as requiring banks to identify their highly leveraged transactions, or HLTs.
The National Community Reinvestment Coalition reported that as of February 2025, it had executed 21 community benefit plans with banking organizations for an aggregate of $580 billion for mortgage, small business and community development lending, investments and philanthropy in LMI and under-resourced communities.
The National Community Reinvestment Coalition reported that as of January 2026, it had executed 22 community benefit plans with banking organizations for an aggregate of $606 billion for mortgage, small business and community development lending, investments and philanthropy in LMI and under-resourced communities.
The Bank sells mortgage loans to Fannie Mae and services these on an actual/actual basis. As a result, the Bank is not obligated to make any advances to Fannie Mae on principal and interest on such mortgage loans where the borrower is entitled to forbearance.
As a result, the Bank is not obligated to make any advances to Fannie Mae on principal and interest on such mortgage loans where the borrower is entitled to forbearance.
“Distributions” include dividends declared or paid on common stock, discretionary bonuses 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, discretionary bonuses and stock repurchases, redemptions or repurchases of Tier 2 capital instruments (unless replaced by a capital instrument in the same quarter). The Company’s primary source of cash is dividends from the Bank.
It also encourages placing appropriate daily limits on overdraft fees, and asks banks to consider eliminating overdraft fees for transactions that overdraw an account by de minimis amounts. Overdraft policies, processes, fees and disclosures have been the subject of various litigation against banks in various jurisdictions.
Banks are encouraged to place appropriate daily limits on overdraft fees, and have been asked to consider eliminating overdraft fees for transactions that overdraw an account by de minimis amounts. Overdraft policies, processes, fees and disclosures have been the subject of various litigation against banks in various jurisdictions.
Table of Contents 32 The federal bank regulators, the SEC and other regulators proposed regulations implementing Section 956 in April 2011, which would have been applicable to, among others, depository institutions and their holding companies with $1 billion or more in assets.
The federal bank regulators, the SEC and other regulators first proposed regulations implementing Section 956 in April 2011, which would have been applicable to, among others, depository institutions and their holding companies with $1 billion or more in assets. These rules have not been adopted.
Excluding our owner-occupied loans, our CRE loans were $234.8 million (42% of total loans) at year end 2023. See “Lending Practices – CRE. ” The Bank has loans outstanding to borrowers in all industries within our primary service area.
Excluding our owner-occupied loans, our CRE loans were $290.2 million (51% of total loans) at year end 2024. See “Lending Practices – CRE. ” The Bank has loans outstanding to borrowers in all industries within our primary service area.
Table of Contents 25 Bank holding company directors must consider different factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position.
Bank holding company directors must consider various factors tis setting a dividend level that is prudent to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position.
The Bank generally services the loans it originates, including those it sells. The CFPB’s mortgage servicing standards include requirements regarding force-placed insurance, certain notices prior to rate adjustments on adjustable-rate mortgages, and periodic disclosures to borrowers.
This relieves smaller banks from many of the “qualified mortgage” requirements. The Bank generally services the loans it originates, including those it sells. The CFPB’s mortgage servicing standards include requirements regarding force-placed insurance, certain notices prior to rate adjustments on adjustable-rate mortgages, and periodic disclosures to borrowers.
The CRA requires a depository institution’s primary federal regulator to periodically assess the institution’s record of assessing and meeting the credit needs of the communities served by that institution, includ ing low- and moderate-income neighborhoods. The bank regulatory agency’s CRA assessment is publicly available.
The CRA requires a depository institution’s primary federal regulator to periodically assess the institution’s record of assessing and meeting the credit needs of the communities served by that institution, including low- and moderate-income neighborhoods. The bank regulatory agencies’ CRA assessments are publicly available.
Table of Contents 9 Bank Holding Company Regulation The Company, as a bank holding company, is subject to supervision, regulation and examination by the Federal Reserve under the BHC Act. Bank holding companies generally are limited to the business of banking, managing or controlling banks, and certain related activities.
Bank Holding Company Regulation The Company, as a bank holding company, is subject to supervision, regulation and examination by the Federal Reserve under the BHC Act. Bank holding companies generally are limited to the business of banking, managing or controlling banks, and certain related activities. The Company is required to file periodic reports and other information with the Federal Reserve.
These laws may also require us to notify law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental agencies that own data. The Data Privacy Act of 2023 was introduced in Congress on February 24, 2023.
These laws may also require us to notify law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental agencies that own data.
Among other things, the Basel III Capital Rules: ● Assigned a 250% risk weight to MSRs; ● Assigned up to a 1,250% risk weight to structured securities, including private label mortgage securities, trust preferred CDOs and asset backed securities; ● Retained existing risk weights for residential mortgages, but assign a 100% risk weight to most commercial real estate loans and a 150% risk-weight for HVCRE; ● Assigned a 150% risk weight to past due exposures (other than sovereign exposures and residential mortgages); ● Assigned a 250% risk weight to DTAs, to the extent not deducted from capital (subject to certain maximums); ● Retained the existing 100% risk weight for corporate and retail loans; and ● Increased the risk weight for exposures to qualifying securities firms from 20% to 100%.
Among other things, Regulation Q: ● Assigns a 250% risk weight to MSRs or 10% or greater investments in other financial institutions; ● Assigns up to a 1,250% risk weight to structured securities, including private label mortgage securities, trust preferred CDOs and asset backed securities; ● Retains existing risk weights for residential mortgages, but assign a 100% risk weight to most commercial real estate loans and a 150% risk-weight for HVCRE; ● Assigns a 150% risk weight to past due exposures (other than sovereign exposures and residential mortgages); ● Assigns a 250% risk weight to DTAs, to the extent not deducted from capital (subject to certain maximums); ● Retains the existing 100% risk weight for corporate and retail loans; and • Increases the risk weight for exposures to qualifying securities firms from 20% to 100%.
The statement addresses how the agencies evaluate violations of individual pillars of the Bank Secrecy Act and anti-money laundering (“AML/BSA”) compliance program. It describes how the agencies incorporate the customer due diligence regulations and recordkeeping requirements issued by the United States. Department of the Treasury (“Treasury”) as part of the internal controls pillar of a financial institution's AML/BSA compliance program.
The statement addresses how the agencies evaluate violations of individual pillars of the AML/CFT compliance program. It describes how the agencies incorporate the customer due diligence regulations and recordkeeping requirements issued by the United States Department of the Treasury (the “Treasury”) as part of the internal controls pillar of a bank’s AML/BSA compliance program.
Market risk is rated based upon, but not limited to, an assessment of the sensitivity of the financial institution’s earnings or the economic value of its capital to adverse changes in interest rates, foreign exchange rates, commodity prices or equity prices; management’s ability to identify, measure, monitor and control exposure to market risk; and the nature and complexity of interest rate risk exposure arising from non-trading positions.
Assessments may be made of the sensitivity of the financial institution’s earnings or the economic value of its capital to adverse changes in interest rates, foreign exchange rates, commodity prices or equity prices; management’s ability to identify, measure, monitor and control exposure to market risk; and the nature and complexity of interest rate risk exposure arising from non -trading positions.
Table of Contents 20 Additional “threshold deductions” of the following that are individually greater than 10% of CET1 or collectively greater than 15% of CET1 (after the above deductions are also made): ● MSAs, net of associated DTLs; ● DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, net of any valuation allowances and DTLs; and ● Significant common stock investments in unconsolidated financial institutions, net of associated DTLs.
Additional “threshold deductions” of each of the following that are individually greater than 25% of CET1 (after the first deductions above): ● MSRs, net of associated DTLs; ● DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, net of any valuation allowances and DTLs; and ● Significant common stock investments in unconsolidated financial institutions, net of associated DTLs.
The Federal Reserve considers the effects of a bank acquisition proposal on the convenience and needs of the markets served by the combining organizations. Bank regulators consider CRA performance in evaluating merger and acquisition applications under the Bank Merger Act and the BHC Act, as well as other expansion proposals, such as new branch offices.
The Federal Reserve considers the effects of a bank acquisition proposal on the convenience and needs of the markets served by the combining organizations, as well as CRA performance in evaluating merger and acquisition applications under the Bank Merger Act and the BHC Act and branching applications.
Table of Contents 11 The Federal Reserve has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Financial Institutions Rating System (“UFIRS”), which assigns each financial institution a confidential composite “CAMELS” rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations: C apital Adequacy, A sset Quality, M anagement, E arnings, L iquidity and S ensitivity to market risk, as well as the quality of risk management practices.
See “-FDIC Insurance Assessments.” Under the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Financial Institutions Rating System (“UFIRS”), the Federal Reserve assigns state member banks a confidential composite “CAMELS” rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations: C apital Adequacy, A sset Quality, M anagement, E arnings, L iquidity and S ensitivity to market risk, as well as the quality of risk management practices.
Table of Contents 24 Dividends and Distributions The Company is a legal entity separate and distinct from the Bank. Federal Reserve Regulation Q limits “distributions,” including discretionary bonus payments from eligible retained income” by state member banks, such as the Bank, unless its capital conservation buffer of common equity Tier 1 capital (“CET1”) exceeds 2.5%.
Federal Reserve Regulation Q limits “distributions,” including discretionary bonus payments from eligible retained income” by state member banks, such as the Bank, unless its capital conservation buffer of common equity Tier 1 capital (“CET1”) exceeds 2.5%.
Section 956 of the Dodd-Frank Act prohibits incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions, are deemed to be excessive, or that may lead to material losses.
No Incentives Encouraging Inappropriate Risk-Taking Section 956 of the Dodd-Frank Act requires the appropriate federal regulators to issue regulations or guidelines that prohibits incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions, are deemed to be excessive, or that may lead to material losses to the covered financial institution.
The federal bank regulators continue to identify elevated risks in leveraged loans and shared national credits. The Bank did not have any leveraged loans at year-end 2024 or 2023 subject to the Interagency Guidance on Leveraged Lending or that were shared national credits.
The Bank did not have any leveraged loans at year-end 2025, 2024 or 2023 subject to the Interagency Guidance on Leveraged Lending or that were shared national credits.
Term deposits, which are deposits with specified maturity dates, will be offered through a Term Deposit Facility. Term deposits will be one of several tools that the Federal Reserve could employ to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy.
Term deposits are one of several tools that the Federal Reserve could employ to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy.
The following provisions of the 2018 Growth Act are helpful to banks of our size, and we have benefitted from the Growth Act’s changes to the deposit rules: ● “qualifying community banks,” defined as institutions with total consolidated assets of less than $10 billion, which meet a “community bank leverage ratio, which is currently 9.0%, may be deemed to have satisfied applicable risk- based capital requirements as well as the capital ratio requirements; ● section 13(h) of the BHC Act, or the “Volcker Rule,” is amended to exempt from the Volcker Rule, banks with total consolidated assets valued at less than $10 billion (“community banking organizations”), and trading assets and liabilities comprising not more than 5.00% of total assets; and ● “reciprocal deposits” will not be considered “brokered deposits” for FDIC purposes, provided such deposits do not exceed the lesser of $5 billion or 20% of the bank’s total liabilities.
The following provisions of the 2018 Growth Act may be particularly helpful to banks of our size, and we have benefited from the Growth Act’s changes to the deposit rules: ● Increased the asset size under the Federal Reserve's Small BHC Policy from $1 billion to $3 billion; ● “qualifying community banks,” defined as institutions with total consolidated assets of less than $10 billion, which meet a “community bank leverage ratio, which is currently 9.0%, may be deemed to have satisfied applicable risk- based capital requirements as well as the capital ratio requirements; ● section 13(h) of the BHC Act, or the “Volcker Rule,” is amended to exempt from the Volcker Rule, banks with total consolidated assets valued at less than $10 billion (“community banking organizations”), and trading assets and liabilities comprising not more than 5.00% of total assets; and ● “reciprocal deposits” held by banks that are well capitalized and well rated will not be considered “brokered deposits” for FDIC purposes, The FDIC issued comprehensive changes to its brokered deposit rules effective April 1, 2021.
Overdrafts also have been a CFPB concern, which began refocusing on this issue in 2021 with a view to “insure that banks continue to evolve their businesses to reduce reliance on overdraft and not sufficient funds fees.” Among other things, the federal regulators require banks to monitor accounts and to limit the use of overdrafts by customers as a form of short-term, high-cost credit, including, for example, giving customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling 12-month period, a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage.
Among other things, the federal regulators require banks to monitor accounts and to limit the use of overdrafts by customers as a form of short-term, high-cost credit, including, for example, giving customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling 12-month period, a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTable of Contents 41 These failures have resulted in bank regulators focusing supervisory activities, generally, on capital adequacy and liquidity in light of growth; asset, liability and customer concentrations and risks; CRE; levels of uninsured deposits; crypto businesses and customers; third-party vendors or “partners” providing digital, electronic and other services known as banking as a service (“BaaS”) and fintech relationships; strategic, capital and liquidity plans and contingency plans; and vendor diligence and risk management.
Biggest changeIn such situations, depositors and other customers tend to reduce their uninsured deposits and bank supervisors more closely scrutinize bank risks. These failures resulted in bank regulators focusing, generally, on capital adequacy and liquidity in light of bank growth rates, customer, asset and deposit concentrations and risks; uninsured deposit levels; CRE; crypto business and customers.
Since these GSEs dominate the residential mortgage markets, any changes in their operations and requirements, as well as their respective restructurings and capital and the costs of their borrowings as private institutions, could adversely affect the primary and secondary mortgage markets, and our residential mortgage businesses, our results of operations and the returns on capital deployed in these businesses.
Since these GSEs dominate the residential mortgage markets, any changes in their operations and requirements, as well as their respective restructurings, and the costs of their capital and borrowings as private institutions, could adversely affect the primary and secondary mortgage markets, and our residential mortgage businesses, our results of operations and the returns on capital deployed in these businesses.
Financial Risks Our cost of funds may increase as a result of general economic conditions, interest rates, inflation and changes in customer behaviors and competitive pressures.
Financial Risks Our cost of funds may increase as a result of general economic conditions, inflation, interest rates, inflation, changes in customer behaviors and competitive pressures.
Security breaches or failures may have serious adverse financial and other consequences, including significant legal and remediation costs, disruptions to operations, misappropriation of confidential information, damage to systems operated by us or our third-party service providers, as well as damages to our customers and our counterparties.
Security breaches or failures may have serious adverse financial and other consequences, including disruptions to operations, misappropriation of confidential information, damage to systems operated by us or our third-party service providers, as well as damages to our customers and our counterparties, and significant remediation costs.
Such personal data could also be compromised via intrusions into our systems or those of our service providers or other persons we do business with such as credit bureaus, data processors and merchants who accept credit or debit cards for payment.
Personal customer data also could be compromised via intrusions into our systems or those of our service providers or other persons we do business with such as credit bureaus, data processors and merchants who accept credit or debit cards for payment.
Other risk management methods depend upon the evaluation of information regarding markets, clients, or other matters that are publicly available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated.
Other risk management methods depend upon the evaluation of information regarding markets, clients, or other matters that are publicly available or otherwise accessible. This information may not always be accurate, complete, up-to-date or properly evaluated.
Changes in accounting and tax rules applicable to banks could adversely affect our financial conditions and results of operations. From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements.
Changes in accounting and tax rules applicable to banks could adversely affect our financial conditions and results of operations. From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern our financial statements.
Additionally, any prolonged government shutdown or reductions in force at various governmental and regulatory authorities may inhibit our ability to evaluate the economy, generally, and affect government workers who are not paid during such events, and where the absence of government services and data could adversely affect consumer and business sentiment, our local economy, and business our customers and our business.
Prolonged government shutdown or reductions in force at various governmental and regulatory authorities may inhibit our ability to evaluate the economy, generally, and affect government workers who are not paid during such events, and where the absence of government services and data could adversely affect consumer and business sentiment, our local economy, and our business.
Resolution of these extremely large GSEs will be complex, and the timing and effects of such resolution and the effects on mortgage originators and the mortgage markets and their participants, including the Company, cannot be predicted. We may be contractually obligated to repurchase mortgage loans we sold to third parties on terms unfavorable to us.
Resolution of these extremely large GSEs will be complex, and the timing and effects of such resolution and the effects on mortgage originators and the mortgage markets and their participants, including the Company, cannot be predicted. We may be obligated to repurchase mortgage loans we sold to third parties on terms unfavorable to us. The Company originates residential mortgage loans.
As market interest rates rose prior to Fall 2024, however, we have experienced unrealized losses on such securities, which would become realized losses upon the sale of such securities, and such sales at a loss would reduce our net income and our regulatory capital.
As market interest rates rose prior to Fall 2024, however, we experienced unrealized losses on our securities available for sale, which would become realized losses upon the sale of such securities, and such sales at a loss would reduce our net income and our regulatory capital.
Our ability to engage in routine investment and banking transactions, as well as the quality and values of our investments in holdings of obligations of other financial institutions such as the FHLB-Atlanta, could be adversely affected by the actions, financial condition, profitability and regulation of such other financial institutions, including the FHLB-Atlanta and our correspondent banks.
Our ability to engage in routine investment and banking transactions, as well as the quality and values of our investments in holdings of obligations of other financial institutions such as the FHLB-Atlanta, could be adversely affected by the actions, financial condition, profitability and regulation of such other financial institutions.
The effective use of technology may help us better analyze our customers and their needs better, and the effective use of technology may increase efficiency and reduce our operating costs.
The effective use of technology may help us better analyze our customers and their needs better, and the effective use of technology may enable us to increase efficiency and reduce our operating costs.
See “Supervision and Regulation – Fiscal and Monetary Policy.” Our profitability and liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions.
See “Supervision and Regulation – Fiscal and Monetary Policy.” Table of Contents 33 Our profitability and liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions.
The process for estimating expected losses requires difficult, subjective, and complex judgments, including forecasts of economic conditions, unemployment levels in Alabama, and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.
The process for estimating expected losses requires difficult, subjective and complex judgments, including forecasts of economic conditions, and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.
Table of Contents 44 Potential gaps in our risk management policies and internal audit procedures may leave us exposed to unidentified or unanticipated risk, which could negatively affect our business. Our enterprise risk management and internal audit program are designed to mitigate material risks and losses to us.
Potential gaps in our risk management policies and internal audit procedures may leave us exposed to unidentified or unanticipated risks, which could negatively affect our business. Our enterprise risk management and internal audit program are designed to mitigate material risks and losses to us.
In addition, these events could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.
These events could damage our reputation, result in loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. See “Item 1C. – Cybersecurity.
Similarly, although we employ controls and procedures designed to prevent misconduct, to monitor associates’ business decisions and prevent them from taking excessive risks, these controls and procedures may not be effective. If our associates take excessive risks, risks to our reputation, financial condition and results of operations could be materially and adversely affected.
Similarly, although we our controls and procedures are designed to govern and monitor associates’ business decisions and prevent them from taking excessive risks and misconduct, these controls and procedures may not be effective. If our employees take excessive risks, our financial condition, results of operations and reputation could be materially and adversely affected.
A failure to remain “well capitalized,” for bank regulatory purposes, including meeting the Basel III Capital Rule’s conservation buffer, could adversely affect customer confidence, and our: ● ability to grow; ● the costs of and availability of funds; ● FDIC deposit insurance premiums; ● ability to raise or replace brokered deposits; ● ability to pay or increase dividends on our capital stock. ● Ability to repurchase our common stock ● ability to make discretionary bonuses to attract and retain quality personnel; ● ability to make acquisitions or engage in new activities; ● flexibility if we become subject to prompt corrective action restrictions; and ● ability to make payments of principal and interest on any of our capital instruments that may be then outstanding.
A failure to remain “well capitalized,” for bank regulatory purposes, could, among other possible consequences adversely affect customer confidence and our: ● ability to grow; ● costs of and availability of funds; ● costs of FDIC deposit insurance premiums; ● ability to raise or replace brokered deposits; ● ability to pay or increase dividends on our capital stock; ● ability to repurchase our common stock; ● ability to make discretionary bonuses to attract and retain quality personnel; ● ability to make acquisitions or engage in new activities; ● flexibility if we become subject to prompt corrective action restrictions; and ● ability to make payments of principal and interest on any of our capital instruments that may be then outstanding.
Interest rates, and consequently our results of operations, are affected by general economic conditions (national, international and local) and fiscal and monetary policies, as well as expectations regarding interest rate changes, fiscal and monetary policies and the shape of the yield curve.
Interest rates, and consequently our results of operations, are affected by general economic conditions (national, international and local), fiscal and monetary policies, and expectations regarding changes in these, and the shape of the yield curve.
General conditions that are not specific to us, such as disruptions in the financial markets, failures of other bank, such as Silicon Valley Bank, Signature Bank and First Republic Bank in 2023, or negative views and expectations about the prospects for the financial services industry could adversely affect us and our liquidity.
General conditions that are not specific to us, such as disruptions in the financial markets, failures of other banks, such as the Spring 2023 bank failures, or negative views and expectations about the prospects for the financial services industry, could adversely affect us and our liquidity.
Many of our risk management models and estimates use observed historical market behavior to model or project potential future exposure. The models used by our business, including our CECL models, are based on assumptions and projections.
Many of our risk management models and estimates are based on assumptions, estimates and judgments from observed historical market behavior to model or project potential future exposure. Other models used by our business, including our CECL models, also are based on assumptions, estimates and projections.
These models may not operate properly, or our inputs and assumptions may be inaccurate, or changes in economic and market conditions, customer behaviors or regulations may adversely affect the accuracy or usefulness of the models. As a result, these methods may not fully or timely predict future exposures, which can be significantly greater and/or faster than historically.
These models may not operate properly or timely, or our inputs, estimates and assumptions may be inaccurate, or changes in economic and market conditions, customer behaviors or regulations may adversely affect the accuracy or usefulness of the models. These models may not fully or timely predict future exposures, which may occur significantly faster or in greater magnitudes than historically.
Our ability to continue to pay dividends to shareholders, repurchase stock and pay discretionary bonuses in the future is subject to our profitability, capital, liquidity and regulatory requirements and these limitations may prevent or limit future dividends. Cash available to pay dividends to our shareholders is derived primarily from dividends paid to the Company by the Bank.
Our ability to pay dividends to shareholders, repurchase stock and pay discretionary bonuses in the future depends on our profitability, capital, liquidity and regulatory requirements, which may prevent or limit future dividends. Cash available to pay dividends to our shareholders is derived primarily from dividends paid to the Company by the Bank.
Certain borrowers and their businesses and real estate and commercial projects and businesses may be adversely affected by inflation and higher interest rates, and economic slowdowns arising from tighter monetary policies, and may request or need loan modifications and deferrals.
Borrowers and their businesses, and real estate and commercial projects and businesses may be adversely affected by inflation and higher interest rates, as well as from tighter monetary policies, and may request or need loan modifications and deferrals.
Lower demand for CRE and fewer CRE purchase and sale transactions, and reduced availability of, and higher interest rates and costs for, CRE loans could adversely affect CRE values and liquidity, our CRE loans and sales of OREO, and therefore our earnings and financial condition, including our capital and liquidity.
Lower demand for CRE and fewer CRE purchase and sale transactions, and reduced availability of, and higher interest rates and costs for, CRE loans could adversely affect the values and liquidity of CRE collateral and our CRE loans, and sales of other real estate owned, and therefore our earnings and financial condition, including our capital and liquidity.
Table of Contents 51 We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, our financial condition, liquidity and results of operations would be adversely affected. We and the Bank must meet regulatory capital requirements and maintain sufficient liquidity, including liquidity at the Company, as well as the Bank.
Table of Contents 35 We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, our financial condition, liquidity and results of operations would be adversely affected. The Bank must meet regulatory capital requirements.
Your ability to sell or purchase common shares depends upon the existence of an active trading market for our common stock. Although our common stock is quoted on the Nasdaq Global Market under the trading symbol “AUBN,” our trading volume has been limited historically.
Your ability to sell or buy our common stock depends upon a trading market for our common stock. Although our common stock is quoted on the Nasdaq Global Market under the trading symbol “AUBN,” our trading volume has been limited historically.
Net interest income will be adversely affected if market interest rates and the interest we pay on our deposits and borrowings increase faster than the interest earned on loans and investments.
Net interest income will be adversely affected if market interest rates and the interest we pay on our deposits and borrowings increase faster than the interest earned on loans and investments, especially as large portion of our loans have fixed interest rates.
Nonetheless, our policies and procedures may not be comprehensive and may not anticipate and identify timely every risk to which we are exposed, and our internal audit process may fail to detect such weaknesses or deficiencies timely in our risk management framework.
We regularly review our risks in an effort to maintain risk management and internal audit policies and procedures addressing our risks. Nonetheless, our policies and procedures may not anticipate and identify timely every risk to which we may be exposed. Our internal audit process may fail to detect such weaknesses or deficiencies timely.
Other financial service institutions and their service providers have reported material security breaches in their websites or other systems, some of which have involved sophisticated and targeted attacks, including use of stolen access credentials, malware, ransomware, phishing and distributed denial-of-service attacks, among other means.
Other financial service institutions and their service providers have reported material security breaches, including use of stolen access credentials, hacking, malware, ransomware, phishing and distributed denial-of-service attacks, among other means.
Higher market interest rates and continuing run-off of maturing securities held by the Federal Reserve in its SOMA in furtherance of its quantitative tightening policy to fight inflation, generally reduce economic activity and may reduce loan demand and growth.
Higher market interest rates and continuing run-off of maturing securities held by the Federal Reserve in its SOMA as quantitative tightening to curb inflation and to maintain sufficient reserves in the system policy, may limit economic growth, and therefore reduce loan demand and growth.
Cybercrime risks have increased as electronic and mobile banking activities have increased, and may increase further as a result of the Russia’s war in Ukraine, tensions with mainland China and other countries, and foreign government sponsored cybercrime and theft.
Cybercrime risks have increased as electronic and mobile banking activities have increased, and may increase further as a result of wars in Ukraine or the Middle East, tensions with mainland China and other countries, foreign government sponsored cybercrime and theft, and the development of intrusion tools using artificial intelligence.
The Federal Reserve may require us to commit capital resources to support the Bank. As a matter of policy, the Federal Reserve expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank.
See “Supervision and Regulation.” The Federal Reserve may require us to commit capital resources to support the Bank. A bank holding company must act as a source of financial and managerial strength to its subsidiary bank.
In addition, net interest income could be affected by asymmetrical changes in the different interest rate indexes, given that not all of our assets or liabilities are priced with the same index.
Net interest income could be affected by asymmetrical changes in the different interest rate indexes because not all of our assets or liabilities are priced with the same index. and the different indices do not change simultaneously or at the same magnitude.
If we fail to maintain adequate internal controls, or if our employees fail to comply with our policies and procedures, misappropriation or inappropriate disclosure or misuse of client information could occur. Such internal control inadequacies or non-compliance could materially damage our reputation, lead to remediation costs and civil or criminal penalties.
If our internal controls are inadequate, or if our employees, vendors and other third parties fail to comply with our policies and procedures, misappropriation or inappropriate disclosure and misuse of customer information could occur. Any such internal control inadequacies or non-compliance could materially damage our reputation, lead to remediation costs and civil or criminal penalties. See Item 1C.
An inability to raise funds through deposits, borrowings, proceeds from loan repayments or sales proceeds from maturing loans and securities, and other sources could have a negative effect on our liquidity. Our funding sources include deposits (primarily core deposits), federal funds purchased, securities sold under repurchase agreements, and short- and long-term debt.
An inability to raise funds through deposits, borrowings or sales of loans and investments or otherwise, or due to materially reduced or delayed proceeds from scheduled loan and securities payments and maturities, could have a negative effect on our liquidity. Our funding sources also include federal funds purchased, securities sold under repurchase agreements, and short- and long-term debt.
The bank regulators continue to scrutinize CRE lending and require banks with elevated CRE under the CRE Guidance, to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending growth and exposures.
The bank regulators’ CRE Guidance requires banks with high levels of CRE and CRE growth, to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels.
Table of Contents 48 We may need to raise additional capital in the future, but that capital may not be available when it is needed or on favorable terms. We anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future under currently effective rules.
Table of Contents 34 If we need to raise additional capital in the future, that capital may not be available on reasonable terms. We anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future under current capital rules.
Any losses, defaults by, or failures of, the institutions we do business with could adversely affect our holdings of the equity in such other institutions, our participation interests in loans originated by other institutions, and our business, including our liquidity, financial condition and earnings.
Any losses, defaults by, or failures of, the institutions we do business with or which affect could adversely affect our business, including our liquidity, financial condition and earnings.
Major employers in our market include education and healthcare, which may be adversely affected by changes in Federal government policies and funding. Attractive acquisition opportunities may not be available to us in the future. While we seek continued organic growth, including loan growth, we also may consider the acquisition of other businesses.
Other major employers in our market include education and healthcare, which may be adversely affected by changes in Federal government policies, including education and healthcare funding, and the availability and costs of student loans. Attractive acquisition opportunities may not be available to us in the future.
Our success is affected by state and federal laws and regulations affecting banks and bank holding companies, and the securities markets, and our costs of compliance could adversely affect our earnings. Banking regulations are primarily intended to protect depositors, and the FDIC’s DIF, not shareholders.
Our success is affected by laws and regulations affecting banks and bank holding companies, and our costs of compliance could adversely affect our earnings. Banking regulations are primarily intended to protect depositors and the FDIC’s DIF, not shareholders. The financial services industry also is subject to frequent legislative and regulatory changes and proposed changes.
Many of our competitors offer products and services different from ours, and have substantially greater resources, name recognition and advertising than we do, which helps them attract business. In addition, larger competitors may be able to price loans and deposits more aggressively than we are able to and have broader and more diverse customer and geographic bases to draw upon.
Many of our competitors offer products and services different from ours, and have substantially greater resources including technology, name recognition and advertising than we do, which helps them attract business. In addition, larger competitors may be able to price loans and deposits more aggressively than us. Out of state banks have branched into our markets.
Our costs of funds have increased as a result of general economic conditions, increased market interest rates and competitive pressures, and inflation, and anticipated future changes in target short-term interest rates by the Federal Reserve to reduce inflation. Traditionally, we have obtained funds principally through local deposits and borrowings from other institutional lenders such as the FHLB-Atlanta.
Our costs of funds are affected by general and local economic conditions, changes in market interest rates and competitive pressures, and inflation, and anticipated future changes in target short -term interest rates resulting from the Federal Reserve’s anti-inflation measures. Traditionally, we have obtained funds principally through local deposits and borrowings from the FHLB-Atlanta.
The production of mortgages and other loans and the value of collateral securing our loans are dependent on demand within the markets we serve, as well as interest rates. Lower interest rates typically increase mortgage originations, decrease MSR values and promote economic growth.
The production of mortgages and other loans and the value of collateral securing our loans are dependent on demand within the markets we serve, as well as interest rates.
Various businesses will be unable to fully pass on increased costs due to inflation, supply chain disruptions and changes and other factors, and their profits may shrink.
Businesses may be unable to fully pass on to their customers increased costs due to inflation, supply chain disruptions, tariffs and other factors, and their cash flows and profits may be adversely affected.
Table of Contents 45 Our systems and networks, as well as those of our third-party service providers, are subject to security risks and could be susceptible to disruption through cyber-attacks, such as denial of service attacks, hacking, terrorist activities, or identity theft.
Our systems and networks, including those provided by our third-party service providers, are subject to security risks and may be disrupted, such as denial of service attacks, hacking, terrorist activities, or identity theft.
Adverse changes in the economic conditions of the Southeastern United States in general, or in one or more of our local markets, including the effects of higher market interest rates and inflation, supply chain disruptions, changes in customer behaviors and in the workforce and demand for space since the COVID-19 pandemic, and the timing and magnitude of future inflation and interest rates, as well as federal healthcare and education funding, could negatively affect our results of operations and our profitability.
Adverse changes in such economic conditions, including higher market interest rates and inflation, supply chain disruptions, changes in customer behaviors and in the workforce and demand for space since the COVID-19 pandemic, and the timing and magnitude of future inflation and interest rates, could negatively affect our results of operations and financial condition.
In addition, we may have to implement more extensive and perhaps different risk management policies and procedures as our regulation and technology uses changes. All of these could adversely affect our costs, and our financial condition and results of operations.
We may have to implement more extensive and perhaps different risk management policies and procedures to reflect changes in the economy, threats to our systems and data, our markets and customers, regulation, and technology uses and exposures. All of these could adversely affect our costs.
Our access to funding sources in amounts adequate to finance or capitalize our activities on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry, the economy, market interest rates and fiscal and monetary policies.
Our access to funding sources in amounts adequate to finance or capitalize our activities on terms which are acceptable to us could be impaired by factors that affect us specifically, or general economic or banking industry issues.
The limited trading volume of our common stock may cause fluctuations in the market value of our common stock to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market.
The limited trading volume may cause fluctuations in the market value of our common stock to be exaggerated, leading to price volatility exceeding what may occur in a more active trading market. As a result, you may be unable to trade our common stock at the volume, price and time that you desire.
Any failure to protect the confidentiality of customer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations . Various laws enforced by the bank regulators and other agencies protect the privacy and security of customers’ non-public personal information.
Any failure to protect the confidentiality of customer information could have material adverse effects on us. Various laws enforced by the bank regulators and other government agencies protect the privacy and security of customers’ non-public personal information maintained by banks and their vendors.
Increases in market interest rates tend to decrease mortgage originations, increase MSR values, decrease the value and liquidity of collateral securing loans, result in unrealized losses on our investment securities and accumulated other comprehensive losses, and potentially increase net interest spread depending upon the yield curve and the magnitude and duration of interest rate increase, and constrain economic growth, generally.
Increases in market interest rates tend to decrease mortgage originations, increase MSR values, decrease the value and liquidity of collateral securing loans, and may result in unrealized losses on our investment securities and increase our accumulated other comprehensive losses. Accumulated other comprehensive losses reduce our reported GAAP equity and tangible equity.
Failures of the executive and legislative branches to agree on spending plans and budgets previously have led to Federal government shutdowns, which may adversely affect the U.S. economy.
Changes in these are beyond our control and are difficult to predict and, consequently, changes in these policies could have negative effects on our activities and results of operations. Failures of the executive and legislative branches to agree on spending plans and budgets previously have led to Federal government shutdowns, which may adversely affect the U.S. economy.
Future acquisitions and expansion activities may disrupt our business, dilute shareholder value and adversely affect our operating results and financial condition. We regularly evaluate potential acquisitions and expansion opportunities, including new branches and other offices. To the extent that we grow through acquisitions, we cannot assure you that we will be able to adequately or profitably manage this growth.
We evaluate potential acquisitions and expansion opportunities, including new branches and other offices. To the extent that we grow through acquisitions or new locations, we cannot assure you that we will be able to adequately or profitably manage such growth.
If the credit quality of our customer base materially decreases, if the risk profile of the market, industry or group of customers changes materially or weaknesses in the real estate markets worsen, borrower payment behaviors change, or if our allowance for loan losses is not adequate, our business, financial condition, including our liquidity and capital, and results of operations could be materially adversely affected.
If the credit quality and risk profile of our customers materially change adversely, or if the risk profile of the market, industry or group of customers changes materially, or conditions in the real estate and other markets worsen, or borrower payment behaviors change, our business, could be materially adversely affected.
Our future success is dependent on our ability to compete effectively in highly competitive markets. The East Alabama banking markets where we operate are highly competitive and our future growth and success will depend on our ability to compete effectively in these markets. This MSA is served by 19 banks, 10 of which are headquartered outside of Alabama.
Lee County and the surrounding areas of East Alabama, where we primarily operate, are highly competitive. Our future growth and success will depend on our ability to compete effectively in these markets. Lee County is served by 21 banks, including 12 national and regional competitors.
The nature and timing of any future changes in monetary and fiscal policies, government policies and their administration and personnel, and their effects on us cannot be predicted. ● Market developments, including unemployment, inflation and price levels, stock and bond market volatility, and changes, including those resulting from Russia’s war in Ukraine and governmental fiscal, operational and monetary policies affect consumer confidence levels, economic activity and interest rates.
Market developments, including unemployment rates, price and inflation levels, stock and bond market volatility, and changes, including those resulting from Russia’s war in Ukraine and other wars and armed conflicts, tariffs and foreign policies, and government fiscal, operational and monetary policies affect consumer confidence levels, economic activity and interest rates.
These and future deferred tax assets may be further reduced in the future if our estimates of future taxable income from our operations and tax planning strategies do not support the amount of the deferred tax asset.
As of December 31, 2025, we had a net deferred tax asset of $6.9 million compared to $10.2 million one year earlier. These and future deferred tax assets may be reduced in the future if our estimates of future taxable income from our operations and tax planning strategies do not support the amount of the deferred tax asset.
We cannot be certain that our allowance for loan losses will be adequate over time to cover credit losses in our portfolio because of unanticipated adverse changes in the economy, including fiscal and monetary policy changes, inflation, market conditions or events adversely affecting specific customers, industries or markets, including disruptions of supply chains, the war in Ukraine, changes in taxes and regulations and changes in borrower behaviors.
We may be adversely affected because of unanticipated adverse changes in the economy, including fiscal and monetary policy changes, unemployment levels, inflation, market conditions or events adversely affecting specific customers, industries or markets, including disruptions of supply chains, war and armed conflicts, changes in taxes and regulation, and changes in borrower behaviors.
If the Bank’s ability to pay dividends to the Company was terminated or limited, the Company’s liquidity and financial condition could be materially and adversely affected.
The Company’s liquidity, financial condition and ability to pay dividends or repurchase Company common stock or pay discretionary could be materially adversely affected if the Bank’s dividends were further limited by law or regulatory restriction, or if the Bank’s earnings, capital position or liquidity were insufficient.
We compete with other financial services companies for people primarily on the basis of compensation and benefits, support services and financial position. Intense competition exists for key employees with demonstrated ability, and we may be unable to hire or retain such employees. Effective succession planning is also important to our long-term success.
We may be unable to attract and retain key people to support our business. Our success depends, in large part, on our ability to attract and retain key people. We compete with other financial services companies for people primarily on the basis of our culture, compensation and benefits, support services and financial position.
At the same time the initial costs of acquiring and implementing technology may be material, and such technology may entail fraud, compliance with the AML/CFT anti-money laundering laws and rules, among others, and various operational and other risks. Largely unregulated “fintech” businesses have increased their participation in the lending and payments businesses, and have increased competition in these businesses.
At the same time, the initial costs of acquiring and implementing technology may be material, and such technology requires ongoing attention to the related risks, including fraud, cybersecurity and customer privacy, compliance with the AML/CFT anti-money laundering and sanctions laws, among others, and various operational and other risks.
We compete for loans, deposits and other financial services and products with local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities and insurance brokerage firms. Various non-local competitors offer services through the mail, by telephone and over the Internet.
We compete for loans, deposits and other financial services and products with local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities and insurance brokerage firms, including services offered in our market. Increasingly, non-banking firms are using technology to compete for loans, payments, and other banking services.
Our local economy is also affected by the growth of automobile manufacturing and related suppliers located in our markets and nearby.
Our local economy is also affected by the growth of automobile manufacturing and related suppliers located in Lee County and nearby. Auto sales and housing sales are cyclical and generally are affected adversely by higher prices, higher inflation and interest rates, and tariffs and changes in tariffs.
We believe deposits are a cheaper and more stable source of funds than other borrowings, generally. Increases in interest rates have caused consumers to shift their funds to more interest- bearing instruments and to increase the competition for and costs of deposits.
Increases in interest rates typically cause consumers to shift their funds to more interest-bearing instruments and increase the competition for deposits.
Increases in market interest rates and inflation, and adverse changes in consumer and business confidence may change customers’ savings and payment behaviors, including potential increases in loan delinquencies and default rates.
Increases in inflation and market interest rates and future expectations of these, and adverse changes in consumer and business confidence may change customers’ savings, payment and borrowing behaviors, and may increase in loan delinquencies and loan losses. These could affect our credit quality, our results of operations and financial condition.
Our ability to realize our deferred tax assets may be reduced in the future if our estimates of future taxable income from our operations and tax planning strategies do not support this amount, and the amount of net operating loss carry-forwards realizable for income tax purposes may be reduced under Section 382 of the Internal Revenue Code by sales of our capital securities.
Our ability to realize our deferred tax assets may be reduced if our estimates of future taxable income from our operations and tax planning strategies do not support this amount, or our tax law reduces or deferred tax assets. We are allowed to carry-back losses for two years for Federal income tax purposes.
Despite our cybersecurity policies and procedures and our Board of Directors and management’s efforts to monitor and ensure the integrity of the systems we and our third-party service providers use, we may not be able to anticipate the rapidly evolving security threats, nor may we be able to implement preventive measures effective against all such threats.
Despite our cybersecurity policies, and our efforts to monitor and maintain the integrity of the systems we and our third- party service providers use, we may not be able to anticipate or counter all rapidly evolving security threats. Artificial intelligence used by cyber criminals, including foreign governments, likely will require additional defenses.
Many of our employees have access to, and routinely process personal information of clients through a variety of media, including information technology systems. Our internal processes, policies and controls are designed to protect the confidentiality of customer information we hold and that is accessible to us and our employees.
Our internal processes, policies and controls are designed to protect the confidentiality of customer information we hold and that is accessible to us, our vendors and employees. It is possible that a vendor or an employee could permit unauthorized access to or improperly use confidential customer information.
ITEM 1A. RISK FACTORS Any of the following risks could harm our business, results of operations and financial condition and an investment in our stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
The risks discussed below also include forward-looking statements, and our actual results and financial condition may differ substantially from those discussed in these forward-looking statements. Operational Risks Market conditions and economic cyclicality may adversely affect us and our industry.
If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected. Our failure to remain “well capitalized” and “well managed”, including meeting the Basel III capital conservation buffers, for bank regulatory purposes, could adversely affect us.
If we fail to maintain our capital and meet other regulatory requirements, our financial condition, liquidity and results of operations may be materially and adversely affected.
Our profitability depends upon net interest income, which is the difference between interest earned on interest-earning assets, such as loans and investments, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Our income is primarily driven by the spread between these rates.
Our profitability is primarily driven by the difference between the interest rates received on our interest earning assets and the interest we pay on our deposits and borrowings.
We depend upon the Bank’s earnings and dividends from the Bank paid to the Company, which are limited by law and regulatory policies and actions, for cash to pay the Company’s corporate obligations, and to pay dividends to our shareholders.
The Company cannot generally borrow from the Bank and depends upon dividends paid by the Bank to the Company, which are limited by law and regulatory policies.
Our future success will depend, in part, upon our ability to use technology effectively to provide products and services that meet our customers’ preferences and create additional efficiencies in operations, while avoiding cyber-attacks and disruptions, data breaches, violations of AML/CFT laws, and other potential violations of law.
Our future success will depend, in part, upon our ability to use technology effectively and efficiently to provide products and services that meet our customers’ preferences and create additional efficiencies in operations, while maintaining the security of our systems and data, and complying with applicable law. Severe weather, natural disasters and conflicts could have significant adverse effects on our business.
Additionally, whether the market prices of our common stock reflect a reasonable valuation of our common stock also is affected by the limited market volumes, and thus the price you receive may not reflect its true or intrinsic value. Table of Contents 49 Legal and Regulatory Risks The Company is an entity separate and distinct from the Bank.
Due to limited trading volumes, market prices may not reflect our common stock’s true or intrinsic value. Legal and Regulatory Risks The Company is an entity separate and distinct from the Bank. The Company is an entity separate and distinct from the Bank. Company transactions with the Bank are limited by the Federal Reserve Act and Federal Reserve Regulation W.
Litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial losses and/or harm to our reputation. We face risks of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits.
Our business is subject to litigation that may result in significant financial losses and/or harm to our reputation. We face risks of litigation in the ordinary course of operating our businesses. Plaintiffs in lawsuits against us may seek very large and/or indeterminate amounts, including punitive and treble damages and legal fees.
Our ability to raise additional capital, if needed, will depend, among other things, on conditions in the capital markets at that time, which are limited by events outside our control, and on our financial performance.
If, however, we need to raise additional capital to support our growth, currently unanticipated losses or new capital requirements, our ability to raise additional capital will depend, among other things, on conditions in the capital markets at that time. If we cannot raise additional capital on acceptable terms when needed, our ability to grow will be limited.
The ability of the Bank to pay dividends, as well as our ability to pay dividends to our shareholders, will continue to be subject to and limited by laws limiting dividend payments by the Bank, the results of operations of our subsidiaries and our need to maintain appropriate liquidity and capital at all levels of our business consistent with regulatory requirements and the needs of our businesses.
The Bank’s ability to pay dividends, and Company’s ability to pay dividends to our shareholders, continue to depend on our earnings and maintaining appropriate liquidity and capital at all levels of our business consistent with regulatory requirements.
We can only pay dividends, repurchase stock and pay discretionary bonuses, if our capital conservation buffer exceeds 2.5% and from our eligible retained income over the last four calendar quarters.
We generally may pay dividends, repurchase stock and pay discretionary bonuses, from our current year’s earnings based on “eligible retained income” over the last four calendar quarters if our capital conservation buffer exceeds 2.5%. See “Supervision and Regulation.” Our common stock trades in limited volumes, which could result in price volatility and inefficient pricing.
If customers move money out of bank deposits and into other investment assets or from transaction deposits to higher cost, interest-bearing time deposits, we could lose relatively low-cost sources of funds, increasing our funding costs and potentially reducing our net interest income and net income.
If customers move (i) money out of bank transaction deposits into investments, stablecoins or other yield-bearing instruments elsewhere, or (ii) they move their funds within the Bank from transaction deposits to higher cost, interest-bearing time deposits, our interest expense may increase, and our net interest income and earnings may be material and adversely affected income.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAccordingly, we have devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: • Implementing an Information Security Program that establishes policies and procedures for security operations and governance; • Establishing an IT Steering Committee that includes participation by directors that is responsible for security administration, including reviewing assessments of our information systems, existing controls, vulnerabilities and potential improvements; • Implementing layers of controls and not allowing excessive reliance on any single control; • Employing a variety of preventative and detective tools designed to monitor, block and provide alerts regarding suspicious activity; • Continuously evaluating tools that can detect and help respond to cybersecurity threats in real-time; • Leveraging people, processes and technology to manage and maintain cybersecurity controls; • Maintaining a vendor management program with pre-engagement and periodic review processes thereafter, and a third-party risk management program designed to identify, assess and manage risks associated with external service providers; Table of Contents 54 • Monitoring our systems and related software and programming periodically to update software and programing, including updating data protection elements, and requiring that our service providers also engage in similar programs that are reasonably designed to deter cybersecurity breaches; • Performing initial and ongoing due diligence with respect to our third-party service providers, including their cybersecurity practices and safeguards, and service level standards based on the risk they pose to the Bank; • Engaging third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments and other procedures to identify potential weaknesses in our systems and processes; and • Conducting periodic cybersecurity training for our employees and the Company’s board of directors.
Biggest changeAccordingly, we have devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: • Implementing an Information Security Program that establishes policies and procedures for security operations and governance; • Establishing an IT Steering Committee that includes participation by directors that is responsible for security administration, including reviewing assessments of our information systems, existing controls, vulnerabilities and potential improvements; • I mplementing layers of controls and avoiding excessive reliance on any single control; Table of Contents 37 • Employing a variety of preventative and detective tools designed to monitor, block and provide alerts regarding suspicious activity; • Continuously evaluating tools that can detect and help respond to cybersecurity threats in real-time; • Leveraging people, processes and technology to manage and maintain cybersecurity controls; • Performing initial and ongoing due diligence with respect to our third-party service providers, including their cybersecurity practices and safeguards, and service level standards based on the risk they pos to the Bank; • Maintaining a vendor management program with pre-engagement and periodic review processes thereafter, and a third-party risk management program designed to identify, assess and manage risks associated with external service providers; • Monitoring our systems and related software and programming periodically to update software and programing, including updating data protection elements, and requiring that our service providers also engage in similar programs that are reasonably designed to deter cybersecurity breaches; • Performing initial and ongoing due diligence with respect to our third-party service providers, including their cybersecurity practices and safeguards, and service level standards based on the risk they pose to the Bank; • Engaging third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments and other procedures to identify potential weaknesses in our systems and processes; and • Conducting periodic cybersecurity training for our employees and the Compa ny’s board of directors.
From time-to-time, we have identified cybersecurity threats that require us to make changes to our processes and equipment and to implement additional safeguards.
From time-to-time, we have identified cybersecurity threats that require us to make changes to our processes and equipment and implement additional safeguards.
In addition, the Company’s Board, both as a whole and through directors participating in the IT Steering Committee, is responsible for the oversight of risk management, including cybersecurity risks.
Table of Contents 38 In addition, the Company’s Board, both as a whole and through directors participating in the IT Steering Committee, is responsible for the oversight of risk management, including cybersecurity risks.
While none of these identified threats or incidents have materially affected us, it is possible that threats and incidents we identify in the future could have a material adverse effect on our business strategy, customer service, data privacy and security, continuity of service and reputation, and our results of operations and financial condition.
While none of these identified threats or incidents have materially affected us, it is possible that threats and incidents we identify in the future could have a material adverse effect on our business strategy, customer service, data privacy and security, continuity of service and reputation, and our results of operations and financial condition. See Item 1A. “Risk Factors”.
The threats are domestic and international and range from small to large, including state sponsored, terrorist and criminal organizations with substantial funds, and technical and other resources As a bank, we and our vendors, service providers and customers may be attractive targets, and we confront continuous cybersecurity threats.
The threats are domestic and international and range from small to large, including state sponsored, terrorist and criminal organizations with substantial funds, and technical and other resources, and may increase during wars, armed conflicts and heightened international tensions. As a bank, we and our vendors, service providers and customers may be attractive targets, and we confront continuous cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Opelika branch is located in Opelika, Alabama. This branch, built in 1991, is owned by the Bank and has approximately 4,000 square feet of space. This branch offers the full line of the Bank’s services and has drive-through windows and an ATM. This branch offers parking for approximately 36 vehicles. The Notasulga branch was opened in August 2001.
Biggest changeThis branch offers the full line of the Bank’s services and has drive-through windows and an ATM. This branch offers parking for approximately 36 vehicles. The Notasulga branch was opened in August 2001. This branch is located in Notasulga, Alabama, about 15 miles west of Auburn, Alabama.
In September 2015, the Bank relocated its Auburn Wal -Mart Supercenter branch in south Auburn, which had been opened in 2004 to a new building, which the Bank built in 2015 at the intersection of S. Donahue Avenue and E. University Drive in Auburn, Alabama. The South Donahue branch has approximately 3,600 square feet of space.
Table of Contents 39 In September 2015, the Bank relocated its Auburn Wal -Mart Supercenter branch in south Auburn, which had been opened in 2004, to a new building which the Bank built in 2015 at the intersection of S. Donahue Avenue and E. University Drive in Auburn, Alabama. The South Donahue branch has approximately 3,600 square feet of space.
The Bank had a 2,500 square feet loan production office on East Samford Avenue in Auburn, Alabama. When this loan production office was relocated to the AuburnBank Center in June 2022, the Company entered into a three-year sublease agreement during 2022.
The Bank had a 2,500 square feet loan production office on East Samford Avenue in Auburn, Alabama. When this loan production office was relocated to the AuburnBank Center in June 2022, the Company entered into a three-year sublease agreement during 2022. The sublessee has renewed this sublease through October 2026.
The Tiger Town branch offers the full line of the Bank’s services and has drive-through windows and an ATM. This branch offers parking for approximately 36 vehicles. In addition to the seven ATMs at various branch locations, the Bank also has three ATMs located at various locations within our primary service area.
The Tiger Town branch offers the full line of the Bank’s services and has drive-through windows and an ATM. This branch offers parking for approximately 36 vehicles. In addition to the seven ATMs at various branch locations, the Bank also has one ATM located in Notasulga, Alabama.
This branch is located in Notasulga, Alabama, about 15 miles west of Auburn, Alabama. This branch is owned by the Bank and has approximately 1,344 square feet of space. The Bank leased the land for this branch from a third party. In May 2024, the Bank’s land lease renewe d for another one-year term.
This branch is owned by the Bank and has approximately 1,344 square feet of space. The Bank leased the land for this branch from a third party. In May 2025, the Bank’s land lease renewed for another one-year term.
In November 2023, the Bank renewed its lease for another 2 years. In February 2009, the Bank opened a branch located on Bent Creek Road in Auburn, Alabama. This branch is owned by the Bank and has approximately 4,000 square feet of space.
In November 2025, the Bank renewed its lease for another year. In February 2009, the Bank opened a branch located on Bent Creek Road in Auburn, Alabama. This branch is owned by the Bank and has approximately 4,000 square feet of space. This branch offers the full line of the Bank’s services and has drive-through windows and a drive-up ATM.
This branch offers the full line of the Bank’s services and has drive-through windows and a drive-up ATM. This branch offers parking for approximately 29 vehicles. In December 2011, the Bank opened a branch located on Fob James Drive in Valley, Alabama, about 30 miles northeast of Auburn, Alabama.
This branch offers parking for approximately 29 vehicles. In December 2011, the Bank opened a branch located on Fob James Drive in Valley, Alabama, about 30 miles northeast of Auburn, Alabama. This branch is owned by the Bank and has approximately 5,000 square feet of space.
The AuburnBank Center includes the Bank’s main office, Auburn loan production office, and all of its back-office operations. The main office branch offers the full line of the Bank’s services and has one ATM. The Bank’s drive-through facility located on the main office campus was constructed in October 2012.
The AuburnBank Center, which was constructed in May 2022, has approximately 90,000 square feet of space. The AuburnBank Center includes the Bank’s main office, the Auburn loan production office, and all of its back-office operations. The main office branch offers the full line of bank services and has one ATM.
This drive-through facility has five drive-through lanes, including an ATM, and a walk-up teller window. The Bank has approximately 46,000 square feet of Class A office space and approximately 5,000 square feet of retail space in the new AuburnBank Center building available for lease to third party tenants, of which approximately 21,000 square feet is currently leased and occupied.
The AuburnBank Center has approximately 46,000 square feet of Class A office space and approximately 5,000 square feet of retail space available for lease to third party tenants, of which approximately 32,000 square feet is currently leased and occupied. The Bank’s drive-through facility located on the main office campus was constructed in October 2012.
ITEM 2. DESCRIPTION OF PROPERTY The Bank conducts its business from its main office, seven full-service branches, and a loan production office.
ITEM 2. DESCRIPTION OF PROPERTY The Bank conducts its business from its main office, seven full-service branches, and a loan production office. The Bank owns its main campus in downtown Auburn, Alabama, which comprises over 4 acres and includes the AuburnBank Center, drive-through facility, and parking deck.
This branch is owned by the Bank and has approximately 5,000 square feet of space. This branch offers the full line of the Bank’s services and has drive-through windows and a drive-up ATM. This branch offers parking for approximately 35 vehicles.
This branch offers the full line of the Bank’s services and has drive-through windows and a drive-up ATM. This branch offers parking for approximately 35 vehicles. Prior to December 2011, the Bank had operated a loan production office in Valley, which was originally opened in September 2004.
Removed
Table of Contents 55 The Bank owns its main campus in downtown Auburn, Alabama, which comprises over 4 acres and includes the newly constructed AuburnBank Center, which was completed in May 2022 and had its grand opening in June 2022. The AuburnBank Center has approximately 90,000 square feet of space.
Added
This drive-through facility has five drive-through lanes, including an ATM, and a walk-up teller window. The parking deck has approximately 500 parking spaces, is open to the public and charges hourly, monthly, and special event rates, and provides parking needs for the Bank’s employees and customers.
Removed
Prior to December 2011, the Bank had operated a loan production office in Valley, which was originally opened in September 2004. In February 2015, the Bank relocated its branch in the Auburn Kroger store to a new leased location within the Corner Village Shopping Center in Auburn.
Added
Of the 500 parking spaces, approximately 100 to 150 parking spaces have been made available to a third-party under a long-term lease. The Opelika branch is located in Opelika, Alabama. This branch, built in 1991, is owned by the Bank and has approximately 4,000 square feet of space.
Removed
The sublessee has an option exercisable by September 2025 to renew the sublease for the remaining term of the Bank’s lease ending in 2028. Table of Contents 56
Added
The Bank operated a branch in the Corner Village Shopping Center in Auburn from 2015 to the end of 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee “Supervision and Regulation –Dividends and Distributions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Adequacy” and “Risk Factors - Our ability to continue to pay dividends to shareholders and repurchase stock in the future is subject to our profitability, capital, liquidity and regulatory requirements and these limitations may prevent or limit future dividends.” Issuer Purchases of Equity Securities Not applicable.
Biggest changeSee “Supervision and Regulation –Dividends and Distributions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Adequacy” and “Risk Factors” . Issuer Purchases of Equity Securities N ot applicable. Table of Contents 42
The amount and frequency of cash dividends is determined in the judgment of the Board based upon a number of factors, including the Company’s earnings, financial condition, liquidity, capital and regulatory requirements and other relevant factors and the availability of dividends payable by the Bank consistent with amounts available therefore, including the Bank’s earnings, financial condition, liquidity, regula tory and capital requirements and other relevant factors.
The amount and frequency of cash dividends is determined in the judgment of the Board based upon a number of factors, including the Company’s earnings, financial condition, liquidity, capital and regulatory requirements and other relevant factors and the availability of dividends payable by the Bank consistent with amounts available therefore, including the Bank’s earnings, financial condition, liquidity, regulatory and capital requirements and other relevant factors.
The Board currently intends to continue its present dividend policies. Table of Contents 57 The amount of dividends payable by the Bank is limited by law and regulation. The Company relies upon dividends from the Bank to pay Company expenses and to pay dividends on Company common stock.
T he Board currently intends to continue its present dividend policies. Table of Contents 41 The amount of dividends payable by the Bank is limited by law and regulation. The Company relies upon dividends from the Bank to pay Company expenses and to pay dividends on Company common stock.
Closing Cash Price Dividends Per Share (1) Declared High Low 2024 First Quarter $ 21.55 $ 18.82 $ 0.27 Second Quarter 19.25 16.63 0.27 Third Quarter 24.35 17.50 0.27 Fourth Quarter 24.57 20.06 0.27 2023 First Quarter $ 24.50 $ 22.55 $ 0.27 Second Quarter 24.32 18.80 0.27 Third Quarter 22.80 20.85 0.27 Fourth Quarter 21.99 19.72 0.27 (1) The price information represents actual transactions.
Closing Cash Price Dividends Per Share (1) Declared High Low 2025 First Quarter $ 23.37 $ 20.36 $ 0.27 Second Quarter 25.28 19.48 0.27 Third Quarter 28.47 23.13 0.27 Fourth Quarter 27.98 24.00 0.27 2024 First Quarter $ 21.55 $ 18.82 $ 0.27 Second Quarter 19.25 16.63 0.27 Third Quarter 24.35 17.50 0.27 Fourth Quarter 24.57 20.06 0.27 (1) The price information represents actual transactions.
The Company has paid cash dividends on its capital stock since 1985. Prior to this time, the Bank paid cash dividends since its organization in 1907, except during the Depression years of 1932 and 1933. Holders of Common Stock are entitled to receive such dividends when, as and if may be declared by the Company’s Board of Directors.
The Company has paid cash dividends on its capital stock since becoming the Bank’s sole stockholder. Prior to forming the Company, the Bank paid cash dividends since its organization in 1907, except during the Depression years of 1932 and 1933.
Added
Holders of Common Stock are entitled to receive such dividends when, as and if may be declared by the Company’s Board of Directors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31 (In thousands) 2024 2023 2022 2021 2020 Net interest income (GAAP) $ 27,125 26,328 27,166 23,990 24,338 Tax-equivalent adjustment 79 417 456 470 492 Net interest income (Tax-equivalent) $ 27,204 26,745 27,622 24,460 24,830 Table of Contents 76 Table 2 - Selected Financial Data Year ended December 31 (Dollars in thousands, except per share amounts) 2024 2023 2022 2021 2020 Income statement Tax-equivalent interest income (a) $ 38,811 34,791 30,001 26,977 28,686 Total interest expense 11,607 8,046 2,379 2,517 3,856 Tax equivalent net interest income (a) 27,204 26,745 27,622 24,460 24,830 Provision for credit losses 36 135 1,000 (600) 1,100 Total noninterest income 3,474 (2,981) 6,506 4,288 5,375 Total noninterest expense 22,166 22,594 19,823 19,433 19,554 Net earnings before income taxes and tax-equivalent adjustment 8,476 1,035 13,305 9,915 9,551 Tax-equivalent adjustment 79 417 456 470 492 Income tax expense 2,000 (777) 2,503 1,406 1,605 Net earnings $ 6,397 1,395 10,346 8,039 7,454 Per share data: Basic and diluted net earnings $ 1.83 0.40 2.95 2.27 2.09 Cash dividends declared $ 1.08 1.08 1.06 1.04 1.02 Weighted average shares outstanding Basic and diluted 3,493,690 3,498,030 3,510,869 3,545,310 3,566,207 Shares outstanding 3,493,699 3,493,614 3,503,452 3,520,485 3,566,276 Stockholders' equity (book value) $ 22.41 21.90 19.42 29.46 30.20 Common stock price High $ 24.57 24.50 34.49 48.00 63.40 Low 16.63 18.80 22.07 31.32 24.11 Period-end $ 23.49 21.28 23.00 32.30 42.29 To earnings ratio (d) 12.84 x 53.20 7.80 14.23 20.23 To book value 105 % 97 118 110 140 Performance ratios: Return on average equity 8.21 % 2.05 12.48 7.54 7.12 Return on average assets 0.65 % 0.14 0.96 0.78 0.83 Dividend payout ratio 59.02 % 270.00 35.93 45.81 48.80 Average equity to average assets 7.93 % 6.66 7.72 10.39 11.63 Asset Quality: Allowance for credit losses as a % of: Loans 1.22 % 1.23 1.14 1.08 1.22 Nonperforming loans 1,366 % 753 211 1,112 1,052 Nonperforming assets as a % of: Loans and other real estate owned 0.09 % 0.16 0.54 0.18 0.12 Total assets 0.05 % 0.09 0.27 0.07 0.06 Nonperforming loans as % of loans 0.09 % 0.16 0.54 0.10 0.12 Net charge-offs (recoveries) as a % of average loans — % 0.01 0.04 0.02 (0.03) Capital Adequacy (c): CET 1 risk-based capital ratio 14.80 % 14.52 15.39 16.23 17.27 Tier 1 risk-based capital ratio 14.80 % 14.52 15.39 16.23 17.27 Total risk-based capital ratio 15.81 % 15.52 16.25 17.06 18.31 Tier 1 leverage ratio 10.49 % 9.72 10.01 9.35 10.32 Other financial data: Net interest margin (a) 3.06 % 2.89 2.81 2.55 2.92 Effective income tax rate 23.82 % (125.73) 19.48 14.89 17.72 Efficiency ratio (b) 72.25 % 95.08 58.08 67.60 64.74 Selected period end balances: Securities $ 243,012 270,910 405,304 421,891 335,177 Loans, net of unearned income 564,017 557,294 504,458 458,364 461,700 Allowance for credit losses 6,871 6,863 5,765 4,939 5,618 Total assets 977,324 975,255 1,023,888 1,105,150 956,597 Total deposits 895,824 896,243 950,337 994,243 839,792 Total stockholders’ equity 78,292 76,507 68,041 103,726 107,689 (a) Tax-equivalent.
Biggest changeYear ended December 31 (In thousands) 2025 2024 2023 2022 2021 Net interest income (GAAP) $ 29,674 27,125 26,328 27,166 23,990 Tax-equivalent adjustment 73 79 417 456 470 N et interest income (Tax-equivalent) $ 29,747 27,204 26,745 27,622 24,460 Table of Contents 58 Table 2 - Selected Financial Data Year ended December 31 (Dollars in thousands, except per share amounts) 2025 2024 2023 2022 2021 Income statement Tax-equivalent interest income (a) $ 40,841 38,811 34,791 30,001 26,977 Total interest expense 11,094 11,607 8,046 2,379 2,517 Tax equivalent net interest income (a) 29,747 27,204 26,745 27,622 24,460 Provision for credit losses 631 36 135 1,000 (600) Total noninterest income 3,119 3,474 (2,981) 6,506 4,288 Total noninterest expense 22,951 22,166 22,594 19,823 19,433 Net earnings before income taxes and tax-equivalent adjustment 9,284 8,476 1,035 13,305 9,915 Tax-equivalent adjustment 73 79 417 456 470 Income tax expense (benefit) 1,956 2,000 (777) 2,503 1,406 Net earnings $ 7,255 6,397 1,395 10,346 8,039 Per share data: Basic net earnings $ 2.08 1.83 0.40 2.95 2.27 Diluted net earnings 2.08 1.83 0.40 2.95 2.27 Cash dividends declared $ 1.08 1.08 1.08 1.06 1.04 Weighted average shares outstanding - basic 3,493,699 3,493,690 3,498,030 3,510,869 3,545,310 Weighted average shares outstanding - diluted 3,495,036 3,493,690 3,498,030 3,510,869 3,545,310 Shares outstanding 3,493,699 3,493,699 3,493,614 3,503,452 3,520,485 Stockholders' equity (book value) $ 26.35 22.41 21.90 19.42 29.46 Common stock price High $ 28.47 24.57 24.50 34.49 48.00 Low 19.48 16.63 18.80 22.07 31.32 Period-end $ 26.95 23.49 21.28 23.00 32.30 To earnings ratio (b) 12.96 12.84 53.20 7.80 14.23 To book value 102.28 104.82 97.17 118.43 109.64 Performance ratios: Return on average equity 8.61 % 8.21 2.05 12.48 7.54 Return on average assets 0.73 % 0.65 0.14 0.96 0.78 Dividend payout ratio 51.92 % 59.02 270.00 35.93 45.81 Average equity to average assets 8.45 % 7.93 6.66 7.72 10.39 Asset Quality: Allowance for credit losses as a % of: Loans 1.27 % 1.22 1.23 1.14 1.08 Nonperforming loans 1,489 % 1,366 753 211 1,112 Nonperforming assets as a % of: Loans and other real estate owned 0.09 % 0.09 0.16 0.54 0.18 Total assets 0.05 % 0.05 0.09 0.27 0.07 Nonperforming loans as % of loans 0.09 % 0.09 0.16 0.54 0.10 Net charge-offs as a % of average loans 0.07 % — 0.01 0.04 0.02 Capital Adequacy (c): CET 1 risk-based capital ratio 16.06 % 14.80 14.52 15.39 16.23 Tier 1 risk-based capital ratio 16.06 % 14.80 14.52 15.39 16.23 Total risk-based capital ratio 17.14 % 15.81 15.52 16.25 17.06 Tier 1 leverage ratio 10.71 % 10.49 9.72 10.01 9.35 Other financial data: Net interest margin (a) 3.27 % 3.06 2.89 2.81 2.55 Effective income tax (benefit) rate 21.24 % 23.82 (125.73) 19.48 14.89 Efficiency ratio (d) 69.83 % 72.25 95.08 58.08 67.60 Selected period end balances: Securities $ 233,259 243,012 270,910 405,304 421,891 Loans, net of unearned income 565,354 564,017 557,294 504,458 458,364 Allowance for credit losses 7,176 6,871 6,863 5,765 4,939 Total assets 1,018,797 977,324 975,255 1,023,888 1,105,150 Total deposits 922,926 895,824 896,243 950,337 994,243 Total stockholders’ equity 92,053 78,292 76,507 68,041 103,726 (a) Tax-equivalent.
Higher market interest rates and reductions in the securities held by the Federal Reserve to reduce inflation generally reduce economic activity and may reduce loan demand and growth, and may adversely affect unemployment rates.
Higher market interest rates and reductions in the securities held by the Federal Reserve to reduce inflation generally reduce economic activity may reduce loan demand and growth, and may adversely affect unemployment rates.
See "Table 1 - Explanation of Non-GAAP Financial Measures". (b) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income. (c) Regulatory capital ratios presented are for the Company's wholly-owned subsidiary, AuburnBank. (d) Calculated by dividing period end share price by earnings per share for the previous four quarters.
See "Table 1 - Explanation of Non-GAAP Financial Measures". (b) Calculated by dividing period end share price by earnings per share for the previous four quarters. (c) Regulatory capital ratios presented are for the Company's wholly-owned subsidiary, AuburnBank. ( d) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income.
To help limit interest rate risk, we have stated policy guidelines for an instantaneous basis point change in interest rates, such that our EVE should not decrease from our base case by more than the following: 35% for an instantaneous change of +/- 400 basis points 30% for an instantaneous change of +/- 300 basis points 25% for an instantaneous change of +/- 200 basis points 15% for an instantaneous change of +/- 100 basis points The following table reports the variance of EVE assuming an immediate change in interest rates up or down when compared to the baseline EVE at December 31, 2024.
To help limit interest rate risk, we have stated policy guidelines for an instantaneous basis point change in interest rates, such that our EVE should not decrease from our base case by more than the following: 35% for an instantaneous change of +/- 400 basis points 30% for an instantaneous change of +/- 300 basis points 25% for an instantaneous change of +/- 200 basis points 15% for an instantaneous change of +/- 100 basis points The following table reports the variance of EVE assuming an immediate change in interest rates up or down when compared to the baseline EVE at December 31, 2025.
An inverted yield curve which means shorter term interest rates are higher than longer term interest rates. This results in a lower spread between our costs of funds and our interest income.
An inverted yield curve means shorter term interest rates are higher than longer term interest rates. This results in a lower spread between our costs of funds and our interest income.
The Company’s effective income tax rate is affected principally by tax-exempt earnings from the Company’s investments in municipal securities, bank-owned life insurance, and New Markets Tax Credits.
The Company’s effective income tax rate is affected principally by tax-exempt earnings from the Company’s investments in municipal securities and loans, bank-owned life insurance, and New Markets Tax Credits.
Actual maturities may differ from contractual maturities of mortgage-backed securities (“MBS”) because the mortgages underlying the securities may be called or prepaid in whole or in part, with or without penalty.
Actual maturities of mortgage-backed securities (“MBS”) may differ from contractual maturities because the mortgages underlying the MBS may be called or prepaid in whole or in part, with or without penalty.
Table of Contents 75 Table 1 – Explanation of Non-GAAP Financial Measures In addition to results presented in accordance with GAAP, this annual report on Form 10-K includes certain designated net interest income amounts presented on a tax-equivalent basis, a non-GAAP financial measure, including the presentation of total revenue and the calculation of the efficiency ratio.
Table of Contents 57 Table 1 – Explanation of Non-GAAP Financial Measures In addition to results presented in accordance with GAAP, this annual report on Form 10-K includes certain designated net interest income amounts presented on a tax-equivalent basis, a non-GAAP financial measure, including the presentation of total revenue and the calculation of the efficiency ratio.
Based upon the level of taxable income over the last three years and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences at December 31, 2024.
Based upon the level of taxable income over the last three years and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences at December 31, 2025.
As of December 31, 2024, we believe that this exposure is not material due to the historical level of repurchase requests and loss trends, the results of our quality control reviews, and the fact that 99% of our residential mortgage loans serviced for Fannie Mae were current as of such date.
As of December 31, 2025, we believe that this exposure is not material due to the historical level of repurchase requests and loss trends, the results of our quality control reviews, and the fact that 99% of our residential mortgage loans serviced for Fannie Mae were current as of such date.
Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. At December 31, 2024 and 2023, reasonable and supportable periods of 4 quarters were utilized followed by an 8 quarter straight line reversion period to long term averages.
Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. At December 31, 2025 and 2024, reasonable and supportable periods of 4 quarters were utilized followed by an 8-quarter straight line reversion period to long term averages.
The amount of the deferred tax assets considered realizable, however, could be reduced if estimates of future taxable income are reduced. See Note 1 - Summary of Significant Accounting Policies and Note 10 – Income Taxes in the notes to the consolidated financial statements that accompany this report.
The amount of the deferred tax assets considered realizable, however, could be reduced if estimates of future taxable income are reduced. See Note 1 - Summary of Significant Accounting Policies and Note 9 – Income Taxes in the notes to the consolidated financial statements that accompany this report.
The specific economic and credit risks associated with our loan portfolio include, but are not limited to, the effects of current economic conditions, including the levels of market interest rates, supply chain disruptions, commercial office occupancy levels, housing supply shortages, and effects of inflation on our borrowers’ cash flows, real estate market sales volumes and liquidity, valuations used in making loans and evaluating collateral, availability and cost of financing properties, real estate industry concentrations, competitive pressures from a wide range of other lenders, deterioration in certain credits, interest rate fluctuations, reduced collateral values or non-existent collateral, title defects, inaccurate appraisals, financial deterioration of borrowers, fraud, and any violation of applicable laws and regulations.
Table of Contents 48 The specific economic and credit risks associated with our loan portfolio include, but are not limited to, the effects of current economic conditions, including the levels of market interest rates, supply chain disruptions, commercial office occupancy levels, housing supply shortages, and effects of inflation and tariffs on our borrowers’ cash flows, real estate market sales volumes and liquidity, valuations used in making loans and evaluating collateral, availability and cost of financing properties, real estate industry concentrations, competitive pressures from a wide range of other lenders, deterioration in certain credits, fluctuations in market interest rates, reduced collateral values or non-existent collateral, title defects, inaccurate appraisals, financial deterioration of borrowers, fraud, and any violation of applicable laws and regulations.
See “Risk Factors.” Table of Contents 65 The Company attempts to reduce these economic and credit risks through its loan-to-value guidelines for collateralized loans, investigating the creditworthiness of borrowers and monitoring borrowers’ financial position. Also, we have established and periodically review, our lending policies and procedures.
See “Risk Factors.” The Company attempts to reduce these economic and credit risks through its loan-to-value guidelines for collateralized loans, investigating the creditworthiness of borrowers and monitoring borrowers’ financial position. Also, we have established and periodically review, our lending policies and procedures.
An increase in mortgage interest rates typically results in an increase in the fair value of the MSRs while a decrease in mortgage interest rates typically results in a decrease in the fair value of MSRs. The following table presents a breakdown of the Company’s mortgage lending income for 2024 and 2023.
An increase in mortgage interest rates typically results in an increase in the fair value of the MSRs while a decrease in mortgage interest rates typically results in a decrease in the fair value of MSRs. The following table presents a breakdown of the Company’s mortgage lending income for 2025 and 2024.
For changes up or down in rates from management’s flat interest rate forecast over the next 12 months, policy limits for net interest income variances are as follows: +/- 20% for a gradual change of 400 basis points +/- 15% for a gradual change of 300 basis points +/- 10% for a gradual change of 200 basis points +/- 5% for a gradual change of 100 basis points Table of Contents 70 The following table reports the variance of net interest income over the next 12 months assuming a gradual change in interest rates up or down when compared to the baseline net interest income forecast at December 31, 2024.
For changes up or down in rates from management’s flat interest rate forecast over the next 12 months, policy limits for net interest income variances are as follows: +/- 20% for a gradual change of 400 basis points +/- 15% for a gradual change of 300 basis points +/- 10% for a gradual change of 200 basis points +/- 5% for a gradual change of 100 basis points The following table reports the variance of net interest income over the next 12 months assuming a gradual change in interest rates up or down when compared to the baseline net interest income forecast at December 31, 2025.
Table of Contents 73 The agreement under which we act as servicer generally specifies our standards of responsibility for actions taken by us in such capacity and provides protection against expenses and liabilities incurred by us when acting in compliance with the respective servicing agreements.
The agreement under which we act as servicer generally specifies our standards of responsibility for actions taken by us in such capacity and provides protection against expenses and liabilities incurred by us when acting in compliance with the respective servicing agreements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of our financial condition at December 31, 2024 and 2023 and our results of operations for the years ended December 31, 2024 and 2023.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of our financial condition at December 31, 2025 and 2024 and our results of operations for the years ended December 31, 2025 and 2024.
Loan concentrations to borrowers in the following classes exceeded 25% of the Bank’s total risk- based capital at December 31, 2024 (and related balances at December 31, 2023).
Loan concentrations to borrowers in the following classes exceeded 25% of the Bank’s total risk- based capital at December 31, 2025 (and related balances at December 31, 2024).
Table of Contents 71 Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates.
Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates.
The decrease in the amortized cost basis of securities available-for-sale was primarily attributable to normal paydowns and maturities. The average annualized tax-equivalent yields earned on total securities were 2.25% in 2024 and 2.37% in 2023. The following table shows the carrying value and weighted average yield of securities available-for-sale as of December 31, 2024 according to contractual maturity.
The decrease in the amortized cost basis of securities available-for-sale was primarily attributable to normal paydowns and maturities. The average annualized tax- equivalent yields earned on total securities were 2.23% in 2025 and 2.25% in 2024. The following table shows the carrying value and weighted average yield of securities available-for-sale as of December 31, 2025 according to contractual maturity.
Primary sources of funding for the Bank include customer deposits, other borrowings, interest payments on earning assets, repayment and maturity of securities and loans, sales of securities, and the sale of loans, particularly residential mortgage loans. Primary uses of funds include repayment of maturing obligations and growing the loan portfolio.
Primary sources of funding for the Bank include customer deposits, other borrowings, interest payments on earning assets, repayments and maturities of securities and loans, sales of securities, and the sale of loans, particularly residential mortgage loans. Primary uses of funds include repayment of maturing obligations and growing the loan portfolio.
The Company may also use derivative financial instruments to improve the balance between interest-sensitive assets and interest-sensitive liabilities and as one tool to manage interest rate sensitivity while continuing to meet the credit and deposit needs of our customers.
Table of Contents 54 The Company may also use derivative financial instruments to improve the balance between interest-sensitive assets and interest-sensitive liabilities and as one tool to manage interest rate sensitivity while continuing to meet the credit and deposit needs of our customers.
We believe that interest rates, inflation and monetary policy may continue to fluctuate in 2025 and may be challenging as a result. Our ability to compete and manage our deposits costs until our interest-earning assets reprice and we generate new fixed rate loans with current market interest rates will be important to our net interest margin during 2025.
We believe that interest rates, inflation and monetary policy may continue to fluctuate in 2026 and may be challenging as a result. Our ability to compete and manage our deposits costs until our interest-earning assets reprice and we generate new loans with current market interest rates will be important to our net interest margin during 2026.
Additionally, the provision for income tax expense and the effective tax rates for 2024 included discrete tax items associated with provision to return adjustments in conjunction with the final 2023 tax return filing and the resolution of state examination activities, which resulted in additional tax expense. The Company paid cash dividends of $1.08 per share in 2024, unchanged from 2023.
The provision for income tax expense and the effective tax rates for 2024 included discrete tax items associated with provision to return adjustments in conjunction with the final 2023 tax return filing and the resolution of state examination activities, which resulted in additional tax expense. The Company paid cash dividends of $1.08 per share in 2025 and 2024.
Advances include both fixed and variable terms and may be taken out with varying maturities. At December 31, 2024, the Bank had no FHLB-Atlanta advances outstanding and available credit from the FHLB-Atlanta of $296.9 million. At December 31, 2024, the Bank also had $65.2 million of available federal funds lines with no borrowings outstanding.
Advances include both fixed and variable terms and may be taken out with varying maturities. At December 31, 2025, the Bank had no FHLB-Atlanta advances outstanding and available credit from the FHLB-Atlanta of $304.9 million. At December 31, 2025, the Bank also had $65.2 million of available federal funds lines with no borrowings outstanding.
Banking regulations limit a bank’s credit exposure by prohibiting unsecured loan relationships that exceed 10% of its capital; or 20% of capital, if loans in excess of 10% of capital are fully secured. Under these regulations, we are prohibited from having secured loan relationships in excess of approximately $22.7 million.
Banking regulations limit a bank’s credit exposure by prohibiting unsecured loan relationships that exceed 10% of its capital; or 20% of capital, if loans in excess of 10% of capital are fully secured. Under these regulations, we are prohibited from having secured loan relationships in excess of approximately $23.5 million.
The allowance is adjusted through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. See Note 1 - Summary of Significant Accounting Policies and Note 5 - Loans and Allowance for Credit Losses in the notes to our consolidated financial statements in this report. Table of Contents 60 Fair Value Determination U.S.
The allowance is adjusted through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. See Note 1 - Summary of Significant Accounting Policies and Note 4 - Loans and Allowance for Credit Losses in the notes to our consolidated financial statements in this report. Fair Value Determination U.S.
For more information regarding fair value measurements and disclosures, please refer to Note 1 - Summary of Significant Accounting Policies and Note 13, Fair Value in the notes to the consolidated financial statements that accompany this report. Fair values are based on active market prices of identical assets or liabilities when available.
For more information regarding fair value measurements and disclosures, please refer to Note 1 - Summary of Significant Accounting Policies and Note 14, Fair Value in the notes to the consolidated financial statements that accompany this report. Table of Contents 44 Fair values are based on active market prices of identical assets or liabilities when available.
Table of Contents 69 The Federal Reserve has treated us as a “small bank holding company’ under the Federal Reserve’s Small Bank Holding Company Policy. Accordingly, our capital adequacy is evaluated at the Bank level, and not for the Company and its consolidated subsidiaries.
The Federal Reserve has treated us as a “small bank holding company’ under the Federal Reserve’s Small Bank Holding Company Policy. Accordingly, our capital adequacy is evaluated at the Bank level, and not for the Company and its consolidated subsidiaries.
Additionally, the provision for income tax expense and the effective tax rates for 2024 included discrete tax items associated with provision to return adjustments in conjunction with the final 2023 tax return filing and the resolution of state examination activities, which resulted in additional tax expense.
The provision for income tax expense and the effective tax rates for 2024 included discrete tax items associated with provision to return adjustments in conjunction with the final 2023 tax return filing and the resolution o f state examination activities, which resulted in additional tax expense.
The Company was not required to repurchase any loans during 2024 and 2023 as a result of representation and warranty provisions contained in the Company’s sale agreements with Fannie Mae, and had no pending repurchase or make -whole requests at December 31, 2024.
Table of Contents 56 The Company was not required to repurchase any loans during 2025 and 2024 as a result of representation and warranty provisions contained in the Company’s sale agreements with Fannie Mae, and had no pending repurchase or make-whole requests at December 31, 2025.
The Company had no FHLB-Atlanta advances or other wholesale borrowings outstanding at December 31, 2024 and 2023. The average rates paid on total interest-bearing deposits were 1.81 % in 2024 and 1.21% in 2023.
The Company had no FHLB-Atlanta advances or other wholesale borrowings outstanding at December 31, 2025 and 2024. The average rates paid on total interest-bearing deposits were 1.72 % in 2025 and 1.81% in 2024.
The Company’s normal practice is to originate mortgage loans for sale in the secondary market and to either sell or retain the MSRs when the loan is sold. MSRs are recognized based on the fair value of the servicing right on the date the corresponding mortgage loan is sold.
The Company’s customary practice is to originate mortgage loans for sale in the secondary market and to either sell or retain the MSRs when the loan is sold. Table of Contents 46 MSRs are recognized based on the fair value of the servicing right on the date the corresponding mortgage loan is sold.
December 31 (Dollars in thousands) 2024 2023 Nonperforming assets: Nonperforming (nonaccrual) loans $ 503 911 Total nonperforming assets $ 503 911 as a % of loans and other real estate owned 0.09 % 0.16 as a % of total assets 0.05 % 0.09 Nonperforming loans as a % of total loans 0.09 % 0.16 Accruing loans 90 days or more past due $ — — Table of Contents 67 The table below provides information concerning the composition of nonaccrual loans at December 31, 2024 and 2023, respectively.
December 31 (Dollars in thousands) 2025 2024 Nonperforming assets: Nonperforming (nonaccrual) loans $ 482 503 Total nonperforming assets $ 482 503 as a % of loans and other real estate owned 0.09 % 0.09 as a % of total assets 0.05 % 0.05 Nonperforming loans as a % of total loans 0.09 % 0.09 Accruing loans 90 days or more past due $ — — The table below provides information concerning the composition of nonaccrual loans at December 31, 2025 and 2024, respectively.
December 31 (In thousands) 2024 2023 Nonaccrual loans: Commercial and industrial $ 99 — Construction and land development 404 — Commercial real estate — 783 Residential real estate — 128 Total nonaccrual loans $ 503 911 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.
December 31 (In thousands) 2025 2024 Nonaccrual loans: Commercial and industrial $ — 99 Construction and land development — 404 Commercial real estate 378 — Residential real estate 104 — Total nonaccrual loans $ 482 503 Table of Contents 50 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.
Off-Balance Sheet Arrangements At December 31, 2024, the Bank had outstanding standby letters of credit of $0.7 million and unfunded loan commitments outstanding of $84.7 million. Because these commitments generally have fixed expiration dates and may expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements.
Table of Contents 55 Off-Balance Sheet Arrangements At December 31, 2025, the Bank had outstanding standby letters of credit of $1.0 million and unfunded loan commitments outstanding of $48.1 million. Because these commitments generally have fixed expiration dates and may expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements.
The provision for credit losses under CECL is reflective of the Company’s credit risk profile and the future economic outlook and forecasts. Our CECL model is largely influenced by economic factors including, most notably, the anticipated unemployment rate. Noninterest income was $3.5 million in 2024 compared to a loss of $3.0 million in 2023.
The provision for credit losses under CECL is reflective of the Company’s credit risk profile and the future economic outlook and forecasts. Our CECL model is largely influenced by economic factors including, most notably, the anticipated unemployment rate. Table of Contents 43 Noninterest income was $3.1 million in 2025 compared to $3.5 million in 2024.
See Note 5 to our Financial Statements. Table of Contents 66 A summary of the changes in the allowance for credit losses on loans and certain asset quality ratios for the years ended December 31, 2024 and 2023 are presented below.
See Note 4 to our Financial Statements. Table of Contents 49 A summary of the changes in the allowance for credit losses on loans and certain asset quality ratios for the years ended December 31, 2025 and 2024 is presented below.
As of December 31, 2024, the unpaid principal balance of residential mortgage loans, which we have originated and sold, but retained the servicing rights (MSRs) totaled $204.4 million.
As of December 31, 2025, the unpaid principal balance of residential mortgage loans, which we have originated and sold, but retained the servicing rights (MSRs) totaled $188.8 million.
Two critical areas of focus for ALCO are interest rate risk and liquidity risk management. Interest Rate Risk Management In the normal course of business, the Company is exposed to market risk arising from fluctuations in interest rates because assets and liabilities may mature or reprice at different times and at different rates of change.
Interest Rate Risk Management In the normal course of business, the Company is exposed to market risk arising from fluctuations in interest rates because assets and liabilities may mature or reprice at different times and at different rates of change.
At December 31, 2024, the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current regulatory standards with a total risk-based capital ratio of 15.81%, a tier 1 leverage ratio of 10.49% and common equity tier 1 or (CET1) of 14.80% at December 31, 2024.
At December 31, 2025, the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current regulatory standards with a total risk-based capital ratio of 17.14%, a tier 1 leverage ratio of 10.71% and common equity tier 1 or (CET1) of 16.06% at December 31, 2025.
See "Table 1 - Explanation of Non-GAAP Financial Measures". Financial Summary The Company’s net earnings were $6.4 million for the full year 2024, compared to $1.4 million for the full year 2023. Basic and diluted net earnings per share were $1.83 per share for the full year 2024, compared to $0.40 per share for the full year 2023.
See "Table 1 - Explanation of Non-GAAP Financial Measures". Financial Summary The Company’s net earnings were $7.3 million for the full year 2025, compared to $6.4 million for the full year 2024. Basic and diluted net earnings per share were $2.08 per share for the full year 2025, compared to $1.83 per share for the full year 2024.
At December 31, 2024, the Company’s allowance for credit losses was $6.9 million, or 1.22% of total loans, compared to $6.9 million, or 1.23% of total loans, at December 31, 2023.
At December 31, 2025, the Company’s allowance for credit losses was $7.2 million, or 1.27% of total loans, compared to $6.9 million, or 1.22% of total loans, at December 31, 2024.
Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding plus unfunded commitments) to a single borrower of $20.4 million. Our loan policy requires that the Loan Committee of the Board of Directors approve any loan relationships that exceed this internal limit. At December 31, 2024, the Bank had one loan relationship exceeding our internal limit.
Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding plus unfunded commitments) to a single borrower of $21.2 million. Our loan policy requires that the Loan Committee of the Board of Directors approve any loan relationships that exceed this internal limit. At December 31, 2025, the Bank did not have any loan relationships exceeding our internal limit.
During 2023, the Bank began participating in the Certificates of Deposit Account Registry Service (the “CDARS”) and the Insured Cash Sweep product (“ICS”), which provide for reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose of maximizing FDIC insurance.
The Bank participates in the Certificates of Deposit Account Registry Service (the “CDARS”) and the Insured Cash Sweep product (“ICS”), which provide for reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose of improving FDIC insurance for our depositors.
From time to time, the Company may enter into interest rate swaps (“swaps”) to facilitate customer transactions and meet their financing needs. These swaps qualify as derivatives, but are not designated as hedging instruments. At December 31, 2024 and 2023, the Company had no derivative contracts to assist in managing interest rate sensitivity.
From time to time, the Company may enter into interest rate swaps (“swaps”) to facilitate customer transactions and meet their financing needs. These swaps qualify as derivatives, and may be designated as hedging instruments. At December 31, 2025, the Company had one derivative contract to assist in managing interest rate sensitivity.
Four loan categories represented the majority of the loan portfolio at December 31, 2024: commercial real estate (51%), residential real estate (21%), construction and land development (15%), and commercial and industrial (11%). Approximately 19% of the Company’s commercial real estate loans were classified as owner-occupied at December 31, 2024.
Four loan categories represented the majority of the loan portfolio at December 31, 2025: commercial real estate (58%), residential real estate (21%), construction and land development (10%), and commercial and industrial (10%). Approximately 18% of the Company’s commercial real estate loans were classified as owner-occupied at December 31, 2025.
Liquidity Risk Management Liquidity is the Company’s ability to convert assets into cash equivalents in order to meet daily cash flow requirements, primarily for deposit withdrawals, loan demand and maturing obligations.
The Company had no derivative contracts at December 31, 2024. Liquidity Risk Management Liquidity is the Company’s ability to convert assets into cash equivalents in order to meet daily cash flow requirements, primarily for deposit withdrawals, loan demand and maturing obligations.
At December 31, 2024 we had total deferred tax assets of $10.2 million included as “other assets”, including $9.9 million resulting from unrealized losses in our securities portfolio.
At December 31, 2025 we had net deferred tax assets of $6.9 million included as “other assets”, including $6.5 million resulting from unrealized losses in our securities portfolio.
Noninterest Expense Year ended December 31 (Dollars in thousands) 2024 2023 Salaries and benefits $ 12,534 $ 12,101 Net occupancy and equipment 2,508 2,954 Professional fees 1,188 1,299 FDIC and other regulatory assessments 564 631 Other 5,372 5,609 Total noninterest expense $ 22,166 $ 22,594 Salaries and benefits increased during 2024 compared to 2023 primarily due to routine annual increases in salaries and wages.
Noninterest Expense Year ended December 31 (Dollars in thousands) 2025 2024 Salaries and benefits $ 13,154 $ 12,534 Net occupancy and equipment 2,353 2,508 Professional fees 1,276 1,188 FDIC and other regulatory assessments 569 564 Other 5,599 5,372 Total noninterest expense $ 22,951 $ 22,166 Salaries and benefits increased during 2025 compared to 2024 primarily due to routine annual increases in salaries and wages.
There were no loans 90 days past due and still accruing interest at December 31, 2024 and 2023, respectively. The Company had no OREO at December 31, 2024 and 2023, respectively.
There were no loans 90 days past due and still accruing interest at December 31, 2025 and 2024, respectively. The Company had no other real estate owned at December 31, 2025 and 2024, respectively.
Net interest income (tax-equivalent) was $27.2 million in 2024, a 2% increase compared to $26.7 million in 2023. This increase was primarily due to improved net interest margin. The Company’s net interest margin (tax-equivalent) was 3.06% in 2024, compared to 2.89% in 2023.
Net interest income (tax-equivalent) was $29.7 million in 2025, a 9% increase compared to $27.2 million in 2024. This increase was primarily due to improved net interest margin and a 2% increase in our interest-earning assets. The Company’s net interest margin (tax-equivalent) was 3.27% in 2025, compared to 3.06% in 2024.
Noninterest Income Year ended December 31 (Dollars in thousands) 2024 2023 Service charges on deposit accounts $ 614 $ 603 Mortgage lending 608 430 Bank-owned life insurance 403 411 Securities losses, net — (6,295) Other 1,849 1,870 Total noninterest income $ 3,474 $ (2,981) The Company’s noninterest income from mortgage lending is primarily attributable to the (1) origination and sale of new mortgage loans and (2) servicing of mortgage loans.
Noninterest Income Year ended December 31 (Dollars in thousands) 2025 2024 Service charges on deposit accounts $ 619 $ 614 Mortgage lending 474 608 Bank-owned life insurance 414 403 Other 1,612 1,849 Total noninterest income $ 3,119 $ 3,474 The Company’s noninterest income from mortgage lending is primarily attributable to the (1) origination and sale of new mortgage loans, including refinancings and (2) servicing of mortgage loans.
Table of Contents 72 The following table presents additional information about our contractual obligations as of December 31, 2024, which by their terms had contractual maturity and termination dates subsequent to December 31, 2024: Payments due by period 1 year 1 to 3 3 to 5 More than (Dollars in thousands) Total or less years years 5 years Contractual obligations: Deposit maturities (1) $ 895,824 879,185 14,239 2,400 — Operating lease obligations 246 81 120 45 — Total $ 896,070 879,266 14,359 2,445 — (1) Deposits with no stated maturity (demand, NOW, money market, and savings deposits) are presented in the "1 year or less" column Management believes that the Company and the Bank have adequate sources of liquidity to meet all known contractual obligations and unfunded commitments, including loan commitments and reasonable borrower, depositor, and creditor requirements over the next 12 months.
The following table presents additional information about our contractual obligations as of December 31, 2025, which by their terms had contractual maturity and termination dates subsequent to December 31, 2025: Payments due by period 1 year 1 to 3 3 to 5 More than (Dollars in thousands) Total or less years years 5 years Contractual obligations: Deposit maturities (1) $ 922,926 910,388 9,726 2,812 — Operating lease obligations 157 55 102 — — Total $ 923,083 910,443 9,828 2,812 — (1) Deposits with no stated maturity (demand, NOW, money market, and savings deposits) are presented in the "1 year or less" column Management believes that the Company and the Bank have adequate sources of liquidity to meet all known contractual obligations and unfunded commitments, including loan commitments and reasonable borrower, depositor, and creditor requirements over the next 12 months.
In contrast with our earnings simulation model which evaluates interest rate risk over a 12-month timeframe, EVE uses a terminal horizon which allows for the re-pricing of all assets, liabilities, and off-balance sheet items.
Economic values are estimated by discounting expected cash flows from assets, liabilities and off-balance sheet items, which are used to establish a base case EVE. In contrast with our earnings simulation model which evaluates interest rate risk over a 12-month timeframe, EVE uses a terminal horizon which allows for the re-pricing of all assets, liabilities, and off-balance sheet items.
See "Table 1 - Explanation of Non-GAAP Financial Measures". RESULTS OF OPERATIONS Net Interest Income and Margin Net interest income (tax-equivalent) was $27.2 million in 2024, a 2% increase compared to $26.7 million in 2023. This increase was primarily due to improved net interest margin. The Company’s net interest margin (tax-equivalent) was 3.06% in 2024, compared to 2.89% in 2023.
See "Table 1 - Explanation of Non-GAAP Financial Measures". Table of Contents 45 RESULTS OF OPERATIONS Net Interest Income and Margin Net interest income (tax-equivalent) was $29.7 million in 2025, a 9% increase compared to $27.2 million in 2024. This increase was primarily due to improved net interest margin and a 2% increase in our interest-earning assets.
Our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment methodology, to adequately cover all expected credit losses as of the date the allowance is determined.
A specific reserve was established for one loan and the other loan was partially charged off. Our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment methodology, to adequately cover all expected credit losses as of the date the allowance is determined.
The ability of many borrowers to service their debts also may decrease during periods of rising interest rates or economic stress, which may differ across industries and economic sectors.
The ability of many borrowers to service their debts also may decrease during periods of rising interest rates or economic stress, which may differ across industries and economic sectors. Depositors and borrowers may also change their deposit and loan preferences and behaviors as a result of changes and expected changes in interest rates.
The Bank utilizes short and long-term non-deposit borrowings from time to time. Short-term borrowings generally consist of federal funds purchased and securities sold under agreements to repurchase with an original maturity of one year or less.
The Bank utilizes short and long-term non-deposit borrowings from time to time. Short-term borrowings generally consist of federal funds purchased and securities sold under agreements to repurchase with an original maturity of one year or less. The Bank had available federal funds lines totaling $65.2 million at December 31, 2025 and 2024 with no federal funds borrow ed.
The provision for income taxes expense was $2.0 million for an effective tax rate of 23.82% for 2024, compared to a tax benefit of $0.8 million for a negative effective tax rate of (125.73)% for 2023.
Income Tax Expense The provision for income taxes expense was $2.0 million for an effective tax rate of 21.24% for 2025, compared to $2.0 million for an effective tax rate of 23.82% for 2024.
Summary of Results of Operations Year ended December 31 (Dollars in thousands, except per share data) 2024 2023 Net interest income (a) $ 27,204 $ 26,745 Less: tax-equivalent adjustment 79 417 Net interest income (GAAP) 27,125 26,328 Noninterest income 3,474 (2,981) Total revenue 30,599 23,347 Provision for credit losses 36 135 Noninterest expense 22,166 22,594 Income tax expense (benefit) 2,000 (777) Net earnings $ 6,397 $ 1,395 Basic and diluted net earnings per share $ 1.83 $ 0.40 (a) Tax-equivalent.
Summary of Results of Operations Year ended December 31 (Dollars in thousands, except per share data) 2025 2024 Net interest income (a) $ 29,747 $ 27,204 Less: tax-equivalent adjustment 73 79 Net interest income (GAAP) 29,674 27,125 Noninterest income 3,119 3,474 Total revenue 32,793 30,599 Provision for credit losses 631 36 Noninterest expense 22,951 22,166 Income tax expense (benefit) 1,956 2,000 Net earnings $ 7,255 $ 6,397 Basic and diluted net earnings per share $ 2.08 $ 1.83 (a) Tax-equivalent.
The Bank’s tier 1 leverage ratio was 10.49%, CET1 risk-based capital ratio was 14.80%, tier 1 risk-based capital ratio was 14.80%, and total risk-based capital ratio was 15.81 % at December 31, 2024.
The Bank’s tier 1 leverage ratio was 10.71%, CET1 risk-based capital ratio was 16.06%, tier 1 risk-based capital ratio was 16.06%, and total risk-based capital ratio was 17.14 % at December 31, 2025.
Changes in Interest Rates Net Interest Income % Variance 400 basis points 0.47 % 300 basis points 0.74 200 basis points 0.67 100 basis points 0.35 (100) basis points (0.92) (200) basis points (1.49) (300) basis points (1.75) (400) basis points (2.20) At December 31, 2024, our earnings simulation model indicated that we were in compliance with the policy guidelines noted above.
Changes in Interest Rates Net Interest Income % Variance 400 basis points 4.67 % 300 basis points 3.95 200 basis points 2.76 100 basis points 1.40 (100) basis points (1.97) (200) basis points (3.13) (300) basis points (4.13) (400) basis points (5.16) At December 31, 2025, our earnings simulation model indicated that we were in compliance with the policy guidelines noted above.
Economic Value of Equity Economic value of equity (“EVE”) measures the extent that estimated economic values of our assets, liabilities and off- balance sheet items will change as a result of interest rate changes. Economic values are estimated by discounting expected cash flows from assets, liabilities and off-balance sheet items, to which establish a base case EVE.
Table of Contents 53 Economic Value of Equity Economic value of equity (“EVE”) measures the extent that estimated economic values of our assets, liabilities and off- balance sheet items will change as a result of interest rate changes.
(Dollars in thousands) December 31, 2024 Maturity of: 3 months or less $ 8,353 Over 3 months through 6 months 23,669 Over 6 months through 12 months 23,939 Over 12 months 2,442 Total estimated uninsured time deposits $ 58,403 Other Borrowings The Company had no long-term debt at December 31, 2024 and 2023.
(Dollars in thousands) December 31, 2025 Maturity of: 3 months or less $ 15,624 Over 3 months through 6 months 31,140 Over 6 months through 12 months 28,306 Over 12 months 4,273 Total estimated uninsured time deposits $ 79,343 Other Borrowings The Company had no long-term debt at December 31, 2025 and 2024.
Year ended December 31 (Dollars in thousands) 2024 2023 Allowance for credit losses: Balance at beginning of period $ 6,863 5,765 Impact of adopting ASC 326 — 1,019 Charge-offs: Commercial and industrial (9) (164) Residential real estate (61) — Consumer installment (114) (105) Total charge -offs (184) (269) Recoveries: Commercial and industrial 144 204 Residential real estate 9 14 Consumer installment 45 5 Total recoveries 198 223 Net recoveries (charge-offs) 14 (46) (Reversal of) provision for credit losses (6) 125 Ending balance $ 6,871 6,863 as a % of loans 1.22 % 1.23 as a % of nonperforming loans 1,366 % 753 Net charge-offs as a % of average loans — % 0.01 Nonperforming Assets At December 31, 2024 the Company had $0.5 million in nonperforming assets compared to $0.9 million at December 31, 2023.
Year ended December 31 (Dollars in thousands) 2025 2024 Allowance for credit losses: Balance at beginning of period $ 6,871 6,863 Charge-offs: Commercial and industrial (142) (9) Commercial real estate (296) — Residential real estate (7) (61) Consumer installment (96) (114) Total charge -offs (541) (184) Recoveries: Commercial and industrial 30 144 Residential real estate 84 9 Consumer installment 29 45 Total recoveries 143 198 Net (charge-offs) recoveries (398) 14 Provision for credit losses - Loans 703 (6) Ending balance $ 7,176 6,871 as a % of loans 1.27 % 1.22 as a % of nonperforming loans 1,489 % 1,366 Net charge-offs as a % of average loans 0.07 % — Nonperforming Assets The Company had $0.5 million in nonperforming assets at both December 31, 2025 and 2024.
Year ended December 31 (Dollars in thousands) 2024 2023 Origination income $ 261 $ 71 Servicing fees, net 347 359 Total mortgage lending income $ 608 $ 430 The Company’s income from mortgage lending typically fluctuates as mortgage interest rates change and is primarily attributable to the origination and sale of new mortgage loans.
Year ended December 31 (Dollars in thousands) 2025 2024 Origination income $ 154 $ 261 Servicing fees, net 320 347 Total mortgage lending income $ 474 $ 608 The Company’s income from mortgage lending typically fluctuates as mortgage interest rates, housing sales and refinancings change.
The Company had reciprocal deposits on balance sheet of $6.9 million at December 31, 2024, compared to none at December 31, 2023. Uninsured amounts are estimated based on the portion of account balances that exceed FDIC insurance limits.
At December 31, 2025, estimated uninsured deposits totaled $392.9 million, or 43% of total deposits, compared to $359.7 million, or 40% of total deposits at December 31, 2024. Uninsured amounts are estimated based on the portion of account balances that exceed FDIC insurance limits.
Loans December 31 (In thousands) 2024 2023 Commercial and industrial $ 63,274 73,374 Construction and land development 82,493 68,329 Commercial real estate 289,992 287,307 Residential real estate 118,627 117,457 Consumer installment 9,631 10,827 Total loans 564,017 557,294 Total loans, net of unearned income, were $564.0 million at December 31, 2024, and $557.3 million at December 31, 2023, an increase of $6.7 million, or 1%.
Loans December 31 (In thousands) 2025 2024 Commercial and industrial $ 58,400 63,274 Construction and land development 56,436 82,493 Commercial real estate 325,521 289,992 Residential real estate 116,554 118,627 Consumer installment 8,421 9,631 Total loans 565,332 564,017 Total loans, net of unearned income, were $565.3 million at December 31, 2025, and $564.0 million at December 31, 2024, an increase of $1.3 million.
Within the residential real estate portfolio segment, the Company had junior lien mortgages of approximately $11.2 million, or 2%, and $8.7 million, or 2%, of total loans at December 31, 2024 and 2023, respectively. For residential real estate mortgage loans with a consumer purpose, the Company had no loans that required interest only payments at December 31, 2024 and 2023.
Within the residential real estate portfolio segment , the Company had junior lien mortgages of approximately $12.3 million, or 2%, and $11.2 million, or 2%, of total loans at December 31, 2025 and 2024, respectively.
The rules included the implementation of a capital conservation buffer of CET1 capital of 2.5% that is added to the minimum requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of 2.5% or less is subject to limitations on “distributions” from “eligible retained earnings”, including dividend payments, share repurchases and certain discretionary bonus payments.
A banking organization with a capital conservation buffer of 2.5% or less is subject to limitations on “distributions” from “eligible retained earnings”, including dividend payments, share repurchases and certain discretionary bonus payments. At December 31, 2025 and 2024, the Bank had a capital conservation buffer of 9.14% and 7.81%, respectively.
Table of Contents 77 Table 3 - Average Balance and Net Interest Income Analysis Year ended December 31 2024 2023 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Interest-earning assets: Loans and loans held for sale (1) $ 568,733 $ 29,735 5.23% $ 523,838 $ 24,925 4.76% Securities - taxable 248,072 5,430 2.19% 335,366 7,208 2.15% Securities - tax-exempt (2) 10,084 373 3.70% 52,122 1,985 3.81% Total securities 258,156 5,803 2.25% 387,488 9,193 2.37% Federal funds sold 17,907 939 5.24% 5,221 250 4.79% Interest bearing bank deposits 44,634 2,334 5.23% 8,593 423 4.92% Total interest-earning assets 889,430 38,811 4.36% 925,140 34,791 3.76% Cash and due from banks 17,779 15,230 Other assets 75,059 81,438 Total assets $ 982,268 $ 1,021,808 Interest-bearing liabilities: Deposits: NOW $ 192,702 2,680 1.39% $ 193,451 1,907 0.99% Savings and money market 251,778 2,168 0.86% 289,235 2,132 0.74% Certificates of deposit 195,097 6,756 3.46% 175,085 3,935 2.25% Total interest-bearing deposits 639,577 11,604 1.81% 657,771 7,974 1.21% Short-term borrowings 628 3 0.48% 3,255 72 2.21% Total interest-bearing liabilities 640,205 11,607 1.81% 661,026 8,046 1.22% Noninterest-bearing deposits 262,224 289,019 Other liabilities 1,918 3,697 Stockholders' equity 77,921 68,066 Total liabilities and and stockholders' equity $ 982,268 $ 1,021,808 Net interest income and margin $ 27,204 3.06% $ 26,745 2.89% (1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included in the computation of average balances.
Table of Contents 59 Table 3 - Average Balance and Net Interest Income Analysis Year ended December 31 2025 2024 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Interest-earning assets: Loans and loans held for sale (1) $ 560,476 $ 30,840 5.50% $ 568,733 $ 29,735 5.23% Securities - taxable 228,793 4,949 2.16% 248,072 5,430 2.19% Securities - tax-exempt (2) 9,173 346 3.77% 10,084 373 3.70% Total securities 237,966 5,295 2.23% 258,156 5,803 2.25% Federal funds sold 26,535 1,127 4.25% 17,907 939 5.24% Interest bearing bank deposits 83,648 3,579 4.28% 44,634 2,334 5.23% Total interest-earning assets 908,625 40,841 4.49% 889,430 38,811 4.36% Cash and due from banks 15,414 17,779 Other assets 72,438 75,059 Total assets $ 996,477 $ 982,268 Interest-bearing liabilities: Deposits: NOW $ 205,951 2,740 1.33% $ 192,702 2,680 1.39% Savings and money market 253,668 2,461 0.97% 251,778 2,168 0.86% Certificates of deposit 184,047 5,891 3.20% 195,097 6,756 3.46% Total interest-bearing deposits 643,666 11,092 1.72% 639,577 11,604 1.81% Short-term borrowings 28 2 7.14% 628 3 0.48% Total interest-bearing liabilities 643,694 11,094 1.72% 640,205 11,607 1.81% Noninterest-bearing deposits 265,978 262,224 Other liabilities 2,578 1,918 Stockholders' equity 84,227 77,921 Total liabilities and and stockholders' equity $ 996,477 $ 982,268 Net interest income and margin $ 29,747 3.27% $ 27,204 3.06% (1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included in the computation of average balances.
The Company’s effective income tax rate is affected principally by tax-exempt earnings from the Company’s investments in municipal securities, bank-owned life insurance, and New Markets Tax Credits.
The provision for income tax expense was $2.0 million for an effective tax rate of 21.24% for 2025, compared to $2.0 million for an effective tax rate of 23.82% for 2024. The Company’s effective income tax rate is affected principally by tax-exempt earnings from the Company’s investments in municipal securities and loans, bank-owned life insurance, and New Markets Tax Credits.
The Bank’s uninsured deposits at December 31, 2024 and 2023 include approximately $223.1 million and $206.2 million, respectively, of deposits of state, county and local governments that are collateralized by securities having a fair value equal to such deposits.
The Bank’s uninsured deposits at December 31, 2025 and 2024 include approximately $228.7 million and $223.1 million, respectively, of deposits of state, county and local governments that are collateralized by securities. Deposits of state, county and local governments were 58% and 62% of our estimated uninsured deposits at December 31, 2025 and 2024, respectively.
See Table 1 - Explanation of Non-GAAP Financial Measures." Table of Contents 78 Table 4 - Volume and Rate Variance Analysis Year ended December 31, 2024 vs. 2023 Year ended December 31, 2023 vs. 2022 Net Due to change in Net Due to change in (Dollars in thousands) Change Rate (2) Volume (2) Change Rate (2) Volume (2) Interest income: Loans and loans held for sale $ 4,810 2,463 2,347 $ 4,684 1,390 3,294 Securities - taxable (1,778) 133 (1,911) 632 1,247 (615) Securities - tax-exempt (1) (1,612) (57) (1,555) (187) 174 (361) Total securities (3,390) 76 (3,466) 445 1,421 (976) Federal funds sold 689 24 665 (185) 1,661 (1,846) Interest bearing bank deposits 1,911 26 1,885 (154) 2,285 (2,439) Total interest income $ 4,020 2,589 1,431 $ 4,790 6,757 (1,967) Interest expense: Deposits: NOW $ 773 783 (10) $ 1,537 1,574 (37) Savings and money market 36 359 (323) 1,483 1,762 (279) Certificates of deposit 2,821 2,128 693 2,635 2,167 468 Total interest-bearing deposits 3,630 3,270 360 5,655 5,503 152 Short-term borrowings (69) (56) (13) 12 40 (28) Total interest expense 3,561 3,214 347 5,667 5,543 124 Net interest income $ 459 (625) 1,084 $ (877) 1,214 (2,091) (1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using an income tax rate of 21%.
See Table 1 - Explanation of Non-GAAP Financial Measures." Table of Contents 60 Table 4 - Volume and Rate Variance Analysis Year ended December 31, 2025 vs. 2024 Year ended December 31, 2024 vs. 2023 Net Due to change in Net Due to change in (Dollars in thousands) Change Rate (2) Volume (2) Change Rate (2) Volume (2) Interest income: Loans and loans held for sale $ 1,105 1,559 (454) $ 4,810 2,463 2,347 Securities - taxable (481) (64) (417) (1,778) 133 (1,911) Securities - tax-exempt (1) (27) 7 (34) (1,612) (57) (1,555) Total securities (508) (57) (451) (3,390) 76 (3,466) Federal funds sold 188 (178) 366 689 24 665 Interest bearing bank deposits 1,245 (424) 1,669 1,911 26 1,885 Total interest income $ 2,030 900 1,130 $ 4,020 2,589 1,431 Interest expense: Deposits: NOW $ 60 (116) 176 $ 773 783 (10) Savings and money market 293 275 18 36 359 (323) Certificates of deposit (865) (511) (354) 2,821 2,128 693 Total interest-bearing deposits (512) (352) (160) 3,630 3,270 360 Short-term borrowings (1) 42 (43) (69) (56) (13) Total interest expense (513) (310) (203) 3,561 3,214 347 Net interest income $ 2,543 1,210 1,333 $ 459 (625) 1,084 (1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using an income tax rate of 21%.
BALANCE SHEET ANALYSIS Securities Securities available-for-sale were $243.0 million at December 31, 2024, compared to $270.9 million at December 31, 2023. This decrease reflects a decrease in the amortized cost basis of securities available -for-sale of $27.1 million, and a decrease of $0.8 million in the fair value of securities available-for-sale.
Table of Contents 47 BALANCE SHEET ANALYSIS Securities Securities available-for-sale were $233.3 million at December 31, 2025, compared to $243.0 million at December 31, 2024. This decrease reflects a decrease in the amortized cost basis of securities available -for-sale of $23.4 million, partially offset by an increase of $13.7 million in the fair value of securities available-for -sale.
Deposits December 31 (In thousands) 2024 2023 Noninterest bearing demand $ 260,874 270,723 NOW 199,883 190,724 Money market 153,916 148,040 Savings 89,904 88,541 Certificates of deposit under $250,000 103,594 100,572 Certificates of deposit and other time deposits of $250,000 or more 87,653 97,643 Total deposits $ 895,824 896,243 Total deposits were stable and decreased only $0.4 million to $895.8 million at December 31, 2024, compared to $896.2 million at December 31, 2023.
Deposits December 31 (In thousands) 2025 2024 Noninterest bearing demand $ 268,026 260,874 NOW 214,827 199,883 Money market 170,352 153,916 Savings 92,920 89,904 Certificates of deposit under $250,000 97,458 103,594 Certificates of deposit and other time deposits of $250,000 or more 79,343 87,653 Total deposits $ 922,926 895,824 Total deposits were $922.9 million at December 31, 2025, compared to $895.8 million at December 31, 2024.
Changes in Interest Rates EVE % Variance 400 basis points 0.43 % 300 basis points 1.69 200 basis points 2.05 100 basis points 1.41 (100) basis points (2.61) (200) basis points (8.19) (300) basis points (17.50) (400) basis points (30.86) At December 31, 2024, our EVE model indicated that we were in compliance with the policy guidelines noted above.
Changes in Interest Rates EVE % Variance 400 basis points 3.76 % 300 basis points 4.08 200 basis points 3.44 100 basis points 2.21 (100) basis points (3.41) (200) basis points (9.01) (300) basis points (17.83) (400) basis points (27.26) At December 31, 2025, our EVE model indicated that we were in compliance with the policy guidelines noted above.
Table of Contents 61 Average Balance Sheet and Interest Rates Year ended December 31 2024 2023 Average Yield/ Average Yield/ (Dollars in thousands) Balance Rate Balance Rate Loans and loans held for sale $ 568,733 5.23% $ 523,838 4.76% Securities - taxable 248,072 2.19% 335,366 2.15% Securities - tax-exempt (a) 10,084 3.70% 52,122 3.81% Total securities 258,156 2.25% 387,488 2.37% Federal funds sold 17,907 5.24% 5,221 4.79% Interest bearing bank deposits 44,634 5.23% 8,593 4.92% Total interest-earning assets 889,430 4.36% 925,140 3.76% Deposits: NOW 192,702 1.39% 193,451 0.99% Savings and money market 251,778 0.86% 289,235 0.74% Certificates of deposit 195,097 3.46% 175,085 2.25% Total interest-bearing deposits 639,577 1.81% 657,771 1.21% Short-term borrowings 628 0.48% 3,255 2.21% Total interest-bearing liabilities 640,205 1.81% 661,026 1.22% Net interest income and margin (a) $ 27,204 3.06% $ 26,745 2.89% (a) Tax-equivalent.
Average Balance Sheet and Interest Rates Year ended December 31 2025 2024 Average Yield/ Average Yield/ (Dollars in thousands) Balance Rate Balance Rate Loans and loans held for sale $ 560,476 5.50% $ 568,733 5.23% Securities - taxable 228,793 2.16% 248,072 2.19% Securities - tax-exempt (a) 9,173 3.77% 10,084 3.70% Total securities 237,966 2.23% 258,156 2.25% Federal funds sold 26,535 4.25% 17,907 5.24% Interest bearing bank deposits 83,648 4.28% 44,634 5.23% Total interest-earning assets 908,625 4.49% 889,430 4.36% Deposits: NOW 205,951 1.33% 192,702 1.39% Savings and money market 253,668 0.97% 251,778 0.86% Certificates of deposit 184,047 3.20% 195,097 3.46% Total interest-bearing deposits 643,666 1.72% 639,577 1.81% Short-term borrowings 28 7.14% 628 0.48% Total interest-bearing liabilities 643,694 1.72% 640,205 1.81% Net interest income and margin (a) $ 29,747 3.27% $ 27,204 3.06% (a) Tax-equivalent.

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