AUBN posts Q3 net income $2.23M, EPS $0.64, stronger NIM
Auburn National Bancorporation (AUBN) reported Q3 2025 results.
Auburn National Bancorporation (AUBN) reported Q3 2025 results. Net earnings were $2,227 thousand, or $0.64 per share, on total revenue of $8,401 thousand. Net interest income was $7,572 thousand, aided by a benefit in provision for credit losses of $255 thousand.
For the first nine months, net earnings reached $5,590 thousand ($1.60 per share). Net interest income was $21,961 thousand, and the net interest margin (tax‑equivalent) was 3.26%. Noninterest income totaled $2,365 thousand while noninterest expense was $17,388 thousand.
At September 30, 2025, total assets were $1,011,184 thousand and deposits were $917,266 thousand. Loans, net were $551,221 thousand with an allowance for credit losses of $6,691 thousand. Stockholders’ equity was $89,613 thousand, reflecting an improvement in accumulated other comprehensive loss to $21,072 thousand. The company paid cash dividends of $0.27 per share in Q3 and $0.81 per share year‑to‑date. Shares outstanding were 3,493,699 as of November 11, 2025.
Positive
- None.
Negative
- None.
Insights
Solid quarter with margin expansion and stable credit; neutral impact.
AUBN posted Q3 net earnings of $2,227,000 (EPS $0.64), with net interest income of $7,572,000. For the first nine months, earnings were $5,590,000 and the tax‑equivalent net interest margin was 3.26%, reflecting higher asset yields and lower deposit costs.
Balance sheet trends were steady: assets $1.01B, deposits $917.3M, and loans, net $551.2M. The allowance for credit losses was $6.691M and nonaccrual loans were $104,000, indicating stable credit quality in the period covered.
Equity improved to $89.6M as accumulated other comprehensive loss narrowed. Dividend payouts were $0.27 in Q3 and $0.81 year‑to‑date. Subsequent filings may provide further detail on margin sustainability and loan growth.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were AUBN’s Q3 2025 earnings and EPS?
Net earnings were $2,227 thousand with EPS $0.64.
How did AUBN perform year-to-date in 2025?
Nine-month net earnings were $5,590 thousand with EPS $1.60 and a tax‑equivalent net interest margin of 3.26%.
What is AUBN’s balance sheet size and deposit base?
As of September 30, 2025, total assets were $1,011,184 thousand and deposits were $917,266 thousand.
What were loans and the allowance at quarter-end?
Loans, net were $551,221 thousand and the allowance for credit losses was $6,691 thousand.
Did AUBN pay dividends in Q3 2025?
Yes. Cash dividends were $0.27 per share in Q3 and $0.81 per share year‑to‑date.
What was AUBN’s equity and AOCI position?
Stockholders’ equity was $89,613 thousand and accumulated other comprehensive loss was $21,072 thousand.
How many AUBN shares were outstanding?
Shares outstanding were 3,493,699 as of November 11, 2025.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
☒
For the quarterly period ended
☐
For the transition period __________ to __________
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
,
)
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter)
during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes
☒
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☐
Accelerated filer
☐
☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
☐
☒
Securities registered pursuant to Section 12(b) of the Act:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at November 11, 2025
Common Stock, $0.01 par value per share
Table of Contents
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
INDEX
P
ART I. FINANCIAL INFORMATION
PAGE
Item 1
Financial Statements
Consolidated Balance Sheets (Unaudited) as of September 30, 2025 and December 31, 2024
3
Consolidated Statements of Earnings (Unaudited) for the quarter and nine months ended September 30,
2025 and 2024
4
Consolidated Statements of Comprehensive Income (Unaudited) for the quarter and nine months ended
September 30, 2025 and 2024
5
Consolidated Statements of Stockholders’ Equity (Unaudited) for the quarter and nine months ended
September 30, 2025 and 2024
6
Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and
2024
7
Notes to Consolidated Financial Statements (Unaudited
)
8
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Table 1 – Explanation of Non-GAAP Financial Measures
41
Table 2 – Selected Quarterly Financial Data
42
Table 3 – Selected Financial Data
43
Table 4 – Average Balances and Net Interest Income Analysis – for the quarter ended September 30,
2025 and 2024
44
Table 5 – Average Balances and Net Interest Income Analysis – for the nine months ended September
30, 2025 and 2024
45
Table 6 – Volume and Rate Variance Analysis for the quarter and nine months ended September 30, 2025
46
46
Item 3
Quantitative and Qualitative Disclosures About Market Risk
47
Item 4
Controls and Procedures
47
PART II. OTHER INFORMATION
Item 1
Legal Proceedings
47
Item 1A
Risk Factors
47
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
48
Item 3
Defaults Upon Senior Securities
48
Item 4
Mine Safety Disclosures
48
Item 5
Other Information
48
Item 6
Exhibits
49
Table of Contents
3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
September 30,
December 31,
(Dollars in thousands, except share data)
2025
2024
Assets:
Cash and due from banks
$
$
Federal funds sold
Interest-bearing bank deposits
Cash and cash equivalents
Securities available-for-sale
Loans held for sale
Loans
557,912
Allowance for credit losses
(6,691 )
(6,871 )
Loans, net
Premises and equipment, net
Bank-owned life insurance
Other assets
Total assets
$
$
Liabilities:
Deposits:
Noninterest-bearing
$
$
Interest-bearing
Total deposits
Accrued expenses and other liabilities
Total liabilities
Stockholders' equity:
Preferred stock of $
no shares issued
—
—
Common stock of $
issued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net
(21,072 )
(29,607 )
Less treasury stock, at cost -
and December 31, 2024, respectively
(11,701 )
(11,701 )
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
S
ee accompanying notes to consolidated financial statements
Table of Contents
4
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands, except share and per share data)
2025
2024
2025
2024
Interest income:
Loans, including fees
$
$
$
$
Securities:
Taxable
Tax-exempt
Federal funds sold and interest-bearing bank deposits
Total interest income
Interest expense:
Deposits
Short-term borrowings
Total interest expense
Net interest income
Provision for credit losses
(255 )
(127 )
(152 )
Net interest income after provision for credit losses
Noninterest income:
Service charges on deposit accounts
Mortgage lending
Bank-owned life insurance
Other
Total noninterest income
Noninterest expense:
Salaries and benefits
Net occupancy and equipment
Professional fees
Other
Total noninterest expense
Earnings before income taxes
Income tax expense
Net earnings
$
$
$
$
Net earnings per share:
Basic and diluted
$
$
$
$
Weighted average shares outstanding:
Basic
Diluted
S
ee accompanying notes to consolidated financial statements
Table of Contents
5
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
Net earnings
$
$
$
$
Other comprehensive income, net of tax:
Change in fair value on available-for-sale securities, net of tax
Other comprehensive income, net of tax
Comprehensive income
$
$
$
$
S
ee accompanying notes to consolidated financial statements
Table of Contents
6
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
Accumulated
Common
Additional
other
Shares
Common
paid-in
Retained
comprehensive
Treasury
(Dollars in thousands, except share data)
Outstanding
Stock
capital
earnings
income (loss)
stock
Total
Quarter ended September 30, 2025
Balance, June 30, 2025
$
$
$
$
(23,305 )
$
(11,701 )
$
Net earnings
—
—
—
—
—
2,227
Other comprehensive income
—
—
—
—
—
2,233
Cash dividends paid ($
—
—
—
(943 )
—
—
(943 )
Stock-based compensation
—
—
—
—
—
Balance, September 30, 2025
$
$
$
$
(21,072 )
$
(11,701 )
$
Quarter ended September 30, 2024
Balance, June 30, 2024
$
$
$
$
(31,284 )
$
(11,701 )
$
Net earnings
—
—
—
—
—
Other comprehensive income
—
—
—
—
—
Cash dividends paid ($
—
—
—
(943 )
—
—
(943 )
Balance, September 30, 2024
$
$
$
$
(22,946 )
$
(11,701 )
$
Nine months ended September 30, 2025
Balance, December 31, 2024
$
$
$
$
(29,607 )
$
(11,701 )
$
Net earnings
—
—
—
—
—
5,590
Other comprehensive income
—
—
—
—
—
8,535
Cash dividends paid ($
—
—
—
(2,829 )
—
—
(2,829 )
Stock-based compensation
—
—
—
—
—
Balance, September 30, 2025
$
$
$
$
(21,072 )
$
(11,701 )
$
Nine months ended September 30, 2024
Balance, December 31, 2023
$
$
$
$
(29,029 )
$
(11,702 )
$
Cumulative effect of change in accounting
standard ASU 2023-12
—
—
—
(263 )
—
—
(263 )
Net earnings
—
—
—
—
—
Other comprehensive income
—
—
—
—
—
6,083
Cash dividends paid ($
—
—
—
(2,830 )
—
—
(2,830 )
Sale of treasury stock
—
—
—
Balance, September 30, 2024
$
$
$
$
(22,946 )
$
(11,701 )
$
S
ee accompanying notes to consolidated financial statements
Table of Contents
7
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
(Dollars in thousands)
2025
2024
Cash flows from operating activities:
Net earnings
$
$
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for credit losses
(152 )
Depreciation and amortization
Premium amortization and discount accretion, net
Net gain on sale of loans held for sale
(150 )
(194 )
Loans originated for sale
(6,357 )
(8,427 )
Proceeds from sale of loans
Increase in cash surrender value of bank-owned life insurance
(309 )
(301 )
Stock-based compensation expense
Net decrease (increase) in other assets
(1,545 )
Net increase in accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from prepayments and maturities of securities available-for-sale
Decrease (increase) in loans, net
(8,407 )
Net purchases of premises and equipment
(845 )
(1,930 )
Decrease in FHLB stock
Net cash provided by investing activities
Cash flows from financing activities:
Net increase (decrease) in noninterest-bearing deposits
(479 )
Net increase in interest-bearing deposits
Net decrease in federal funds purchased and securities sold
under agreements to repurchase
(1,486 )
Dividends paid
(2,829 )
(2,830 )
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
$
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest
$
$
Income taxes
See accompanying notes to consolidated financial statements
Table of Contents
8
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Auburn National Bancorporation, Inc. (the “Company”) provides a full range of banking services to individuals and
commercial customers in Lee County, Alabama and surrounding areas through its wholly owned subsidiary, AuburnBank
(the “Bank”). The Company does not have any segments other than banking that are considered material.
Basis of Presentation and Use of Estimates
The unaudited consolidated financial statements in this report have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for interim financial information. Accordingly, these financial statements do not
include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited
consolidated financial statements include, in the opinion of management, all adjustments necessary to present a fair
statement of the financial position and the results of operations for all periods presented. All such adjustments are of a
normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results of
operations that the Company and its subsidiaries may achieve for future interim periods or the entire year. For further
information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form
10-K for the year ended December 31, 2024.
The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
Significant intercompany transactions and accounts are eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of
the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term
include the determination of allowance for credit losses on loans and investment securities, the fair value of financial
instruments, and the valuation of deferred tax assets and other real estate owned (“OREO”).
Subsequent Events
The Company has evaluated the effects of events and transactions through the date of this filing that have occurred
subsequent to September 30, 2025. The Company does not believe there were any material subsequent events during this
period that would have required further recognition or disclosure in the unaudited consolidated financial statements
included in this report.
Reclassifications
Certain amounts reported in prior periods have been reclassified to conform to the current-period presentation. These
reclassifications had no effect on the Company’s previously reported net earnings or total stockholders’ equity.
Accounting Developments
I
n the first nine months of 2025, the Company did not adopt any new accounting guidance.
Table of Contents
9
NOTE 2: SECURITIES
At September 30, 2025 and December 31, 2024, respectively, all securities within the scope of ASC 320,
Investments –
Debt and Equity Securities,
were classified as available-for-sale. The fair value and amortized cost for securities available-
for-sale by contractual maturity at September 30, 2025 and December 31, 2024, respectively, are presented below.
1 year
1 to 5
5 to 10
After 10
Fair
Gross Unrealized
Amortized
(Dollars in thousands)
or less
years
years
years
Value
Gains
Losses
Cost
September 30, 2025
Agency obligations (a)
$
$
Agency MBS (a)
State and political subdivisions
Total available-for-sale
$
$
December 31, 2024
Agency obligations (a)
$
$
Agency MBS (a)
State and political subdivisions
Total available-for-sale
$
$
(a) Includes securities issued by U.S. government agencies or government -sponsored entities. Expected lives of these
securities may differ from contractual maturities because (i) issuers may have the right to call or repay such securities
obligations with or without prepayment penalties and (ii) borrowers of the loans included in Agency MBS generally
have the right to prepay such loan in whole or in part at any time.
Securities with aggregate fair values of $
respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, FHLB advances, and
for other purposes required or permitted by law.
Included in other assets on the accompanying consolidated balance sheets include non-marketable equity investments. The
carrying amounts of non-marketable equity investments were $
respectively. Non-marketable equity investments include FHLB of Atlanta stock, Federal Reserve Bank of Atlanta
(“FRB”) stock, and stock in a privately held financial institution.
Gross Unrealized Losses and Fair Value
The fair values and gross unrealized losses on securities at September 30, 2025 and December 31, 2024, respectively,
segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or
longer, are presented below.
Less than 12 Months
12 Months or Longer
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in thousands)
Value
Losses
Value
Losses
Value
Losses
September 30, 2025:
Agency obligations
$
$
Agency MBS
State and political subdivisions
Total
$
$
December 31, 2024:
Agency obligations
$
$
Agency MBS
State and political subdivisions
Total
$
$
Table of Contents
10
For the securities in the previous table, the Company assesses whether or not it intends to sell the security, or more likely
than not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down
to fair value through net income. Because the Company currently does not intend to sell those securities that have an
unrealized loss at September 30, 2025, and it is not more-likely-than-not that the Company will be required to sell the
securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-
down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value of securities is the
result of credit deterioration, which would require the recognition of an allowance for credit losses. Such evaluations
consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other
known adverse conditions related to the specific security. The unrealized losses associated with securities at September 30,
2025 are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no
allowance for credit losses is considered necessary related to securities at September 30, 2025. These securities will
continue to be monitored as a part of the Company’s ongoing evaluation of credit quality. Management evaluates the
financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all
contractual principal and interest payments.
Realized Gains and Losses
The Company had no realized gains or losses on sale of securities during the quarter and nine months ended September 30,
2025 and 2024, respectively.
NOTE 3: LOANS AND ALLOWANCE FOR CREDIT LOSSES
September 30,
December 31,
(Dollars in thousands)
2025
2024
Commercial and industrial
$
$
Construction and land development
Commercial real estate:
Owner occupied
Hotel/motel
Multi-family
Other
Total commercial real estate
Residential real estate:
Consumer mortgage
Investment property
Total residential real estate
Consumer installment
Total Loans
$
$
Loans secured by real estate were approximately 88.5% of the Company’s total loan portfolio at September 30, 2025. At
September 30, 2025, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and
surrounding areas.
The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for
determining its allowance for credit losses. As part of the Company’s quarterly assessment of the allowance, the loan
portfolio included the following portfolio segments: commercial and industrial, construction and land development,
commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio
segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute,
risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk.
The following describes the risk characteristics relevant to each of the portfolio segments and classes.
Commercial and industrial (“C&I”) —
includes loans to finance business operations, equipment purchases, or other needs
for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural
production. Generally, the primary source of repayment is the cash flow from business operations and activities of the
borrower.
Table of Contents
11
Construction and land development (“C&D”) —
includes both loans and credit lines for the purpose of purchasing,
carrying, and developing land into commercial developments or residential subdivisions. Also included are loans and credit
lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is
dependent upon the sale or refinance of the real estate collateral.
Commercial real estate (“CRE”) —
includes loans in these classes:
●
Owner occupied
owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary
source of repayment is the cash flow from business operations and activities of the borrower, who owns the
property.
●
Hotel/motel
– includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon
income generated from the hotel/motel securing the loan. The underwriting of these loans takes into consideration
the occupancy and rental rates, as well as the financial health of the borrower.
●
Multi-family
for 5 or more unit residential properties and apartments leased to residents. Generally, the primary source of
repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans
takes into consideration the occupancy and rental rates, as well as the financial health of the respective borrowers.
●
Other
multi-family properties, and which are not owner occupied. Loans in this class include loans for neighborhood
retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to
local and other businesses. Generally, the primary source of repayment is dependent upon income generated from
the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates,
as well as the financial health of the borrower.
Residential real estate (“RRE”) —
includes loans in these two classes:
●
Consumer mortgage
consumers that are secured by a primary residence or second home. These loans are underwritten in accordance
with the Bank’s general loan policies and procedures which require, among other things, proper documentation of
each borrower’s financial condition, satisfactory credit history, and property value.
●
Investment property
Generally, the primary source of repayment is dependent upon income generated from leasing the property
securing the loan. The underwriting of these loans takes into consideration the rental rates and property values, as
well as the financial health of the borrowers.
Consumer installment —
includes loans to individuals, which may be secured by personal property or are unsecured. Loans
include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with
the Bank’s general loan policies and procedures which require, among other things, proper documentation of each
borrower’s financial condition, satisfactory credit history, and, if applicable, property values.
Table of Contents
12
The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of
September 30, 2025 and December 31, 2024.
Accruing
Accruing
Total
30-89 Days
Greater than
Accruing
Non-
Total
(Dollars in thousands)
Current
Past Due
90 days
Loans
Accrual
Loans
September 30, 2025:
Commercial and industrial
$
—
$
Construction and land development
—
Commercial real estate:
Owner occupied
—
61,621
Hotel/motel
—
34,686
Multi-family
—
51,543
Other
Total commercial real estate
—
Residential real estate:
Consumer mortgage
Investment property
Total residential real estate
Consumer installment
—
Total
$
$
557,912
December 31, 2024:
Commercial and industrial
$
$
Construction and land development
Commercial real estate:
Owner occupied
—
Hotel/motel
—
Multi-family
—
Other
—
Total commercial real estate
—
Residential real estate:
Consumer mortgage
—
Investment property
—
Total residential real estate
—
Consumer installment
—
Total
$
$
Table of Contents
13
Credit Quality Indicators
The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the
standard asset classification system used by the federal banking agencies. These categories are utilized to develop the
associated allowance for credit losses using historical losses adjusted for qualitative and environmental factors and are
defined as follows:
●
Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if
any) or by the fair value, less the estimated cost to acquire and sell any underlying collateral.
●
Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or
inadequately protect the Company’s position at some future date. These loans are not adversely classified and do
not expose an institution to sufficient risk to warrant an adverse classification.
●
Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment,
even though they are currently performing. These loans are characterized by the distinct possibility that the
Company may incur a loss in the future if these weaknesses are not corrected.
●
Nonaccrual – includes loans where management has determined that full payment of principal and interest is not
expected.
Substandard accrual and nonaccrual loans are often collectively referred to as “classified.”
Table of Contents
14
The following tables presents credit quality indicators for the loan portfolio segments and classes by year of origination as
of September 30, 2025 and December 31, 2024.
Year of Origination
2025
2024
2023
2022
2021
Prior to
2021
Revolving
Loans
Total
Loans
(Dollars in thousands)
September 30, 2025:
Commercial and industrial
Pass
$
$
Special mention
Substandard
Nonaccrual
Total commercial and industrial
Current period gross charge-offs
—
—
—
—
—
Construction and land development
Pass
Special mention
Substandard
Nonaccrual
Total construction and land development
Current period gross charge-offs
—
—
—
—
—
—
—
—
Commercial real estate:
Owner occupied
Pass
Special mention
Substandard
Nonaccrual
Total owner occupied
Current period gross charge-offs
—
—
—
—
—
—
—
—
Hotel/motel
Pass
Special mention
Substandard
Nonaccrual
Total hotel/motel
Current period gross charge-offs
—
—
—
—
—
—
—
—
Table of Contents
15
Year of Origination
2025
2024
2023
2022
2021
Prior to
2021
Revolving
Loans
Total
Loans
(Dollars in thousands)
September 30, 2025:
Multi-family
Pass
Special mention
Substandard
Nonaccrual
Total multi-family
Current period gross charge-offs
—
—
—
—
—
—
—
—
Other
Pass
Special mention
Substandard
Nonaccrual
Total other
Current period gross charge-offs
—
—
—
—
—
—
—
—
Residential real estate:
Consumer mortgage
Pass
Special mention
Substandard
Nonaccrual
Total consumer mortgage
Current period gross charge-offs
—
—
—
—
—
Investment property
Pass
Special mention
Substandard
Nonaccrual
Total investment property
Current period gross charge-offs
—
—
—
—
—
—
Consumer installment
Pass
Special mention
Substandard
Nonaccrual
Total consumer installment
Current period gross charge-offs
—
—
—
—
Total loans
Pass
Special mention
Substandard
Nonaccrual
Total loans
$
$
Total current period gross charge-offs
$
—
$
Table of Contents
16
Year of Origination
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Total
Loans
(Dollars in thousands)
December 31, 2024:
Commercial and industrial
Pass
$
$
Special mention
Substandard
Nonaccrual
Total commercial and industrial
Current period gross charge-offs
—
—
—
—
—
—
Construction and land development
Pass
Special mention
Substandard
Nonaccrual
Total construction and land development
Current period gross charge-offs
—
—
—
—
—
—
—
—
Commercial real estate:
Owner occupied
Pass
Special mention
Substandard
Nonaccrual
Total owner occupied
Current period gross charge-offs
—
—
—
—
—
—
—
—
Hotel/motel
Pass
Special mention
Substandard
Nonaccrual
Total hotel/motel
Current period gross charge-offs
—
—
—
—
—
—
—
—
Table of Contents
17
Year of Origination
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Total
Loans
(Dollars in thousands)
December 31, 2024:
Multi-family
Pass
Special mention
Substandard
Nonaccrual
Total multi-family
Current period gross charge-offs
—
—
—
—
—
—
—
—
Other
Pass
Special mention
Substandard
Nonaccrual
Total other
Current period gross charge-offs
—
—
—
—
—
—
—
—
Residential real estate:
Consumer mortgage
Pass
Special mention
Substandard
Nonaccrual
Total consumer mortgage
Current period gross charge-offs
—
—
—
—
—
—
Investment property
Pass
Special mention
Substandard
Nonaccrual
Total investment property
Current period gross charge-offs
—
—
—
—
—
—
—
—
Consumer installment
Pass
Special mention
Substandard
Nonaccrual
Total consumer installment
Current period gross charge-offs
—
—
Total loans
Pass
Special mention
Substandard
Nonaccrual
Total loans
$
$
T
otal current period gross charge-offs
$
—
$
Table of Contents
18
Allowance for Credit Losses
The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and for
loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an
individual basis.
The composition of the provision for credit losses for the respective periods is presented below.
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
Provision for credit losses:
Loans
$
(196 )
$
(206 )
$
(87 )
$
Reserve for unfunded commitments
(59 )
(65 )
Total provision for credit losses
$
(255 )
$
(127 )
$
(152 )
$
The following table details the changes in the allowance for credit losses for loans, by portfolio segment, for the respective
periods.
(Dollars in thousands)
Commercial and
industrial
Construction
and land
development
Commercial
real estate
Residential
real estate
Consumer
installment
Total
Quarter ended September 30, 2025:
Beginning balance
$
$
Charge-offs
(87 )
(87 )
Recoveries
Net recoveries (charge-offs)
(82 )
(78 )
Provision for credit losses
(86 )
(61 )
(113 )
(34 )
(196 )
Ending balance
$
$
Nine months ended September 30, 2025:
Beginning balance
$
$
Charge-offs
(103 )
(7 )
(96 )
(206 )
Recoveries
Net (charge-offs) recoveries
(73 )
(81 )
(93 )
Provision for credit losses
(45 )
(804 )
(87 )
Ending balance
$
$
Quarter ended September 30, 2024:
Beginning balance
$
$
Charge-offs
(54 )
(40 )
(94 )
Recoveries
Net recoveries (charge-offs)
(52 )
(33 )
(60 )
Provision for credit losses
(231 )
(102 )
(206 )
Ending balance
$
$
Nine months ended September 30, 2024:
Beginning balance
$
$
Charge-offs
(9 )
(54 )
(83 )
(146 )
Recoveries
Net recoveries (charge-offs)
(47 )
(45 )
(2 )
Provision for credit losses
(218 )
Ending balance
$
$
Table of Contents
19
The Company had no collateral dependent loans which were individually evaluated at September 30, 2025. The following
table presents the amortized cost basis of collateral dependent loans, which were individually evaluated to determine
expected credit losses at December 31, 2024.
Business
(Dollars in thousands)
Real Estate
Assets
Total Loans
December 31, 2024:
Commercial and industrial
$
—
$
Construction and land development
—
Total
$
$
The following table summarizes the Company’s nonaccrual loans by major categories for the respective periods.
Nonaccrual Loans
Nonaccrual Loans
Total
(Dollars in thousands)
With No Allowance
With An Allowance
Nonaccrual Loans
September 30, 2025
Residential real estate
$
—
$
Total
$
—
$
December 31, 2024
Commercial and industrial
$
—
$
Construction and land development
—
Total
$
$
Table of Contents
20
NOTE 4: MORTGAGE SERVICING RIGHTS, NET
Mortgage servicing rights (“MSRs”) are recognized based on the fair value of the servicing rights on the date the
corresponding mortgage loans are sold. An estimate of the fair value of the Company’s MSRs is determined using
assumptions that market participants would use in estimating future net servicing income, including estimates of
prepayment speeds, discount rates, default rates, costs to service, escrow account earnings, contractual servicing fee
income, ancillary income, and late fees. Subsequent to the date of transfer, the Company has elected to measure its MSRs
under the amortization method. Under the amortization method, MSRs are amortized in proportion to, and over the period
of, estimated net servicing income.
The Company generally sells, without recourse, conforming, fixed-rate, closed-end, residential mortgages to Fannie Mae,
where the Company services the mortgages sold and records MSRs. MSRs are included in other assets on the
accompanying consolidated balance sheets.
The Company evaluates MSRs for impairment on a quarterly basis. Impairment is determined by stratifying MSRs into
groupings based on predominant risk characteristics, such as interest rate and loan type. If, by individual stratum, the
carrying amount of the MSRs exceeds fair value, a valuation allowance is established. The valuation allowance is adjusted
as the fair value changes. Changes in the valuation allowance are recognized in earnings as a component of mortgage
lending income.
The following table details the changes in amortized MSRs and the related valuation allowance for the respective periods.
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
MSRs, net:
Beginning balance
$
$
$
$
Additions, net
Amortization expense
(48 )
(51 )
(130 )
(127 )
Ending balance
$
$
$
$
Valuation allowance included in MSRs, net:
Beginning of period
$
$
$
$
End of period
Fair value of amortized MSRs:
Beginning of period
$
$
$
$
End of period
NOTE 5: FAIR VALUE
Fair Value Hierarchy
“Fair value” is defined by ASC 820,
Fair Value Measurements and Disclosures
, and focuses on the exit price, i.e., the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction occurring in the principal
market (or most advantageous market in the absence of a principal market) for an asset or liability at the measurement date.
GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as
follows:
Level 1—inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active
markets.
Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable for the
asset or liability, either directly or indirectly.
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21
Level 3—inputs to the valuation methodology are unobservable and reflect the Company’s own assumptions about the
inputs market participants would use in pricing the asset or liability.
Level changes in fair value measurements
Transfers between levels of the fair value hierarchy are generally recognized at the end of each reporting period. The
Company monitors the valuation techniques utilized for each category of financial assets and liabilities to ascertain when
transfers between levels have been affected. The nature of the Company’s financial assets and liabilities generally is such
that transfers in and out of any level are expected to be infrequent. For the nine months ended September 30, 2025, there
were no transfers between levels and no changes in valuation techniques for the Company’s financial assets and liabilities.
Assets and liabilities measured at fair value on a recurring basis
Securities available-for-sale
Fair values of securities available for sale were primarily measured using Level 2 inputs. For these securities, the Company
obtains pricing data from third-party pricing services. These third-party pricing services consider observable data that may
include broker/dealer quotes, market spreads, cash flows, benchmark yields, reported trades for similar securities, market
consensus prepayment speeds, credit information, and the securities’ terms and conditions. On a quarterly basis,
management reviews the pricing data received from the third-party pricing services for reasonableness given current market
conditions. As part of its review, management may obtain non-binding third-party broker/dealer quotes to validate the fair
value measurements. In addition, management will periodically submit pricing information provided by the third-party
pricing services to another independent valuation firm on a sample basis. This independent valuation firm will compare the
prices provided by the third-party pricing service with its own prices and will review the significant assumptions and
valuation methodologies used with management.
The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of
September 30, 2025 and December 31, 2024, respectively, by caption, on the accompanying consolidated balance sheets by
ASC 820 valuation hierarchy (as described above).
Quoted Prices in
Significant
Active Markets
Other
Significant
for
Observable
Unobservable
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
September 30, 2025:
Securities available-for-sale:
Agency obligations
$
Agency MBS
State and political subdivisions
Total securities available -for-sale
Total assets at fair value
$
December 31, 2024:
Securities available-for-sale:
Agency obligations
$
Agency MBS
State and political subdivisions
Total securities available -for-sale
Total assets at fair value
$
Table of Contents
22
Assets and liabilities measured at fair value on a nonrecurring basis
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value. Fair values of loans held for sale are determined using
quoted secondary market prices for similar loans. Loans held for sale are classified within Level 2 of the fair value
hierarchy.
Collateral dependent loans
Collateral dependent loans are measured at the fair value of the collateral securing the loan less estimated selling costs. The
fair value of real estate collateral is determined based on real estate appraisals which are generally based on recent sales of
comparable properties which are then adjusted for property specific factors. Non-real estate collateral is valued based on
various sources, including third party asset valuations and internally determined values based on cost adjusted for
depreciation and other judgmentally determined discount factors. Collateral dependent loans are classified within Level 3 of
the hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower's
underlying financial condition.
Mortgage servicing rights, net
MSRs, net, included in other assets on the accompanying consolidated balance sheets, are carried at the lower of cost or
estimated fair value. MSRs do not trade in an active market with readily observable prices. To determine the fair value of
MSRs, the Company engages an independent third party. The independent third party’s valuation model calculates the
present value of estimated future net servicing income using assumptions that market participants would use in estimating
future net servicing income, including estimates of mortgage prepayment speeds, discount rates, default rates, costs to
service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Periodically, the
Company will review broker surveys and other market research to validate significant assumptions used in the model. The
significant unobservable inputs include mortgage prepayment speeds or the constant prepayment rate (“CPR”) and the
weighted average discount rate. Because the valuation of MSRs requires the use of significant unobservable inputs, all of
the Company’s MSRs are classified within Level 3 of the valuation hierarchy.
The following table presents the balances of the assets and liabilities measured at fair value on a nonrecurring basis as of
September 30, 2025 and December 31, 2024, respectively, by caption, on the accompanying consolidated balance sheets
and by FASB ASC 820 valuation hierarchy (as described above):
Quoted Prices in
Active Markets
Other
Significant
for
Observable
Unobservable
Carrying
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Amount
(Level 1)
(Level 2)
(Level 3)
September 30, 2025:
Loans held for sale
$
Other assets
(2)
Total assets at fair value
$
December 31, 2024:
Loans, net
(1)
$
Other assets
(2)
Total assets at fair value
$
(1)
Loans considered collateral dependent under ASC 326.
(2)
Represents MSRs, net, carried at lower of cost or estimated fair value.
Table of Contents
23
Quantitative Disclosures for Level 3 Fair Value Measurements
At September 30, 2025 and December 31, 2024, the Company had no Level 3 assets measured at fair value on a recurring
basis. For Level 3 assets measured at fair value on a non-recurring basis at September 30, 2025 and December 31, 2024,
the significant unobservable inputs used in the fair value measurements and the range of such inputs with respect to such
assets are presented below.
Range of
Weighted
Carrying
Significant
Unobservable
Average
(Dollars in thousands)
Amount
Valuation Technique
Unobservable Input
Inputs
of Input
September 30, 2025:
Mortgage servicing rights, net
$
Discounted cash flow
Prepayment speed or CPR
-
%
%
Discount rate
-
December 31, 2024:
Collateral dependent loans
$
Appraisal
Appraisal discounts
-
%
%
Mortgage servicing rights, net
Discounted cash flow
Prepayment speed or CPR
-
Discount rate
-
Fair Value of Financial Instruments
ASC 825,
Financial Instruments
, requires disclosure of fair value information about financial instruments, whether or not
recognized on the face of the balance sheet, where it is practicable to estimate that value. The assumptions used in the
estimation of the fair value of the Company’s financial instruments are explained below. Where quoted market prices are
not available, fair values are based on estimates using discounted cash flow analyses. Discounted cash flows can be
significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The
following fair value estimates cannot be substantiated by comparison to independent markets and should not be considered
representative of the liquidation value of the Company’s financial instruments, but rather are good-faith estimates of the fair
value of financial instruments held by the Company. ASC 825 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements.
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Loans, net
Fair values for loans were calculated using discounted cash flows. The discount rates reflected current rates at which similar
loans would be made for the same remaining maturities. Expected future cash flows were projected based on contractual
cash flows, adjusted for estimated prepayments. The fair value of loans was measured using an exit price notion.
Loans held for sale
Fair values of loans held for sale are determined using quoted secondary market prices for similar loans.
Time Deposits
Fair values for time deposits were estimated using discounted cash flows. The discount rates were based on rates currently
offered for deposits with similar remaining maturities.
Table of Contents
24
The carrying value, related estimated fair value, and placement in the fair value hierarchy of the Company’s financial
instruments at September 30, 2025 and December 31, 2024 are presented below. This table excludes financial instruments
for which the carrying amount approximates fair value. Financial assets for which fair value approximates carrying value
included cash and cash equivalents. Financial liabilities for which fair value approximates carrying value included
noninterest-bearing demand deposits, interest-bearing demand deposits, and savings deposits. Fair value approximates
carrying value in these financial liabilities due to these products having no stated maturity. Additionally, financial
liabilities for which fair value approximates carrying value included overnight borrowings such as federal funds purchased
and securities sold under agreements to repurchase.
The following table summarizes our fair value estimates:
Fair Value Hierarchy
Carrying
Estimated
Level 1
Level 2
Level 3
(Dollars in thousands)
amount
fair value
inputs
inputs
Inputs
September 30, 2025:
Financial Assets:
Loans, net (1)
$
$
$
Loans held for sale
Financial Liabilities:
Time Deposits
$
$
$
December 31, 2024:
Financial Assets:
Loans, net (1)
$
$
$
Financial Liabilities:
Time Deposits
$
$
$
(
1) Represents loans, net of allowance for credit losses. The fair value of loans was measured using an exit price notion.
Table of Contents
25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company registered with the Board of Governors
of the Federal Reserve System (the “Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the
“BHC Act”). The Company was incorporated in Delaware in 1990, and in 1994 it succeeded its Alabama predecessor as the
bank holding company controlling AuburnBank, an Alabama state member bank with its principal office in Auburn,
Alabama (the “Bank”). The Company and its predecessor have controlled the Bank since 1984. As a bank holding
company, the Company may diversify into a broader range of financial services and other business activities than currently
are permitted to the Bank under applicable laws and regulations. The holding company structure also provides greater
financial and operating flexibility than is presently permitted to the Bank.
The Bank has operated continuously since 1907 and currently conducts its business primarily in East Alabama, including
Lee County and surrounding areas. The Bank has been a member of the Federal Reserve System since April 1995. The
Bank’s primary regulators are the Federal Reserve and the Alabama Superintendent of Banks (the “Alabama
Superintendent”). The Bank has been a member of the FHLB of Atlanta since 1991. Certain of the statements made in this
discussion and analysis and elsewhere, including information incorporated herein by reference to other documents, are
“forward-looking statements” as more fully described under “Special Cautionary Notice Regarding Forward-Looking
Statements” below.
The following discussion and analysis is intended to provide a better understanding of various factors related to the results
of operations and financial condition of the Company and the Bank. This discussion is intended to supplement and
highlight information contained in the accompanying unaudited condensed consolidated financial statements and related
notes for the quarters and nine months ended September 30, 2025 and 2024, as well as the information contained in our
annual report on Form 10-K for the year ended December 31, 2024 and our interim reports on Form 10-Q for the quarters
ended March 31, 2025 and June 30, 2025.
Special Cautionary Notice Regarding Forward-Looking Statements
Various of the statements made herein under the captions “Management’s Discussion and Analysis of Financial Condition
and Results of Operations”, “Quantitative and Qualitative Disclosures about Market Risk”, “Risk Factors” “Description of
Property” and elsewhere, are “forward-looking statements” within the meaning and protections of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations,
anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks,
uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance,
achievements or financial condition of the Company to be materially different from future results, performance,
achievements or financial condition expressed or implied by such forward-looking statements. You should not expect us to
update any forward-looking statements.
All statements other than statements of historical fact are statements that could be forward-looking statements. You can
identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,”
“should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “designed,” “plan,” “point to,”
“project,” “could,” “intend,” “target,” “seek” and other similar words and expressions of the future. These forward-looking
statements may not be realized due to a variety of factors, including, without limitation:
●
the effects of future economic, business and market conditions and changes, foreign, domestic and locally,
including inflation, seasonality, natural disasters or climate change, such as rising sea and water levels, hurricanes
and tornadoes, epidemics or pandemics including supply chain disruptions, inventory volatility, and changes in
consumer behaviors;
●
the effects of war or other conflicts, acts of terrorism, trade restrictions, tariffs, sanctions, the value of the U.S.
dollar against other currencies, or other events that may affect general economic conditions, including inflation,
and consumer and business confidence;
Table of Contents
26
●
governmental monetary and fiscal policies, including taxes, federal deficit spending and the debt required to fund
such spending, changes in monetary policies in response to inflation and changes in prices and unemployment,
including changes in the Federal Reserve’s target federal funds rate and changes in the Federal Reserve’s holdings
of securities through quantitative tightening or easing; and the timing and speed of any changes in furtherance of
the Federal Reserve’s long-term inflation target of 2% while supporting maximum employment;
●
the effects of the federal government shutdown that began October 1, 2025 due to federal budget disputes, which
continues and the effects of any resolution of such disputes;
●
legislative, executive branch and regulatory changes, including changes by executive orders, the possible
reorganization and/or consolidation of the bank regulatory agencies, the SEC and/or the CFPB, changes in the
leadership and personnel, including reductions in the number and experience of personnel, at the bank and
securities regulators and the CFPB, oversight by the Office of Management and Budget of these agencies, freezes
on changes in regulations and interpretations, numerous new Executive Orders, and the uncertain effects of all
these, including the costs and benefits of such changes;
●
the effects of the potential privatization of Fannie Mae and Freddie Mac and their release from conservatorship on
the mortgage markets and us as an originator, seller and servicer of residential mortgage loans;
●
recent Supreme Court rulings that may lead to more court challenges to regulations and regulatory actions, which
may cause uncertainty, wasted implementation costs and time by the industry, and lengthy delays until ultimate
resolution;
●
changes in banking, securities and tax laws, regulations and rules and their application and enforcement by the
regulators, including capital and liquidity requirements, and changes in the scope and cost of FDIC insurance;
●
changes in accounting pronouncements and interpretations;
●
the failure of assumptions and estimates, including those used in the Company’s CECL models to establish our
allowance for credit losses and estimate asset impairments, as well as differences in, and changes to, economic,
market and credit conditions, including changes in borrowers’ credit risks and payment behaviors from those used
in our CECL models and loan portfolio reviews;
●
the risks of changes in market interest rates and the shape of the yield curve on customer behaviors; the levels,
composition and costs of deposits, loan demand and mortgage loan originations; the values and liquidity of loan
collateral, our securities portfolio and interest-sensitive assets and liabilities; and the risks and uncertainty of the
amounts realizable on collateral;
●
the risks of increases in market interest rates creating unrealized losses on our securities available for sale, which
adversely affect our stockholders’ equity for financial reporting purposes and our tangible equity;
●
changes in borrower liquidity and credit risks, and changes in savings, deposit and payment behaviors;
●
changes in the availability and cost of credit and capital in the financial markets, and the types of instruments that
may be included as capital for regulatory purposes;
●
changes in the prices, values and sales volumes of residential and commercial real estate;
●
the effects of competition from a wide variety of local, regional, national and other providers of financial,
investment and insurance services, including the disruptive effects of financial technology and other competitors
who are not subject to the same regulation, including capital and liquidity requirements, internal controls, and
supervision and examination, as the Company and the Bank, and competition from credit unions, which are not
subject to federal income taxation;
Table of Contents
27
●
legislation such as the federal GENIUS Act on stablecoins signed into law on July 18, 2025, and the proposed
CLARITY Act and the Anti-CBDC Surveillance Act bills being considered by Congress, more permissive
policies, regulation and/or enforcement regarding digital assets, such as cyber currency and stable coins, including
the chartering of new depository institutions focused on crypto coins and which creates additional competition to
banks and potential disintermediation of deposits, and greater risks to the payment systems that the banking
industry, including the Company, relies on, and greater risks of fraud and theft of digital assets and their effects on
customers, other financial institutions, including our counterparties, financial stability and confidence in the
financial system, generally;
●
the timing and amount of rental income from third parties from office space in our Auburn Center headquarters
and in former office locations;
●
the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of
implementing such transactions, integrating operations as part of these transactions and possible failures to achieve
expected gains, revenue growth and/or expense savings from such transactions;
●
changes in technology or products that may be more difficult, costly, or less effective than anticipated;
●
cyber-attacks and data breaches that may compromise our systems, our vendors’ systems or customers’
information;
●
the risks that our deferred tax assets (“DTAs”) included in “other assets” on our consolidated balance sheets, if
any, could be reduced if estimates of future taxable income from our operations and tax planning strategies are less
than currently estimated, and sales of our capital stock could trigger a reduction in the amount of net operating loss
carry-forwards that we may be able to utilize for income tax purposes;
●
the risks that our dividends, share repurchases and discretionary bonuses are limited by regulation requiring the
maintenance of capital, including a capital conservation buffer of 2.5% and to the amount of our future earnings
and “eligible retained earnings” over rolling four calendar quarter periods;
●
other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we make
with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.
All written or oral forward-looking statements that we make or are attributable to us are expressly qualified in their entirety
by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-
looking statements after the date of this report, or after the respective dates on which such statements otherwise are made.
Summary of Results of Operations
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands, except per share amounts)
2025
2024
2025
2024
Net interest income (a)
$
7,590
$
6,811
$
22,015
$
20,216
Less: tax-equivalent adjustment
18
21
54
60
Net interest income (GAAP)
7,572
6,790
21,961
20,156
Noninterest income
829
846
2,365
2,629
Total revenue
8,401
7,636
24,326
22,785
Provision for credit losses
(255)
(127)
(152)
84
Noninterest expense
5,806
5,500
17,388
16,694
Income tax expense
623
531
1,500
1,170
Net earnings
$
2,227
$
1,732
$
5,590
$
4,837
Basic and diluted earnings per share
$
0.64
$
0.50
$
1.60
$
1.38
(a) Tax-equivalent. See "Table 1 - Explanation of Non-GAAP Financial Measures."
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28
Financial Summary
The Company’s net earnings were $5.6 million for the first nine months of 2025, a 16% increase compared to $4.8 million
for the first nine months of 2024. Basic and diluted earnings per share were $1.60 per share for the first nine months of
2025, compared to $1.38 per share for the first nine months of 2024.
Net interest income (tax-equivalent) was $22.0 million for the first nine months of 2025, a 9% increase compared to $20.2
million for the first nine months of 2024. This increase was primarily due to an increase in the Company’s net interest
margin and an increase in average interest-earning assets. The Company’s net interest margin (tax-equivalent) was 3.26%
for the first nine months of 2025 compared to 3.05% for the first nine months of 2024. This increase was primarily due to
improvements in our yields on interest-earning assets, and a decrease in our cost of interest-bearing deposits. See “Results
of Operations – Average Balance Sheet and Interest Rates” and “Net Interest Income and Margin” below.
At September 30, 2025, the Company’s allowance for credit losses was $6.7 million, or 1.20% of total loans, compared to
$6.9 million, or 1.22% of total loans, at December 31, 2024, and $6.9 million, or 1.22% of total loans, at September 30,
2024.
The Company recorded a negative provision for credit losses during the first nine months of 2025 of $152 thousand,
compared to a charge to provision of $84 thousand during the first nine months of 2024. The provision for credit losses
under CECL reflects the Company’s evaluation of its credit risk profile and its future economic outlook and forecasts. Our
CECL model is largely influenced by economic factors including, the anticipated Alabama unemployment rate, which may
be affected by government policies, including monetary, fiscal and other policies, including tariffs.
Noninterest income was $2.4 million in the first nine months of 2025, compared to $2.6 million in the first nine months of
2024. The decrease was primarily related to a decrease in mortgage lending income and other noninterest income.
Noninterest expense was $17.4 million in the first nine months of 2025, compared to $16.7 million for the first nine months
of 2024. The increase was primarily related to increases in salaries and benefits expense and other noninterest expense.
These increases were partially offset by a decrease in net occupancy and equipment expense.
Income tax expense was $1.5 million for the first nine months of 2025 compared to $1.2 million for the first nine months of
2024. The Company's effective tax rate for the first nine months of 2025 was 21.16%, compared to 19.48% in the first nine
months of 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 (“BOLI”), and New Markets Tax
Credits (“NMTCs”).
The Company paid cash dividends of $0.81 per share in the first nine months of 2025 and 2024. At September 30, 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 16.49%, a tier 1 leverage ratio of 10.72% and a common equity
tier 1 (“CET1”) ratio of 15.51% at September 30, 2025. See “Balance Sheet Analysis – Capital Adequacy”.
For the third quarter of 2025, net earnings were $2.2 million, or $0.64 per share, compared to $1.7 million, or $0.50 per
share, for the third quarter of 2024. Net interest income (tax-equivalent) was $7.6 million for the third quarter of 2025
compared to $6.8 million for the third quarter of 2024. The increase was due to growth in average interest-earning assets
and improvements in our net interest margin. The Company’s net interest margin (tax-equivalent) was 3.30% in the third
quarter of 2025 compared to 3.05% in the third quarter of 2024. The increase was primarily due to improved yields on
interest-earning assets, and a decrease in our cost of interest-bearing deposits. The Company recorded a negative provision
for credit losses of $255 thousand in the third quarter of 2025, compared to a negative provision for credit losses of $127
thousand in the third quarter of 2024. Noninterest income was $0.8 million for the third quarter of 2025 and 2024.
Noninterest expense was $5.8 million in the third quarter of 2025, compared to $5.5 million for the third quarter of 2024.
The increase in noninterest expense was primarily due to increases in salaries and benefits expense and increases in other
noninterest expense. Income tax expense was $0.6 million for the third quarter of 2025 compared to $0.5 million for the
third quarter of 2024. The Company’s effective tax rate for the third quarter of 2025 was 21.86%, compared to 23.46% in
the third quarter of 2024.
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29
CRITICAL ACCOUNTING POLICIES
The accounting principles we follow and our methods of applying these principles conform with U.S. GAAP and with
general practices within the banking industry. There have been no significant changes to our Critical Accounting Policies as
described in our Form 10-K as of and for the year ended December 31, 2024.
RESULTS OF OPERATIONS
Average Balance Sheet and Interest Rates
Nine months ended September 30,
2025
2024
Average
Yield/
Average
Yield/
(Dollars in thousands)
Balance
Rate
Balance
Rate
Loans and loans held for sale
$
560,946
5.48%
$
568,939
5.18%
Securities - taxable
230,165
2.18%
248,923
2.20%
Securities - tax-exempt
9,131
3.79%
10,235
3.71%
Total securities
239,296
2.24%
259,158
2.26%
Federal funds sold
26,717
4.38%
18,014
5.47%
Interest bearing bank deposits
76,254
4.46%
39,530
5.47%
Total interest-earning assets
903,213
4.51%
885,641
4.35%
Deposits:
NOW
202,381
1.35%
193,428
1.41%
Savings and money market
254,095
1.01%
250,146
0.79%
Time deposits
185,355
3.22%
196,584
3.45%
Total interest-bearing deposits
641,831
1.75%
640,158
1.80%
Short-term borrowings
37
3.61%
838
0.48%
Total interest-bearing liabilities
641,868
1.75%
640,996
1.80%
Net interest income and margin (tax-equivalent)
$
22,015
3.26%
$
20,216
3.05%
See Tables 4 and 5 – Average Balances and Net Interest Income Analysis for the quarters and nine months ended
September 30, 2025 and 2024, and Table 6 – Volume and Rate Variance Analysis.
Net Interest Income and Margin
Net interest income (tax-equivalent) was $22.0 million for the first nine months of 2025, a 9% increase compared to $20.2
million for the first nine months of 2024. This increase was primarily due to an increase in the Company’s net interest
margin and an increase in average interest-earning assets. The Company’s net interest margin (tax-equivalent) was 3.26%
in the first nine months of 2025 compared to 3.05% in the first nine months of 2024. This increase was primarily due to
improvements in our yields on interest-earning assets, and a decrease in our cost of our interest-bearing deposits. Since
March 2022, the Federal Reserve increased the target federal funds rate by 525 basis points before announcing a 50-basis
points rate reduction on September 18, 2024, its first decrease in rates since its March 2020 COVID rate reduction,
followed by two 25 basis points reductions in October and December 2024 and another 25 basis point reduction in
September 2025. At September 30, 2025, the Federal Reserve’s target federal funds rate ranged from 4.00% to 4.25%. The
Federal Reserve further reduced its target federal funds rate range to 3.75% to 4.00% on October 29, 2025.
The tax-equivalent yield on total interest-earning assets increased by 16 basis points to 4.51% in the first nine months of
2025 compared to 4.35% in the first nine months of 2024. This increase was primarily due to changes in our asset mix, as
cash and cash equivalents increased and securities declined. Average interest-earning assets were $903.2 million during the
first nine months of 2025, a 2% increase compared to $885.6 million during the first nine months of 2024.
The cost of interest-bearing liabilities decreased 5 basis points in the first first nine months of 2025 to 175 basis points,
compared to 180 basis points in the first first nine months of 2024. Our deposit costs may fluctuate as we compete for
deposit funds against other banks, money market mutual funds, Treasury securities and other interest-bearing alternative
investments.
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30
The Company continues to deploy various asset liability management strategies to manage its risks from interest rate
fluctuations. Deposit and loan pricing remain competitive in our markets. We believe this challenging rate environment
will continue throughout the remainder of 2025. Our ability to compete and manage our deposit 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 the remainder of 2025.
Provision for Credit Losses
The Company recorded a negative provision for credit losses during the first nine months of 2025 of $152 thousand,
compared to a charge of $84 thousand during the first nine months of 2024. Provision expense is affected by organic loan
growth in our loan portfolio, our internal assessment of the credit quality of the loan portfolio, our expectations about future
economic conditions and net charge-offs. Our CECL model is largely influenced by economic factors including, the
anticipated Alabama unemployment rate, which may be affected by government policies, including monetary, fiscal and
other policies, including tariffs. The negative provision for the first nine months of 2025 was primarily driven by
improvements in the economic forecasts utilized in the model, most notably a reduction in the Alabama unemployment
rate. The reclassification, upon completion of construction of two multifamily projects, from the construction and land
development loan segment to the multifamily loan segment, which carries lower modeled loss rates, also contributed to the
negative provision for credit losses during the current period.
Our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment
methodology, to adequately cover all expected credit losses as of the date the allowance is determined. At September 30,
2025, the Company’s allowance for credit losses was $6.7 million, or 1.20% of total loans, compared to $6.9 million, or
1.22% of total loans, at December 31, 2024, and $6.9 million, or 1.22% of total loans, at September 30, 2024.
Noninterest Income
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
Service charges on deposit accounts
$
154
$
154
$
461
$
463
Mortgage lending income
167
133
391
463
Bank-owned life insurance
103
100
309
301
Other
405
459
1,204
1,402
Total noninterest income
$
829
$
846
$
2,365
$
2,629
The Company’s mortgage lending income includes income from the (1) origination and sale of mortgage loans and (2)
servicing of mortgage loans. Origination income, net, is comprised of gains or losses from the sale of the mortgage loans
originated, origination fees, underwriting fees, and other fees associated with the origination of loans, which are netted
against the commission expense associated with these originations. The Company’s normal practice is to originate
mortgage loans for sale in the secondary market and to either sell or retain the associated 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 has elected to measure its MSRs under the amortization method. Servicing fee income is reported net of any
related amortization expense.
The Company evaluates MSRs for impairment on a quarterly basis. Impairment is determined by grouping MSRs by
common predominant characteristics, such as interest rate and loan type. If the aggregate carrying amount of a particular
group of MSRs exceeds the group’s aggregate fair value, a valuation allowance for that group is established. The valuation
allowance is adjusted as the fair value changes. An increase in mortgage interest rates typically results in an increase in the
fair value of the MSRs while a decrease in mortgage interest rates typically results in a decrease in the fair value of MSRs.
The following table presents a breakdown of the Company’s mortgage lending income.
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
Origination income
$
93
$
52
$
150
$
194
Servicing fees, net
74
81
241
269
Total mortgage lending income
$
167
$
133
$
391
$
463
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31
The Company’s mortgage lending income typically fluctuates as mortgage interest rates, housing sales and refinancings
change. Origination income decreased in the first nine months of 2025 compared to the first nine months of 2024 due to a
decrease in mortgage lending demand in our primary market area.
Other noninterest income was $2.4 million for the first nine months of 2025, compared to $2.6 million for the first nine
months of 2024. The decrease in other noninterest income was primarily due to decreased fee income on reciprocal
deposits sold through the Intrafi network.
Noninterest Expense
Quarter ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2025
2024
2025
2024
Salaries and benefits
$
3,375
$
3,148
$
9,943
$
9,359
Net occupancy and equipment
598
614
1,916
1,980
Professional fees
312
291
984
931
Other
1,521
1,447
4,545
4,424
Total noninterest expense
$
5,806
$
5,500
$
17,388
$
16,694
The increase in salaries and benefits expense was primarily due to routine annual increases in salaries and wages.
Income Tax Expense
Income tax expense was $1.5 million for the first nine months of 2025 compared to $1.2 million for the first nine months of
2024. The Company's effective tax rate for the first nine months of 2025 was 21.16%, compared to 19.48% in the first nine
months of 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, BOLI, and NMTCs.
BALANCE SHEET ANALYSIS
Securities
Securities available-for-sale were $236.4 million at September 30, 2025, compared to $243.0 million at December 31,
2024. This decrease reflects the effects of an $18.0 million decrease in the amortized cost basis of securities available-for-
sale and an increase in the fair value of securities available-for-sale of $11.4 million. Unrealized losses on securities
declined 29% in the first nine months of 2025, primarily due to decreases in market interest rates.
The average annualized tax-equivalent yields earned on total securities were 2.24 % in the first nine months of 2025
compared to 2.26% in the first nine months of 2024.
Loans
2025
2024
Third
Second
First
Fourth
Third
(In thousands)
Quarter
Quarter
Quarter
Quarter
Quarter
Commercial and industrial
$
55,102
59,773
59,061
63,274
61,510
Construction and land development
79,045
93,820
86,403
82,493
77,956
Commercial real estate
298,681
282,868
288,353
289,992
297,773
Residential real estate
116,279
117,160
117,500
118,627
118,582
Consumer installment
8,805
9,093
9,333
9,631
9,878
Total loans
$
557,912
562,714
560,650
564,017
565,699
Total loans were $557.9 million at September 30, 2025, a slight decrease compared to $564.0 million at December 31,
2024. Four loan categories represented the majority of the loan portfolio at September 30, 2025: commercial real estate
(54%), residential real estate (21%), construction and land development (14%) and commercial and industrial (10%).
Approximately 21% of the Company’s commercial real estate loans were classified as owner-occupied at September 30,
2025.
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32
Within the residential real estate portfolio segment, the Company had junior lien mortgages of approximately $12.2 million,
or 2% of total loans, and $11.2 million, or 2%, of total loans at September 30, 2025 and December 31, 2024, respectively.
For residential real estate mortgage loans with a consumer purpose, the Company had no loans that required interest only
payments at September 30, 2025 and December 31, 2024. The Company’s residential real estate mortgage portfolio does
not include any option or hybrid ARM loans, subprime loans, or any material amount of other consumer mortgage products
which are generally viewed as high risk.
The average yield earned on loans and loans held for sale was 5.48% in the first nine months of 2025 and 5.18% in the first
nine months of 2024.
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, in accurate
appraisals, financial deterioration of borrowers, fraud, and any violation of applicable laws and regulations. Vario us
projects financed earlier that were based on lower interest rate assumptions than currently in effect may not be as profitable
or successful at the higher interest rates currently in effect and which may exist in the future.
The Company attempts to reduce these economic and credit risks through its loan-to-value guidelines for collateralized
loans, investigating the creditworthiness of borrowers and monitoring borrowers’ financial position. Also, we have
established and periodically review, lending policies and procedures. Banking regulations limit a bank’s credit exposure by
prohibiting unsecured loan relationships that exceed 10% of its capital; or 20% of capital, if loans in excess of 10% of
capital are fully secured. Under these regulations, we are prohibited from having secured loan relationships in excess of
approximately $23.3 million. Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding plus
unfunded commitments) to a single borrower of $20.9 million. Our loan policy requires that the Loan Committee of the
Board of Directors approve any loan relationships that exceed this internal limit. At September 30, 2025, the Bank had no
loan relationships exceeding our internal limit.
We periodically analyze our commercial and industrial and commercial real estate loan portfolios to determine if a
concentration of credit risk exists in any one or more industries. We use classification systems broadly accepted by the
financial services industry in order to categorize our commercial borrowers. Loans to borrowers in each of the following
classes exceeded 25% of the Bank’s total risk-based capital at September 30, 2025 (and related balances at December 31,
2024).
September 30,
December 31,
(Dollars in thousands)
2025
2024
Lessors of 1-4 family residential properties
$
56,860
$
58,228
Multi-family residential properties
51,543
43,556
Shopping centers/strip malls
34,387
37,349
Hotel/motel
34,686
35,210
Allowance for Credit Losses
Our allowance for credit losses was approximately $6.7 million and $6.9 million at September 30, 2025 and December 31,
2024, respectively, which our management believed to be adequate at each of the respective dates. Our allowance for credit
losses as a percentage of total loans was 1.20% at September 30, 2025, compared to 1.22% at December 31, 2024.
Our CECL models rely largely on projections of macroeconomic conditions to estimate future credit losses.
Macroeconomic factors used in the model include the Alabama unemployment rate, the Alabama home price index, the
national commercial real estate price index and the Alabama gross state product. Projections of these macroeconomic
factors, obtained from an independent third party, are utilized to predict quarterly rates of default.
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33
Under the CECL methodology the allowance for credit losses is measured on a collective basis for pools of loans with
similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools,
evaluations are performed on an individual basis. Losses are predicted over a period of time determined to be reasonable
and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages.
At September 30, 2025, reasonable and supportable periods of four quarters were utilized followed by an eight quarters
straight line reversion period to long term averages.
A summary of the changes in the allowance for credit losses and certain asset quality ratios for the third quarter of 2025 and
the previous four quarters is presented below.
2025
2024
Third
Second
First
Fourth
Third
(Dollars in thousands)
Quarter
Quarter
Quarter
Quarter
Quarter
Balance at beginning of period
$
6,965
6,750
6,871
6,876
7,142
Charge-offs:
Commercial and industrial
—
(3)
(100)
—
—
Residential real estate
—
(6)
(1)
(7)
(54)
Consumer installment
(87)
(9)
—
(31)
(40)
Total charge -offs
(87)
(18)
(101)
(38)
(94)
Recoveries
9
67
37
54
34
Net (charge-offs) recoveries
(78)
49
(64)
16
(60)
Provision for credit losses - Loans
(196)
166
(57)
(21)
(206)
Ending balance
$
6,691
6,965
6,750
6,871
6,876
as a % of loans
1.20
%
1.24
1.20
1.22
1.22
as a % of nonperforming loans
6,434
%
2,306
1,298
1,366
887
Net charge-offs (recoveries) as % of average loans (a)
0.06
%
(0.03)
0.05
(0.01)
0.04
(
a) Net charge-offs (recoveries) are annualized.
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34
The allowance for credit losses by loan category for the third quarter of 2025 and the previous four quarters is presented
below.
2025
2024
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
(Dollars in thousands)
Amount
%*
Amount
%*
Amount
%*
Amount
%*
Amount
%*
Commercial and industrial
$
1,126
9.9
$
1,212
10.6
$
1,219
10.5
$
1,244
11.2
$
1,160
10.9
Construction and land
development
1,445
14.2
1,613
16.7
1,401
15.4
1,059
14.6
985
13.8
Commercial real estate
3,145
53.5
3,151
50.3
3,153
51.4
3,842
51.5
3,989
52.6
Residential real estate
836
20.8
866
20.8
861
21.0
588
21.0
595
21.0
Consumer installment
139
1.6
123
1.6
116
1.7
138
1.7
147
1.7
Total allowance for credit losses
$
6,691
$
6,965
$
6,750
$
6,871
$
6,876
* Loan balance in each category expressed as a percentage of total loans.
Nonperforming Assets
At September 30, 2025 and December 31, 2024, the Company had $0.1 million and $0.5 million, respectively, in
nonperforming assets.
The table below provides information concerning total nonperforming assets and certain asset quality ratios for the third
quarter of 2025 and the previous four quarters.
2025
2024
Third
Second
First
Fourth
Third
(Dollars in thousands)
Quarter
Quarter
Quarter
Quarter
Quarter
Nonperforming assets:
Nonaccrual loans
$
104
302
520
503
775
Total nonperforming assets
$
104
302
520
503
775
as a % of loans and OREO
0.02
%
0.05
0.09
0.09
0.14
as a % of total assets
0.01
%
0.03
0.05
0.05
0.08
Nonperforming loans as a % of total loans
0.02
%
0.05
0.09
0.09
0.14
Accruing loans 90 days or more past due
$
77
—
77
—
—
The table below provides information concerning the composition of nonaccrual loans for the third quarter of 2025 and the
previous four quarters.
2025
2024
Third
Second
First
Fourth
Third
(In thousands)
Quarter
Quarter
Quarter
Quarter
Quarter
Nonaccrual loans:
Commercial and industrial
$
—
—
3
99
—
Construction and land development
—
—
404
404
—
Commercial real estate
—
119
—
—
735
Residential real estate
104
183
113
—
40
Total nonaccrual loans
$
104
302
520
503
775
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
90 days or more past due, unless the loan is both well-secured and in the process of collection.
The Company had $77 thousand in loans 90 days or more past due and still accruing at September 30, 2025 compared to
none at December 31, 2024.
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35
The Company had no OREO at September 30, 2025 or December 31, 2024.
Deposits
(In thousands)
2025
2024
Noninterest bearing demand
$
266,793
260,874
NOW
211,187
199,883
Money market
172,224
153,916
Savings
86,105
89,904
Certificates of deposit under $250,000
96,613
103,594
Certificates of deposit and other time deposits of $250,000 or more
84,344
87,653
Total deposits
$
917,266
895,824
Total deposits were $917.3 million at September 30, 2025, compared to $895.8 million at December 31, 2024. The 2%
increase in deposits compared to December 31, 2024 was primarily related to an increase in money market and interest-
bearing checking accounts. At September 30, 2025 the Company had $33.0 million in reciprocal deposits sold, compared
to $74.1 million at December 31, 2024. The Company had no brokered deposits at September 30, 2025 and December 31,
2024. Noninterest-bearing deposits were $266.8 million, or 29% of total deposits, at September 30, 2025, compared to
$260.9 million, or 29% of total deposits at December 31, 2024.
The average rate paid on total interest-bearing deposits was 1.75% in the first nine months of 2025, compared to 1.80% in
first nine months of 2024.
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 the FDIC insurance coverage for our depositors. The Company had reciprocal deposits on balance sheet of
$34.1 million at September 30, 2025, compared to $6.9 million at December 31, 2024.
At September 30, 2025, estimated uninsured deposits totaled $369.1 million, or 40% 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 in excess of FDIC insurance limits. The Bank’s estimated uninsured deposits at September 30, 2025 and
December 31, 2024 include approximately $207.6 million and $223.1 million, respectively, of deposits of state, county and
local governments that are collateralized by securities having an equal fair value to such deposits. Excluding estimated
uninsured deposits of state, county and local governments, our estimated uninsured deposits would have been 18% of total
deposits at September 30, 2025 and 15% of total deposits at December 31, 2024.
The estimated uninsured time deposits by maturity as of September 30, 2025 is presented below.
(Dollars in thousands)
September 30, 2025
Maturity of:
3 months or less
$
37,525
Over 3 months through 6 months
6,289
Over 6 months through 12 months
8,673
Over 12 months
3,107
Total estimated uninsured time deposits
$
55,594
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36
Other Borrowings and Available Credit
The Company had no long-term debt at September 30, 2025 and December 31, 2024. 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 with no federal funds borrowings outstanding at September 30, 2025, and December 31,
2024, respectively. The Company had no securities sold under agreements to repurchase, which generally have been
entered into on behalf of certain customers at both September 30, 2025 and December 31, 2024. The Bank is eligible to
borrow from the FRB’s discount window, but had no such borrowings at September 30, 2025 and December 31, 2024. The
Bank never borrowed from the Federal Reserve’s Bank Term Facility Program (“BTFP”), which ceased making new loans
on March 11, 2024.
The Bank is a member of the FHLB of Atlanta and has borrowed, and may in the future borrow from time to time under the
FHLB of Atlanta’s advance program. FHLB advances include both fixed and variable rates and are taken out with varying
maturities, and are generally secured by eligible assets. The Bank had no borrowings under FHLB of Atlanta’s advance
program at September 30, 2025 and December 31, 2024, respectively. At those dates, the Bank had $308.6 million and
$296.9 million, respectively, of available lines of credit at the FHLB of Atlanta.
CAPITAL ADEQUACY
The Company’s consolidated stockholders’ equity was $89.6 million and $78.3 million as of September 30, 2025 and
December 31, 2024, respectively. The increase from December 31, 2024 was primarily driven by net earnings of $5.6
million and other comprehensive income due to the change in unrealized gains/losses on securities available-for-sale, net of
tax of $8.6 million, partially offset by cash dividends of $2.8 million. Unrealized losses do not affect the Bank’s capital for
regulatory capital purposes.
The Company paid cash dividends of $0.81 per share for both the first nine months of 2025 and the first nine months of
2024.
During July of 2025, the Company granted certain officers restricted stock units (“RSUs”) on 3,030 shares of Company
common stock pursuant to the Company’s 2024 Equity and Incentive Compensation Plan. The RSUs are reflected in the
consolidated statements of stockholders’ equity and in earnings per share, were not material to the Company’s financial
condition, results of operations, or cash flows for the period. The Form of Award Agreement is filed as Exhibit 10.1 to this
report.
Federal Reserve rules require 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 limitation on “distributions” from “eligible retained earnings”, including dividend payments, share repurchases
and certain discretionary bonus payments.
The Federal Reserve has treated us as a “small bank holding company’ under the Federal Reserve’s Small Bank Holding
Company Policy. Accordingly, our capital adequacy is evaluated at the Bank level, and not for the Company and its
consolidated subsidiaries. The Bank’s tier 1 leverage ratio was 10.72%, CET1 risk-based capital ratio was 15.51%, tier 1
risk-based capital ratio was 15.51%, and total risk-based capital ratio was 16.49% at September 30, 2025. These ratios
exceed the minimum regulatory capital percentages of 5.0% for tier 1 leverage ratio, 6.5% for CET1 risk-based capital
ratio, 8.0% for tier 1 risk-based capital ratio, and 10.0% for total risk-based capital ratio to be considered “well capitalized.”
The Bank’s capital conservation buffer was 8.49% at September 30, 2025.
MARKET AND LIQUIDITY RISK MANAGEMENT
Management’s objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within
the framework of established liquidity, loan, investment, borrowing, and capital policies. The Bank’s Asset Liability
Management Committee (“ALCO”) is charged with the responsibility of monitoring these policies, which are designed to
ensure an acceptable asset/liability composition. Two critical areas of focus for ALCO are interest rate risk and liquidity
risk management.
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37
Interest Rate Risk Management
In the normal course of business, the Company is exposed to market risk arising from fluctuations in interest rates. ALCO
measures and evaluates interest rate risk so that the Bank can meet customer demands for various types of loans and
deposits. Measurements used to help manage interest rate sensitivity include an earnings simulation model and an economic
value of equity (“EVE”) model.
Earnings simulation
. Management believes that interest rate risk is best estimated by our earnings simulation modeling.
Forecasted levels of earning assets, interest-bearing liabilities, and off-balance sheet financial instruments are combined
with ALCO forecasts of market interest rates for the next 12 months and other factors in order to produce various earnings
simulations and estimates. To help limit interest rate risk, we have guidelines for earnings at risk which seek to limit the
variance of net interest income from gradual changes in interest rates. For changes up or down in rates from management’s
flat interest rate forecast over the next 12 months, policy limits for net interest income variances are as follows:
●
+/- 20% for a gradual change of 400 basis points
●
+/- 15% for a gradual change of 300 basis points
●
+/- 10% for a gradual change of 200 basis points
●
+/- 5% for a gradual change of 100 basis points
While a gradual change in interest rates was used in the above analysis to provide an estimate of exposure under these
scenarios, our modeling under both a gradual and instantaneous change in interest rates indicates our balance sheet is
liability sensitive over the forecast period of 12 months.
At September 30, 2025, our earnings simulation model indicated that we were in compliance with the policy guidelines
noted above.
Economic Value of Equity
. EVE measures the extent that the 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, which establishes a base case EVE. In contrast with our
earnings simulation model, which evaluates interest rate risk over a 12-month timeframe, EVE uses a terminal horizon
which allows for the re-pricing of all assets, liabilities, and off-balance sheet items. Further, EVE is measured using values
as of a point in time and does not reflect any actions that ALCO might take in responding to or anticipating changes in
interest rates, or market and competitive conditions. 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
At September 30, 2025, our EVE model indicated that we were in compliance with our policy guidelines.
Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by
changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates, and other
economic and market factors, including market perceptions. Interest rates on certain types of assets and liabilities fluctuate
in advance of changes in general market rates, while interest rates on other types of assets and liabilities may lag behind
changes in general market rates. In addition, certain assets, such as adjustable-rate mortgage loans, have features (generally
referred to as “interest rate caps and floors”) which limit changes in interest rates. Prepayments and early withdrawal levels
also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many
borrowers to service their debts also may decrease during periods of rising interest rates or economic stress, which may
differ across industries and economic sectors. ALCO reviews each of the above interest rate sensitivity analyses along with
several different interest rate scenarios in seeking satisfactory, consistent levels of profitability within the framework of the
Company’s established liquidity, loan, investment, borrowing, and capital policies.
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38
The Company may also use derivative financial instruments to improve the balance between interest-sensitive assets and
interest-sensitive liabilities, and as a tool to manage interest rate sensitivity while continuing to meet the credit and deposit
needs of our customers. From time to time, the Company also may enter into back-to-back interest rate swaps to facilitate
customer transactions and meet their financing needs. These interest rate swaps qualify as derivatives, but are not
designated as hedging instruments. At September 30, 2025 and December 31, 2024, the Company had no derivative
contracts designated as part of a hedging relationship to assist in managing its interest rate sensitivity.
Liquidity Risk Management
Liquidity is the Company’s ability to convert assets into cash equivalents in order to meet daily cash flow requirements,
primarily for deposit withdrawals, loan demand and maturing obligations. The Company seeks to manage its liquidity to
manage or reduce its costs of funds by maintaining liquidity believed adequate to meet its anticipated funding needs, while
balancing against excessive liquidity that likely would reduce earnings due to the cost of foregoing alternative higher-
yielding assets.
Liquidity is managed at two levels. The first is the liquidity of the Company. The second is the liquidity of the Bank. The
management of liquidity at both levels is essential, because the Company and the Bank are separate and distinct legal
entities with different funding needs and sources, and each are subject to regulatory guidelines and requirements. The
Company depends upon dividends from the Bank for liquidity to pay its operating expenses, debt obligations and
dividends, and Federal Reserve Regulation W restricts Company borrowings from, and other transactions with, the Bank.
The Bank’s payment of dividends depends on its earnings, liquidity, capital and the absence of regulatory restrictions on
such dividends.
The primary source of funding and liquidity for the Company has been dividends received from the Bank. If needed, the
Company could also borrow money, or issue common stock or other securities. Primary uses of funds by the Company
include payment of Company expenses, dividends paid to stockholders and Company stock repurchases.
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. The Bank has access to federal funds lines from various banks and borrowings from the Federal Reserve discount
window. In addition to these sources, the Bank is eligible to participate in the FHLB of Atlanta’s advance program to obtain
funding for growth and liquidity. Advances include both fixed and variable terms and may be taken out with varying
maturities. At September 30, 2025, the Bank had no FHLB of Atlanta advances outstanding and available credit from the
FHLB of $308.6 million. At September 30, 2025, the Bank also had $65.2 million of available federal funds lines with no
borrowings outstanding. Primary uses of funds include repayment of maturing obligations and growing the loan portfolio.
The Company also has access to the FRB discount window.
Management believes that the Company and the Bank have adequate sources of liquidity to meet all their respective known
contractual obligations and unfunded commitments, including loan commitments and reasonably expected borrower,
depositor, and creditor requirements over the next twelve months.
Off-Balance Sheet Arrangements, Commitments, Contingencies and Contractual Obligations
At September 30, 2025, the Bank had outstanding standby letters of credit of $0.8 million and unfunded loan commitments
outstanding of $61.1 million. Because these commitments generally have fixed expiration dates and many will expire
without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to
fund these outstanding commitments, the Bank could use its cash and cash equivalents, deposits with other banks, liquidate
federal funds sold or a portion of our securities available-for-sale, or draw on its available credit facilities or raise deposits.
Mortgage lending activities
We generally sell residential mortgage loans in the secondary market to Fannie Mae while retaining the servicing of these
loans. The sale agreements for these residential mortgage loans with Fannie Mae and other investors include various
customary representations and warranties regarding the origination and characteristics of the residential mortgage loans.
Although the representations and warranties vary among investors, they typically cover ownership of the loan, validity of
the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, compliance with
loan criteria set forth in the applicable agreement and compliance with applicable federal, state, and local laws, among other
matters.
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39
As of September 30, 2025, the aggregate unpaid principal balance of residential mortgage loans, which we have originated
and sold, but retained the servicing rights, was $193.5 million. Although these loans are generally sold on a non-recourse
basis, we may be obligated to repurchase residential mortgage loans or reimburse investors for losses incurred (make whole
requests) if a loan review reveals a potential breach of our seller representations and warranties. Upon receipt of a
repurchase or make whole request, we work with investors to arrive at a mutually agreeable resolution. Repurchase and
make whole requests are typically reviewed on an individual loan by loan basis to validate the claims made by the investor
and to determine if a contractually required repurchase or make whole event has occurred. We seek to reduce and manage
the risks of potential repurchases, make whole requests, or other claims by mortgage loan investors through our
underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market
standards.
The Company was not required to repurchase any loans during the first nine months of 2025 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 September 30, 2025.
We service all residential mortgage loans originated and sold by us to Fannie Mae. As servicer, our primary duties are to:
(1) collect payments due from borrowers; (2) advance certain delinquent payments of principal and interest; (3) maintain
and administer any hazard, title, or primary mortgage insurance policies relating to the mortgage loans; (4) maintain any
required escrow accounts for payment of taxes and insurance and administer escrow payments; and (5) foreclose on
defaulted mortgage loans or take other actions to mitigate the potential losses to investors consistent with the agreements
governing our rights and duties as servicer.
Our mortgage servicing agreements generally specify our standards of responsibility as servicer and provide protection
against expenses and liabilities incurred by us when acting in compliance with these servicing agreements. However, if we
commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a
specified period following notice. The standards governing servicing and the possible remedies for violations of such
standards are determined by our agreements with Fannie Mae and Fannie Mae’s mortgage servicing guides. Remedies
could include repurchase of an affected loan.
Although repurchase and make whole requests related to representation and warranty provisions and servicing activities
have been limited to date, it is possible that requests to repurchase mortgage loans or reimburse investors for losses incurred
(make whole requests) may increase in frequency if investors more aggressively pursue all means of recovering losses on
their purchased loans. As of September 30, 2025, we do not believe that this exposure is material due to the historical level
of repurchase requests and loss trends, in addition to the fact that 99% of our residential mortgage loans serviced for Fannie
Mae was current as of such date. We maintain ongoing communications with our mortgage purchasers and will continue to
evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in our
investor portfolios.
The 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.
Effects of Inflation and Changing Prices
The consolidated financial statements and related consolidated financial data presented herein have been prepared in
accordance with GAAP and practices within the banking industry which require the measurement of financial position and
operating results in terms of historical dollars without considering the changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution
are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance
than the effects of general levels of inflation.
Inflation can increase our noninterest expenses. It also can affect our customers’ behaviors, the mix of deposits between
interest and noninterest bearing, the levels of interest rates we have to pay on our deposits and other borrowings, and the
interest rates we earn on our earning assets. The difference between our interest expense and interest income is also affected
by the shape of the yield curve and the speeds and amounts at which our various assets and liabilities, respectively, reprice
in response to interest rate changes. The yield curve was inverted during most of 2024, until September, when it began to
normalize. 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. As of October 31, 2025, yields on one- and two-
m
onth maturity Treasury securities were higher than other Treasury securities with maturities of 10 years or less.
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40
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. 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. Inflation and related changes in market interest rates, as the Federal Reserve
maintains interest rates to meet its longer-term inflation goal of 2%, also can adversely affect the values and liquidity of our
loans and securities, the value of collateral securing loans to our borrowers, and the success of our borrowers and such
borrowers’ available cash to pay interest on and principal of our loans to them.
Beginning in September 2024, in light of inflation moderating, the Federal Reserve’s Federal Open Market Committee
(“FOMC”) had three reductions in its target federal funds rate range totaling 100 basis points to 4.25% to 4.50%. While the
FOMC reaffirmed its target inflation rate of 2% over the longer run, it indicated it was “recalibrating” its policy based on
decreasing inflation rates and the risks of increasing unemployment, but would act on incoming data, the evolving outlook
and the balance of the risks of inflation and unemployment levels. In the future, the Federal Reserve could further decrease
target interest rates, or could increase such target rates, depending on the data and its outlook. On July 31, 2025, the FOMC
stated that it seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty
about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. …
The [FOMC’s] assessments will take into account a wide range of information, including readings on labor market
conditions, inflation pressures and inflation expectations, and financial and international developments.”
On September 17, 2025, the FOMC reduced its target federal funds rate range 25 basis points to 4.00% to 4.25%, and stated
it would continue to reduce its holdings of Treasury and agency debt and mortgage-backed securities (“MBS”). Most
recently, on October 29, 2025, the FOMC noted inflation had risen and was somewhat elevated, and that downside risks to
employment had risen in recent months. As a result, the FOMC reduced its target federal funds rate range 25 basis points
to 3.75% to 4.00%. The FOMC took further action with respect to its overnight repurchase and reverse repurchase rates
and daily volume limitations and effective October 30, 2025, limited the rate of reduction in the Federal Reserve’s
securities holdings, subject to modest deviations for operational reasons:
●
The Federal Reserve will roll over and reinvest at auction principal payments on Treasury securities maturing in
excess of $5 billion per month.
●
Beginning December1, all principal payments on Treasury securities would be rolled over and reinvested.
●
Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS
received in October and November that exceeds a cap of $35 billion per month in Treasury securities to roughly
match the maturity composition of Treasury securities outstanding.
●
Beginning, all principal payments from the Federal Reserve's holdings of agency securities would be reinvested in
Treasury bills.
CURRENT ACCOUNTING DEVELOPMENTS
The following ASU has been issued by the FASB but is not yet effective.
●
ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax disclosures
ASU 2023-09 seeks to enhance the transparency and decision usefulness of income tax disclosures. For public business
entities, the new standard is effective for annual periods beginning after December 15, 2024. The Company does not
e
xpect the new standard to have a material impact on the Company’s consolidated financial statements.
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41
Table 1 – Explanation of Non-GAAP Financial Measures
In addition to results presented in accordance with U.S. generally accepted accounting principles (GAAP), this quarterly
report on Form 10-Q includes certain designated net interest income amounts presented on a tax-equivalent basis, a non-
GAAP financial measure, including the presentation and calculation of the efficiency ratio.
The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net
interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the
Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance,
these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-
GAAP financial measures to their most directly comparable GAAP financial measures are presented below.
2025
2024
Third
Second
First
Fourth
Third
(in thousands)
Quarter
Quarter
Quarter
Quarter
Quarter
Net interest income (GAAP)
$
7,572
7,344
7,045
6,969
6,790
Tax-equivalent adjustment
18
19
17
19
21
Net interest income (Tax -equivalent)
$
7,590
7,363
7,062
6,988
6,811
Nine months ended September 30,
(In thousands)
2025
2024
Net interest income (GAAP)
$
21,961
20,156
Tax-equivalent adjustment
54
60
N
et interest income (Tax-equivalent)
$
22,015
20,216
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42
Table 2 - Selected Quarterly Financial Data
2025
2024
Third
Second
First
Fourth
Third
(Dollars in thousands, except per share amounts)
Quarter
Quarter
Quarter
Quarter
Quarter
Results of Operations
Net interest income (a)
$
7,590
7,363
7,062
6,988
6,811
Less: tax-equivalent adjustment
18
19
17
19
21
Net interest income (GAAP)
7,572
7,344
7,045
6,969
6,790
Noninterest income
829
789
747
845
846
Total revenue
8,401
8,133
7,792
7,814
7,636
Provision for credit losses
(255)
113
(10)
(48)
(127)
Noninterest expense
5,806
5,702
5,880
5,472
5,500
Income tax expense
623
485
392
830
531
Net earnings
$
2,227
1,833
1,530
1,560
1,732
Per share data:
Basic and diluted net earnings
$
0.64
0.52
0.44
0.45
0.50
Cash dividends declared
0.27
0.27
0.27
0.27
0.27
Weighted average shares outstanding:
Basic
3,493,699
3,493,699
3,493,699
3,493,699
3,493,699
Diluted
3,495,972
3,493,699
3,493,699
3,493,699
3,493,699
Shares outstanding, at period end
3,493,699
3,493,699
3,493,699
3,493,699
3,493,699
Book value
$
25.65
24.64
23.79
22.41
24.14
Common stock price:
High
$
28.47
25.28
23.37
24.57
24.35
Low
23.13
19.48
20.36
20.06
17.50
Period end:
28.44
25.00
21.59
23.49
22.90
To earnings ratio (b)
13.87
x
13.09
11.42
12.77
91.60
To book value
111
%
101
91
105
95
Performance ratios:
Annualized return on average equity
10.65
%
9.00
7.83
7.49
9.10
Annualized return on average assets
0.89
%
0.74
0.62
0.63
0.71
Dividend payout ratio
42.19
%
51.92
61.36
60.00
54.00
Asset Quality:
Allowance for credit losses as a % of:
Loans
1.20
%
1.24
1.20
1.22
1.22
Nonperforming loans
6,434
%
2,306
1,298
1,366
887
Nonperforming assets as a % of:
Loans and other real estate owned
0.02
%
0.05
0.09
0.09
0.14
Total assets
0.01
%
0.03
0.05
0.05
0.08
Nonperforming loans as a % of total loans
0.02
%
0.05
0.09
0.09
0.14
Annualized net charge-offs (recoveries) as % of average loans
0.06
%
(0.03)
0.05
(0.01)
0.04
Capital Adequacy: (c)
CET 1 risk-based capital ratio
15.51
%
15.32
15.04
14.80
14.75
Tier 1 risk-based capital ratio
15.51
%
15.32
15.04
14.80
14.75
Total risk-based capital ratio
16.49
%
16.35
16.05
15.81
15.76
Tier 1 leverage ratio
10.72
%
10.64
10.52
10.49
10.43
Other financial data:
Net interest margin (a)
3.30
%
3.27
3.20
3.09
3.05
Effective income tax rate
21.86
%
20.92
20.40
34.73
23.46
Efficiency ratio (d)
68.96
%
69.95
75.30
69.86
71.83
Selected average balances:
Securities
$
237,161
240,177
240,588
255,168
251,723
Loans, net of unearned income
556,233
559,770
566,082
567,634
571,651
Total assets
997,892
990,523
987,272
991,275
982,656
Total deposits
909,293
905,227
906,805
904,605
904,860
Total stockholders’ equity
83,642
81,447
78,158
83,325
76,113
Selected period end balances:
Securities
$
236,420
239,681
242,468
243,012
258,285
Loans, net of unearned income
557,912
562,714
560,650
564,017
565,699
Allowance for credit losses
6,691
6,965
6,750
6,871
6,876
Total assets
1,011,184
1,029,224
996,786
977,324
990,143
Total deposits
917,266
939,851
910,503
895,824
901,724
Total stockholders’ equity
89,613
86,071
83,115
78,292
84,336
(a) Tax-equivalent. 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.
See Table 1 - Explanation of Non-GAAP Measures.
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43
Table 3 - Selected Financial Data
Nine months ended September 30,
(Dollars in thousands, except per share amounts)
2025
2024
Results of Operations
Net interest income (a)
$
22,015
20,216
Less: tax-equivalent adjustment
54
60
Net interest income (GAAP)
21,961
20,156
Noninterest income
2,365
2,629
Total revenue
24,326
22,785
Provision for credit losses
(152)
84
Noninterest expense
17,388
16,694
Income tax expense
1,500
1,170
Net earnings
$
5,590
4,837
Per share data:
Basic and diluted net earnings
$
1.60
1.38
Cash dividends declared
0.81
0.81
Weighted average shares outstanding:
Basic
3,493,699
3,493,687
Diluted
3,494,465
3,493,687
Shares outstanding, at period end
3,493,699
3,493,699
Book value
$
25.65
24.14
Common stock price:
High
$
28.47
24.35
Low
19.48
16.63
Period end
28.44
22.90
To earnings ratio (b)
13.87
x
91.60
To book value
111
%
95
Performance ratios:
Annualized return on average equity
9.06
%
8.59
Annualized return on average assets
0.75
%
0.66
Dividend payout ratio
50.63
%
58.70
Asset Quality:
Allowance for credit losses as a % of:
Loans
1.20
%
1.22
Nonperforming loans
6,434
%
887
Nonperforming assets as a % of:
Loans and other real estate owned
0.02
%
0.14
Total assets
0.01
%
0.08
Nonperforming loans as a % of total loans
0.02
%
0.14
Annualized net recoveries as a % of average loans
0.02
%
—
Capital Adequacy: (c)
CET 1 risk-based capital ratio
15.51
%
14.75
Tier 1 risk-based capital ratio
15.51
%
14.75
Total risk-based capital ratio
16.49
%
15.76
Tier 1 leverage ratio
10.72
%
10.43
Other financial data:
Net interest margin (a)
3.26
%
3.05
Effective income tax rate
21.16
%
19.48
Efficiency ratio (d)
71.32
%
73.08
Selected average balances:
Securities
$
239,296
259,158
Loans, net of unearned income
560,659
568,628
Total assets
991,935
979,243
Total deposits
907,105
900,876
Total stockholders’ equity
82,281
75,044
Selected period end balances:
Securities
$
236,420
258,285
Loans, net of unearned income
557,912
565,699
Allowance for credit losses
6,691
6,876
Total assets
1,011,184
990,143
Total deposits
917,266
901,724
Total stockholders’ equity
89,613
84,336
(a) Tax-equivalent. 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.
See Table 1 - Explanation of Non-GAAP Measures.
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44
Table 4 - Average Balances and Net Interest Income Analysis
Quarter ended September 30,
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)
$
556,736
$
7,793
5.55%
$
571,917
$
7,642
5.32%
Securities - taxable (2)
228,127
1,220
2.12%
241,604
1,327
2.19%
Securities - tax-exempt (2)(3)
9,034
86
3.78%
10,119
97
3.81%
Total securities
237,161
1,306
2.18%
251,723
1,424
2.25%
Federal funds sold
27,572
304
4.37%
18,696
255
5.43%
Interest bearing bank deposits
90,964
1,027
4.48%
46,174
659
5.68%
Total interest-earning assets
912,433
$
10,430
4.54%
888,510
$
9,980
4.47%
Cash and due from banks
13,627
17,909
Other assets
71,832
76,237
Total assets
$
997,892
$
982,656
Interest-bearing liabilities:
Deposits:
NOW
$
199,060
$
650
1.30%
$
192,781
$
729
1.50%
Savings and money market
265,627
763
1.14%
253,943
614
0.96%
Time deposits
180,618
1,427
3.13%
198,009
1,826
3.67%
Total interest-bearing deposits
645,305
2,840
1.75%
644,733
3,169
1.96%
Short-term borrowings
—
—
—
2
—
—
Total interest-bearing liabilities
645,305
$
2,840
1.75%
644,735
$
3,169
1.96%
Noninterest-bearing deposits
263,988
260,127
Other liabilities
4,957
1,681
Stockholders' equity
83,642
76,113
Total liabilities and stockholders' equity
$
997,892
$
982,656
Net interest income and margin (tax-equivalent)
$
7,590
3.30%
$
6,811
3.05%
(1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included
(2) Includes average net unrealized gains (losses) on investment securities available for sale
(3) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal income
tax rate of 21%.
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45
Table 5 - Average Balances and Net Interest Income Analysis
Nine months ended September 30,
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)
$
560,946
$
23,012
5.48%
$
568,939
$
22,082
5.18%
Securities - taxable (2)
230,165
3,751
2.18%
248,923
4,109
2.20%
Securities - tax-exempt (2)(3)
9,131
259
3.79%
10,235
284
3.71%
Total securities
239,296
4,010
2.24%
259,158
4,393
2.26%
Federal funds sold
26,717
875
4.38%
18,014
738
5.47%
Interest bearing bank deposits
76,254
2,541
4.46%
39,530
1,619
5.47%
Total interest-earning assets
903,213
$
30,438
4.51%
885,641
$
28,832
4.35%
Cash and due from banks
15,864
17,917
Other assets
72,858
75,685
Total assets
$
991,935
$
979,243
Interest-bearing liabilities:
Deposits:
NOW
$
202,381
$
2,042
1.35%
$
193,428
$
2,045
1.41%
Savings and money market
254,095
1,910
1.01%
250,146
1,486
0.79%
Time deposits
185,355
4,470
3.22%
196,584
5,082
3.45%
Total interest-bearing deposits
641,831
8,422
1.75%
640,158
8,613
1.80%
Short-term borrowings
37
1
3.61%
838
3
0.48%
Total interest-bearing liabilities
641,868
$
8,423
1.75%
640,996
$
8,616
1.80%
Noninterest-bearing deposits
265,274
260,718
Other liabilities
2,512
2,485
Stockholders' equity
82,281
75,044
Total liabilities and stockholders' equity
$
991,935
$
979,243
Net interest income and margin (tax-equivalent)
$
22,015
3.26%
$
20,216
3.05%
(1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included
(2) Includes average net unrealized gains (losses) on investment securities available for sale
(3) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal income
tax rate of 21%.
Table of Contents
46
Table 6 –Volume and Rate Variance Analysis
Quarter ended
Nine months ended
September 30, 2025 vs. 2024
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
$
151
342
(191)
$
930
1,275
(345)
Securities - taxable
(107)
(38)
(69)
(358)
(48)
(310)
Securities - tax-exempt (1)
(11)
(1)
(10)
(25)
7
(32)
Total securities
(118)
(39)
(79)
(383)
(41)
(342)
Federal funds sold
49
(49)
98
137
(147)
284
Interest bearing bank deposits
368
(139)
507
922
(299)
1,221
Total interest income
$
450
115
335
$
1,606
788
818
Interest expense:
Deposits:
NOW
$
(79)
(101)
22
$
(3)
(91)
88
Savings and money market
149
113
36
424
395
29
Certificates of deposit
(399)
(266)
(133)
(612)
(336)
(276)
Total interest-bearing deposits
(329)
(254)
(75)
(191)
(32)
(159)
Short-term borrowings
—
—
—
(2)
20
(22)
Long-term debt
—
—
—
—
—
—
Total interest expense
(329)
(254)
(75)
(193)
(12)
(181)
Net interest income
$
779
369
410
$
1,799
800
999
(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."
(
2) Changes that are not solely a result of volume or rate have been allocated to volume.
Table of Contents
47
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by ITEM 3 is set forth in ITEM 2 under the caption “MARKET AND LIQUIDITY RISK
MANAGEMENT” and is incorporated herein by reference.
ITEM 4. CONTROLS AND PROCEDURES
The Company, with the participation of its management, including its Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this report. Based upon that evaluation and as of the end of the period covered by this report, the
Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective to allow timely decisions regarding disclosure in its reports that the Company files or submits to
the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. There have been no
changes in the Company’s internal control over financial reporting that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of its business, the Company and the Bank are, from time to time, involved in legal proceedings. The
Company’s and Bank’s management believe there are no pending or threatened legal, governmental, or regulatory
proceedings that, upon resolution, are expected to have a material adverse effect upon the Company’s or the Bank’s
financial condition or results of operations. See also, Part I, Item 3 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2024.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I,
Item 1A. “RISK FACTORS” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024,
which could materially affect our business, financial condition or future results. The risks described in our annual report on
Form 10-K are not the only the risks facing our Company. The persistence of inflation above the Federal Reserve’s long
term targets, and the maintenance of or further increases in, tightened Federal Reserve monetary policy by increased target
interest rates and reductions in the Federal Reserve’s securities portfolio, have and may continue to affect the levels of
interest rates, mortgage originations and income, the market values of our securities portfolio and loans and have resulted in
unrealized securities losses that have adversely affected our stockholders’ equity. Although inflation has remained above
the 2% rate, during the last year the Federal Reserve has reduced its target federal funds range from 5.25% to 5.50% to
3.75% to 4.00%, and on October 29, 2025 announced that it would end the roll-off of maturing securities it held beginning
December 1, 2025 as the Federal Reserve sought to meet its dual mandate of maximum employment and 2% inflation over
the longer run. These actions, and the changes from tighter to more accommodative monetary policy have affected and are
expected to continue to affect our deposit costs and mixes, and consumer savings and payment behaviors. These may also
affect our borrowers’ operating costs, expected returns and cash flows available to service our loans. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our
b
usiness, financial condition, and/or operating results in the future.
Table of Contents
48
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not make any unregistered sales of common stock or other equity securities during the third quarter of
2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
N
ot applicable.
Table of Contents
49
ITEM 6. EXHIBITS
Exhibit
Number Description
3.1
Certificate of Incorporation of Auburn National Bancorporation, Inc. and all amendments thereto.*
3.2
Amended and Restated Bylaws of Auburn National Bancorporation, Inc., adopted as of November 13, 2007. **
10.1
Form of Notice of Discretionary Equity Award Agreement and related Terms and Conditions (together, the
“RSU Award Agreement”)
***
31.1
Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, by David A. Hedges, President and Chief Executive Officer.
31.2
Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, by W. James Walker, IV, Senior Vice President and Chief Financial
Officer.
32.1
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, by David A. Hedges, President and Chief Executive Officer.** **
32.2
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, by W. James Walker, IV, Senior Vice President and Chief Financial Officer.****
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
**
***
****
The certifications attached as exhibits 32.1 and 32.2 to this quarterly report on Form 10-Q are “furnished” to the
Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be
deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
AUBURN NATIONAL BANCORPORATION, INC.
Date: November 12, 2025
By: /s/ David A. Hedges
David A. Hedges
President and CEO
Date: November 12, 2025
By: /s/
W.
James Walker, IV
W. James Walker, IV
Senior Vice President and Chief Financial Officer