Auburn National Q3 2026 earnings rise to $2.52M

Q: What were AUBN's third-quarter 2026 earnings?

AUBN reported third-quarter 2026 net earnings of $2.523 million, compared with $2.227 million in the prior-year quarter. Basic and diluted earnings per share were both $0.72, versus $0.64 a year earlier.

Q: How much dividend did AUBN pay in the third quarter of 2026?

AUBN paid cash dividends of $0.27 per share for the quarter ended September 30, 2026, totaling $940,000. For the nine months ended September 30, 2026, cash dividends were $0.81 per share, totaling $2.825 million.

Q: What was AUBN's comprehensive income in the third quarter of 2026?

AUBN reported a comprehensive loss of $3.169 million for the quarter, compared with comprehensive income of $4.460 million in the 2025 quarter. The 2026 quarter included a $5.221 million net-of-tax unrealized loss on securities and a $471,000 net-of-tax loss on an interest rate floor designated as a cash flow hedge.

Nine-month earnings rose, while operating cash flow declined and the quarter recorded a comprehensive loss.

Available on EDGAR 11/06/2026 - 01:09 PM EST Accepted by SEC EDGAR 11/06/2026 - 01:09 PM EST

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)How Sentiment works

Sentiment and the balance of points

Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.

How Sentiment works How the balance works

Form Type

10-Q

Rhea-AI Filing Summary

Auburn National Bancorporation, Inc. (AUBN) reported third-quarter 2026 net earnings of $2.523 million, compared with $2.227 million a year earlier; diluted earnings per share were $0.72 versus $0.64. Net interest income was $8.014 million, compared with $7.572 million, and nine-month net earnings were $7.019 million versus $5.590 million.

At September 30, 2026, total assets were $1,016.988 million and deposits were $923.338 million; available-for-sale securities had a fair value of $291.817 million, compared with $233.259 million at December 31, 2025. Nine-month operating cash flow was $8.008 million, versus $8.849 million. The quarter recorded a comprehensive loss of $3.169 million, compared with comprehensive income of $4.460 million a year earlier; quarterly other comprehensive loss included a $5.221 million net-of-tax unrealized loss on securities and a $471,000 net-of-tax loss on an interest rate floor designated as a cash flow hedge.

1 point · 0 major

How this balance works

Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

How the balance works How Sentiment works

0 major · 1 point

How the balance works

Positive

Moderate pointNet earnings increased: $2.523 million quarterly and $7.019 million for nine months.

Negative

Moderate pointNine-month operating cash flow: $8.008 million, versus $8.849 million.

Filing Explained

At September 30, the company reported a shift between cash and available-for-sale securities, alongside a $90 million swap hedge.

This unaudited Form 10-Q reports the quarter ended September 30, 2026 for Auburn National Bancorporation. At quarter-end, the company reported cash and available-for-sale securities; compared with year-end, the reported balance-sheet mix therefore shifted between cash and securities.

In August 2026, the company bought Treasury securities with contractual maturities longer than ten years and designated a pay-fixed, receive-floating swap with a stated notional amount of $90 million to hedge benchmark-rate changes in those securities.

Key Figures

Net earnings: $2.523 million Diluted earnings per share: $0.72 per share Nine-month net earnings: $7.019 million +5 more

8 metrics

Net earnings $2.523 million Quarter ended September 30, 2026; $2.227 million in 2025

Diluted earnings per share $0.72 per share Quarter ended September 30, 2026; $0.64 in 2025

Nine-month net earnings $7.019 million Nine months ended September 30, 2026; $5.590 million in 2025

Net interest income $8.014 million Quarter ended September 30, 2026; $7.572 million in 2025

Operating cash flow $8.008 million Nine months ended September 30, 2026; $8.849 million in 2025

Comprehensive income (loss) $3.169 million loss Quarter ended September 30, 2026; $4.460 million income in 2025

Total deposits $923.338 million As of September 30, 2026

Available-for-sale securities fair value $291.817 million As of September 30, 2026; $233.259 million as of December 31, 2025

Key Terms

available-for-sale, fair value hedge, allowance for credit losses, cash flow hedge, +1 more

5 terms

available-for-sale financial

"all securities within the scope of ASC 320 were classified as available-for-sale"

A classification for bonds, stocks or other investments that a company plans to keep but might sell before they reach full term. Think of it like items a shop keeps on a shelf for potential sale: their market value can go up or down while the company holds them, and those unrealized gains or losses are shown separately from operating profit until they are sold. Investors watch this because large swings can change a company’s reported net worth and signal how much flexibility it has to raise cash quickly.

fair value hedge financial

"designated a pay-fixed, receive-floating interest rate swap as a fair value hedge"

A fair value hedge is a risk-management technique where a company uses a financial contract to offset changes in the market value of a specific asset or liability, like locking in a price to protect against losses. Investors care because gains or losses from both the hedge and the hedged item flow through reported earnings together, which can reduce or reveal volatility in profit and the balance sheet value of holdings — much like insurance that smooths out the ups and downs of an owned item.

allowance for credit losses financial

"determination of allowance for credit losses on loans and investment securities"

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

cash flow hedge financial

"interest rate floor designated as a cash flow hedge"

A cash flow hedge is an accounting label for a contract or arrangement used to offset expected future swings in a company’s cash payments or receipts — for example from variable-rate interest, foreign currency sales, or forecasted purchases. It matters to investors because it aims to smooth future cash and earnings volatility: gains or losses on the hedge are held out of current profit and reported separately until the underlying transaction affects results, much like buying insurance to steady future bills.

treasury stock method financial

"RSUs are included in the computation of diluted net earnings per share using the treasury stock method"

A bookkeeping technique used to estimate how many additional shares would exist if all outstanding stock options, warrants and convertible securities were exercised, assuming the company uses the cash received to buy back shares at the current market price. Investors use it to calculate diluted earnings per share and to gauge potential ownership and profit dilution—like figuring out how a pie would be divided if more people claimed slices and some money was used to buy slices back.

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were AUBN's third-quarter 2026 earnings?

AUBN reported third-quarter 2026 net earnings of $2.523 million, compared with $2.227 million in the prior-year quarter. Basic and diluted earnings per share were both $0.72, versus $0.64 a year earlier.

How much dividend did AUBN pay in the third quarter of 2026?

AUBN paid cash dividends of $0.27 per share for the quarter ended September 30, 2026, totaling $940,000. For the nine months ended September 30, 2026, cash dividends were $0.81 per share, totaling $2.825 million.

What was AUBN's comprehensive income in the third quarter of 2026?

AUBN reported a comprehensive loss of $3.169 million for the quarter, compared with comprehensive income of $4.460 million in the 2025 quarter. The 2026 quarter included a $5.221 million net-of-tax unrealized loss on securities and a $471,000 net-of-tax loss on an interest rate floor designated as a cash flow hedge.

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 10-Q

(Mark One)

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2026

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period __________ to __________

Commission File Number: 0-26486

Auburn National Bancorporation, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

63-0885779

(I.R.S. Employer

Identification No.)

100 N. Gay Street

Auburn, Alabama 36830

(334) 821-9200

(Address and telephone number of principal executive offices)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Title of each class	Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01	AUBN		NASDAQ Global Market

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 ☒ No ☐

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 ☒ No ☐

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 ☐

Non-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 ☐ No ☒

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 5, 2026
Common Stock, $0.01 par value per share		3,479,447 shares

Table of Contents

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION		PAGE

Item 1	Financial Statements
	Consolidated Balance Sheets (Unaudited) as of September 30, 2026 and December 31, 2025	3
	Consolidated Statements of Earnings (Unaudited) for the quarter and nine months ended September 30, 2026 and 2025	4
	Consolidated Statements of Comprehensive Income (Unaudited) for the quarter and nine months ended September 30, 2026 and 2025	5
	Consolidated Statements of Stockholders’ Equity (Unaudited) for the quarter and nine months ended September 30, 2026 and 2025	6
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2026 and 2025	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Table 1 – Explanation of Non-GAAP Financial Measures	47
	Table 2 – Selected Quarterly Financial Data	48
	Table 3 – Selected Financial Data	49
	Table 4 – Average Balances and Net Interest Income Analysis – for the quarter ended September 30, 2026 and 2025	50
	Table 5 – Average Balances and Net Interest Income Analysis – for the nine months ended September 30, 2026 and 2025	51
	Table 6 – Volume and Rate Variance Analysis for the quarter and nine months ended September 30, 2026	52
	Table 7 – Loan Maturities	53
	Table 8 – Loan Sensitivities to Changes in Interest Rates on Loans Maturing in More Than One Year	54
Item 3	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4	Controls and Procedures	55

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	55
Item 1A	Risk Factors	55
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3	Defaults Upon Senior Securities	57
Item 4	Mine Safety Disclosures	57
Item 5	Other Information	57
Item 6	Exhibits	58

Table of Contents

PART I. 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)	2026			2025
Assets:
Cash and due from banks	$	16,523		$	22,335
Federal funds sold		17,667			21,322
Interest-bearing bank deposits		38,220			104,175
Cash and cash equivalents		72,410			147,832
Securities available-for-sale		291,817			233,259
Loans held for sale		—			172
Loans, net of unearned income		571,847			565,354
Allowance for credit losses		(6,487	)		(7,176	)
Loans, net		565,360			558,178
Premises and equipment, net		44,456			45,600
Bank-owned life insurance		17,762			17,927
Other assets		25,183			15,829
Total assets	$	1,016,988		$	1,018,797
Liabilities:
Deposits:
Noninterest-bearing	$	264,477		$	268,026
Interest-bearing		658,861			654,900
Total deposits		923,338			922,926
Accrued expenses and other liabilities		4,063			3,818
Total liabilities		927,401			926,744
Stockholders' equity:
Preferred stock of $.01 par value; authorized 200,000 shares; no shares issued		—			—
Common stock of $.01 par value; authorized 8,500,000 shares; issued 3,959,302 shares at September 30, 2026 and 3,957,135 shares at December 31, 2025, respectively		39			39
Additional paid-in capital		3,888			3,864
Retained earnings		123,435			119,241
Accumulated other comprehensive loss, net		(25,685	)		(19,390	)
Less treasury stock, at cost - 478,816 shares and 463,436 shares at September 30, 2026 and December 31, 2025, respectively		(12,090	)		(11,701	)
Total stockholders’ equity		89,587			92,053
Total liabilities and stockholders’ equity	$	1,016,988		$	1,018,797

See accompanying notes to consolidated financial statements

Table of Contents

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)	2026			2025			2026			2025
Interest income:
Loans, including fees	$	8,303		$	7,793		$	24,420		$	23,012
Securities		1,590			1,288			4,015			3,956
Federal funds sold and interest-bearing bank deposits		876			1,331			3,275			3,416
Total interest income		10,769			10,412			31,710			30,384
Interest expense:
Deposits		2,754			2,840			8,074			8,422
Short-term borrowings		1			—			1			1
Total interest expense		2,755			2,840			8,075			8,423
Net interest income		8,014			7,572			23,635			21,961
Provision for credit losses		(50	)		(255	)		(374	)		(152	)
Net interest income after provision for credit losses		8,064			7,827			24,009			22,113

Noninterest income:
Service charges on deposit accounts		158			154			464			461
Mortgage lending		127			167			431			391
Bank-owned life insurance		247			103			526			309
Other		442			405			1,324			1,204
Total noninterest income		974			829			2,745			2,365

*Noninterest expense:*
Salaries and benefits		3,416			3,375			10,053			9,943
Net occupancy and equipment		555			598			1,682			1,916
Professional fees		281			312			1,057			984
Other		1,642			1,521			5,108			4,545
Total noninterest expense		5,894			5,806			17,900			17,388

Earnings before income taxes		3,144			2,850			8,854			7,090
Income tax expense		621			623			1,835			1,500

Net earnings	$	2,523		$	2,227		$	7,019		$	5,590

Net earnings per share:
Basic and diluted	$	0.72		$	0.64		$	2.01		$	1.60

Weighted average shares outstanding:
Basic		3,484,168			3,493,699			3,490,131			3,493,699
Diluted		3,485,208			3,495,972			3,491,127			3,494,465

See accompanying notes to consolidated financial statements

Table of Contents

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

	Quarter ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2026			2025		2026			2025
Net earnings	$	2,523		$	2,227	$	7,019		$	5,590
Other comprehensive (loss) income, net of tax:
Unrealized net holding (loss) gain on securities, net of tax benefit (expense) of $1,752, $(749), $1,954 and $(2,863), respectively		(5,221	)		2,233		(5,824	)		8,535
Unrealized loss on interest rate floor designated as a cash flow hedge, net of tax benefit of $157, $0, $157 and $0, respectively		(471	)		—		(471	)		—

Other comprehensive (loss) income, net of tax		(5,692	)		2,233		(6,295	)		8,535
Comprehensive (loss) income	$	(3,169	)	$	4,460	$	724		$	14,125

See accompanying notes to consolidated financial statements

Table of Contents

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, 2026*
Balance, June 30, 2026		3,487,830		$	39	$	3,871		$	121,852		$	(19,993	)	$	(11,895	)	$	93,874
Net earnings		—			—		—			2,523			—			—			2,523
Other comprehensive loss		—			—		—			—			(5,692	)		—			(5,692	)
Cash dividends paid ($.27 per share)		—			—		—			(940	)		—			—			(940	)
Stock repurchases		(7,344	)		—		—			—			—			(195	)		(195	)
Stock-based compensation expense		—			—		17			—			—			—			17
Balance, September 30, 2026		3,480,486		$	39	$	3,888		$	123,435		$	(25,685	)	$	(12,090	)	$	89,587

*Quarter ended September 30, 2025*
Balance, June 30, 2025		3,493,699		$	39	$	3,802		$	117,236		$	(23,305	)	$	(11,701	)	$	86,071
Net earnings		—			—		—			2,227			—			—			2,227
Other comprehensive income		—			—		—			—			2,233			—			2,233
Cash dividends paid ($.27 per share)		—			—		—			(943	)		—			—			(943	)
Stock-based compensation expense		—			—		25			—			—			—			25
Balance, September 30, 2025		3,493,699		$	39	$	3,827		$	118,520		$	(21,072	)	$	(11,701	)	$	89,613

*Nine months ended September 30, 2026*
Balance, December 31, 2025		3,493,699		$	39	$	3,864		$	119,241		$	(19,390	)	$	(11,701	)	$	92,053
Net earnings		—			—		—			7,019			—			—			7,019
Other comprehensive loss		—			—		—			—			(6,295	)		—			(6,295	)
Cash dividends paid ($.81 per share)		—			—		—			(2,825	)		—			—			(2,825	)
Stock repurchases		(15,380	)		—		—			—			—			(389	)		(389	)
Stock-based compensation expense		—			—		46			—			—			—			46
Common stock issued under equity
compensation plans, net		2,167			—		(22	)		—			—			—			(22	)
Balance, September 30, 2026		3,480,486		$	39	$	3,888		$	123,435		$	(25,685	)	$	(12,090	)	$	89,587

*Nine months ended September 30, 2025*
Balance, December 31, 2024		3,493,699		$	39	$	3,802		$	115,759		$	(29,607	)	$	(11,701	)	$	78,292
Net earnings		—			—		—			5,590			—			—			5,590
Other comprehensive income		—			—		—			—			8,535			—			8,535
Cash dividends paid ($.81 per share)		—			—		—			(2,829	)		—			—			(2,829	)
Stock-based compensation expense		—			—		25			—			—			—			25
Balance, September 30, 2025		3,493,699		$	39	$	3,827		$	118,520		$	(21,072	)	$	(11,701	)	$	89,613

See accompanying notes to consolidated financial statements

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AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended September 30,
(Dollars in thousands)	2026			2025
Cash flows from operating activities:
Net earnings	$	7,019		$	5,590
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for credit losses		(374	)		(152	)
Depreciation and amortization		1,638			1,564
Premium amortization and discount accretion, net		920			1,047
Net gain on sale of loans held for sale		(204	)		(150	)
Loans originated for sale		(7,389	)		(6,357	)
Proceeds from sale of loans		7,692			6,318
Increase in cash surrender value of bank-owned life insurance		(314	)		(309	)
Income recognized from death benefit on bank-owned life insurance		(212	)		—
Stock-based compensation		46			25
Net (increase) decrease in other assets		(1,116	)		111
Net increase in accrued expenses and other liabilities		302			1,162
Net cash provided by operating activities		8,008			8,849

Cash flows from investing activities:
Proceeds from prepayments and maturities of securities available-for-sale		17,209			16,942
Purchase of securities available-for-sale		(88,885	)		—
Purchase of interest rate floor		(1,604	)		—
(Increase) decrease in loans, net		(7,725	)		6,012
Net purchases of premises and equipment		(263	)		(845	)
Proceeds from bank-owned life insurance death benefit		691			—
Increase in FHLB stock		(29	)		—
Net cash (used in) provided by investing activities		(80,606	)		22,109

Cash flows from financing activities:
Net (decrease) increase in noninterest-bearing deposits		(3,549	)		5,919
Net increase in interest-bearing deposits		3,961			15,523
Shares withheld for vested RSUs		(22	)		—
Stock repurchases		(389	)		—
Dividends paid		(2,825	)		(2,829	)
Net cash (used in) provided by financing activities		(2,824	)		18,613

Net change in cash and cash equivalents		(75,422	)		49,571
Cash and cash equivalents at beginning of period		147,832			93,354
Cash and cash equivalents at end of period	$	72,410		$	142,925

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	8,009		$	8,523
Income taxes		1,012			1,030

See accompanying notes to consolidated financial statements

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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”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, AuburnBank (the “Bank”). AuburnBank is a commercial bank located in

Auburn, Alabama. The Bank provides a full range of banking services in its primary market area, Lee County, which includes the Auburn-Opelika Metropolitan Statistical Area.

Basis of Presentation 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, 2025.

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”).

Segment Information

The Company’s operations consist of a single reportable segment, community banking, which is conducted through the Bank. The Company’s Chief Executive Officer is the chief operating decision maker (“CODM”). The CODM assesses performance and allocates resources based on consolidated net earnings and total assets, as reported in the accompanying consolidated statements of earnings and balance sheets, and regularly reviews expense information at the level of the captions presented in the consolidated statements of earnings. Accordingly, the segment’s revenues, significant expenses, measure of profit or loss and total assets are the consolidated amounts presented in those statements, and no reconciliation is necessary.

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, 2026. 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

In the first nine months of 2026, the Company did not adopt any new accounting guidance.

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NOTE 2: BASIC AND DILUTED NET EARNINGS PER SHARE

Basic net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding for the respective period. Diluted net earnings per share reflects the potential dilution that could occur upon exercise of securities or other rights for, or convertible into, shares of the Company’s common stock. During 2026, the Company granted 8,172 restricted stock units (“RSUs”), which represent potential common shares. During 2025, the Company granted 3,029 RSUs, which vested during the first quarter of 2026. RSUs are included in the computation of diluted net earnings per share using the treasury stock method. See “Note 5 – Stock-Based Compensation.”

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

	Quarter ended September 30,				Nine months ended September 30,
(Dollars in thousands, except share and per share data)	2026		2025		2026		2025
Basic:
Net earnings	$	2,523	$	2,227	$	7,019	$	5,590
Weighted average common shares outstanding		3,484,168		3,493,699		3,490,131		3,493,699
Net earnings per share	$	0.72	$	0.64	$	2.01	$	1.60

Diluted:
Net earnings	$	2,523	$	2,227	$	7,019	$	5,590
Weighted average common shares outstanding, basic		3,484,168		3,493,699		3,490,131		3,493,699
Dilutive effect of restricted stock units		1,040		2,273		996		766
Weighted average common shares outstanding, diluted		3,485,208		3,495,972		3,491,127		3,494,465
Net earnings per share	$	0.72	$	0.64	$	2.01	$	1.60

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NOTE 3: SECURITIES

At September 30, 2026 and December 31, 2025, respectively, all securities within the scope of ASC 320, Investments – Debt Securities, were classified as available-for-sale. The fair value and amortized cost for securities available-for-sale by contractual maturity at September 30, 2026 and December 31, 2025, respectively, are presented below. In August 2026, the Company purchased U.S. Treasury securities with contractual maturities of more than ten years and designated a pay-fixed, receive-floating interest rate swap with a notional amount of $90.0 million as a fair value hedge of the change in fair value of these securities attributable to changes in the benchmark interest rate. The cumulative fair value hedging adjustment is recognized as an adjustment to the amortized cost of the hedged securities and is included in the amortized cost amounts presented in the table below. See “Note 7 – Derivative Instruments.”

	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, 2026
U.S. Treasury (a)	$	—		—		—		84,784		84,784		256		—	$	84,528
Agency obligations (b)		257		42,758		7,323		—		50,338		—		5,907		56,245
Agency MBS (b)		—		20,159		23,856		96,727		140,742		—		24,710		165,452
State and political subdivisions		—		6,087		4,326		5,540		15,953		—		3,308		19,261
Total available-for-sale	$	257		69,004		35,505		187,051		291,817		256		33,925	$	325,486

*December 31, 2025*
Agency obligations (b)	$	—		35,580		18,204		—		53,784		—		4,727	$	58,511
Agency MBS (b)		—		20,112		16,171		125,644		161,927		—		19,063		180,990
State and political subdivisions		—		1,590		9,160		6,798		17,548		1		2,103		19,650
Total available-for-sale	$	—		57,282		43,535		132,442		233,259		1		25,893	$	259,151

(a)	Amortized cost of U.S. Treasury securities at September 30, 2026 includes a cumulative fair value hedging adjustment of $(4,420) related to an interest rate swap designated as a fair value hedge of these securities. See "Note 7 - Derivative Instruments."

(b)

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) 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 $190.8 million and $209.4 million at September 30, 2026 and December 31, 2025, were pledged to secure public deposits, securities sold under agreements to repurchase, Federal Home Loan Bank of Atlanta (“FHLB – Atlanta”) advances, and for other purposes required or permitted by law.

Included in other assets on the accompanying consolidated balance sheets are nonmarketable equity investments. The carrying amounts of nonmarketable equity investments were $1.4 million at both September 30, 2026 and December 31, 2025. Nonmarketable equity investments include FHLB - Atlanta stock, Federal Reserve Bank (“FRB”) stock, and stock in a privately held financial institution.

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Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at September 30, 2026 and December 31, 2025, 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, 2026:
Agency obligations	$	—		—		50,338		5,907	$	50,338		5,907
Agency MBS		2,384		181		138,358		24,529		140,742		24,710
State and political subdivisions		3,197		220		12,756		3,088		15,953		3,308
Total	$	5,581		401		201,452		33,524	$	207,033		33,925

December 31, 2025:
Agency obligations	$	—		—		53,784		4,727	$	53,784		4,727
Agency MBS		—		—		161,840		19,063		161,840		19,063
State and political subdivisions		—		—		14,827		2,103		14,827		2,103
Total	$	—		—		230,451		25,893	$	230,451		25,893

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. Unrealized losses have not been recognized into income as the decline in fair value is largely due to changes in interest rates and not credit quality. For the securities in the previous table, as of September 30, 2026 the Company does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.

U.S. Treasury

Investments in U.S. Treasury obligations are guaranteed of full and timely payments by the federal government. Based on management's analysis and judgment, there were no credit losses attributable to the Company’s investments in U.S. Treasury obligations at September 30, 2026.

Agency Obligations

Investments in agency obligations are guaranteed of full and timely payments by the issuing agency. Based on management's analysis and judgment, there were no credit losses attributable to the Company’s investments in agency obligations at September 30, 2026.

Agency MBS

Investments in agency MBS are issued by Ginnie Mae, Fannie Mae, and Freddie Mac. Each of these agencies provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based on management's analysis and judgment, there were no credit losses attributable to the Company’s investments in agency MBS at September 30, 2026.

State and Political Subdivisions

Investments in state and political subdivisions are securities issued by various municipalities in the United States. The majority of the portfolio was rated AA or higher, with no securities rated below investment grade at September 30, 2026. Based on management's analysis and judgment, there were no credit losses attributable to the Company’s investments in state and political subdivisions at September 30, 2026.

Realized Gains and Losses

The Company had no sales of securities during the quarters and nine months ended September 30, 2026 and 2025, respectively.

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NOTE 4: LOANS AND ALLOWANCE FOR CREDIT LOSSES

	September 30,			December 31,
(Dollars in thousands)	2026			2025
Commercial and industrial	$	27,061		$	33,887
Municipal		34,318			24,513
Construction and land development		57,067			56,436
Commercial real estate:
Owner occupied		53,903			59,568
Hotel/motel		56,292			47,870
Multifamily		56,873			51,516
Other		159,907			166,567
Total commercial real estate		326,975			325,521
Residential real estate:
Consumer mortgage		60,096			59,781
Investment property		58,304			56,773
Total residential real estate		118,400			116,554
Consumer installment		8,886			8,421
Total loans, net of unearned income before basis adjustment		572,707			565,332
Basis adjustment associated with fair value hedge (1)		(860	)		22
Total loans, net of unearned income	$	571,847		$	565,354

(1) Represents the basis adjustment associated with application of hedge accounting on certain loans. The basis adjustment will be allocated to the amortized cost of associated loans within the portfolio if the hedge accounting is discontinued. Refer to Note 7 - Derivative Instruments for additional information.

Loans secured by real estate were approximately 87.7% of the Company’s total loan portfolio at September 30, 2026. At September 30, 2026, 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 is disaggregated into the following portfolio segments: commercial and industrial, municipal, 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.

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During the first quarter of 2026, the Company refined its loan portfolio segmentation to separately identify municipal loans, which were previously included within commercial and industrial loans, due to their recent growth and distinct risk characteristics. The allowance for credit losses related to municipal loans is determined using a discounted cash flow methodology incorporating probability of default and loss given default assumptions derived from external data sources. As a result of this refinement, the total allowance decreased due to the lower expected credit losses associated with these loans. This refinement represents a change in accounting estimate and is accounted for prospectively. Accordingly, the allowance for credit losses and the provision for credit losses for prior periods have not been revised. Loan balances in prior period tables have been reclassified to conform to the current period presentation.

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

Commercial and industrial — 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.

Municipal — includes loans to state and local governmental entities and related public-sector organizations to finance capital projects, infrastructure improvements, and other governmental or public service needs. These loans are typically supported by general tax revenues, utility revenues, special assessments, or other dedicated revenue sources of the municipality. Repayment is primarily dependent on the financial capacity and revenue-generating ability of the governmental entity.

Construction and land development — 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 lines for construction of residential, multifamily, and commercial buildings. Generally, the primary source of repayment is dependent upon the sale or refinancing of the real estate collateral.

Commercial real estate — includes loans disaggregated in these classes:

●

Owner-occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary source of loan repayment are the cash flows 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 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.

●

Multifamily – primarily includes loans to finance income-producing multifamily properties. Loans in this class include loans for 5 or more unit residential property 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 borrower.

●

Other – primarily includes loans to finance income-producing commercial real estate. Loans in this class include loans for neighborhood retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased generally to local businesses and 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 borrower.

Residential real estate — includes loans disaggregated into two classes:

●

Consumer mortgage – primarily includes first or second lien mortgages and home equity lines to 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 – primarily includes loans to finance income-producing 1-4 family residential properties. Generally, the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates, as well as the financial health of the borrowers.

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Consumer installment — includes loans to individuals, both secured by personal property and 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 value.

The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of September 30, 2026 and December 31, 2025.

			Accruing		Accruing		Total
			30-89 Days		Greater than		Accruing		Non-		Total
(Dollars in thousands)	Current		Past Due		90 days		Loans		Accrual		Loans
September 30, 2026:
Commercial and industrial	$	26,991		48		—		27,039		22	$	27,061
Municipal		34,318		—		—		34,318		—		34,318
Construction and land development		57,067		—		—		57,067		—		57,067
Commercial real estate:
Owner occupied		53,903		—		—		53,903		—		53,903
Hotel/motel		56,292		—		—		56,292		—		56,292
Multifamily		56,873		—		—		56,873		—		56,873
Other		159,907		—		—		159,907		—		159,907
Total commercial real estate		326,975		—		—		326,975		—		326,975
Residential real estate:
Consumer mortgage		59,887		13		—		59,900		196		60,096
Investment property		58,160		144		—		58,304		—		58,304
Total residential real estate		118,047		157		—		118,204		196		118,400
Consumer installment		8,860		26		—		8,886		—		8,886
Total	$	572,258		231		—		572,489		218	$	572,707

December 31, 2025:
Commercial and industrial	$	33,881		6		—		33,887		—	$	33,887
Municipal		24,513		—		—		24,513		—		24,513
Construction and land development		56,395		41		—		56,436		—		56,436
Commercial real estate:
Owner occupied		59,085		105		—		59,190		378		59,568
Hotel/motel		47,870		—		—		47,870		—		47,870
Multifamily		51,516		—		—		51,516		—		51,516
Other		166,567		—		—		166,567		—		166,567
Total commercial real estate		325,038		105		—		325,143		378		325,521
Residential real estate:
Consumer mortgage		58,993		720		—		59,713		68		59,781
Investment property		56,737		—		—		56,737		36		56,773
Total residential real estate		115,730		720		—		116,450		104		116,554
Consumer installment		8,348		73		—		8,421		—		8,421
Total	$	563,905		945		—		564,850		482	$	565,332

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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 cost to acquire and sell, of 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.

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During 2026, the Company established municipal loans as a separate portfolio segment. Certain prior period amounts have been reclassified to conform to the current period presentation. The following tables present credit quality indicators for the loan portfolio segments and classes by year of origination as of September 30, 2026 and December 31, 2025.

Year of Origination	2026		2025		2024		2023		2022		Prior to 2022		Revolving Loans		Total Loans
(Dollars in thousands)
September 30, 2026:
Commercial and industrial
Pass	$	2,783		4,384		3,075		1,851		751		5,722		8,284		26,850
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		72		—		—		—		117		—		—		189
Nonaccrual		—		—		—		—		22		—		—		22
Total commercial and industrial		2,855		4,384		3,075		1,851		890		5,722		8,284		27,061
Current period gross charge-offs		—		—		—		5		—		—		—		5

Municipal
Pass	$	11,814		—		—		1,157		3,448		17,507		392		34,318
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total municipal		11,814		—		—		1,157		3,448		17,507		392		34,318
Current period gross charge-offs		—		—		—		—		—		—		—		—

*Construction and land development*
Pass		26,472		23,733		3,418		1,436		1,872		—		1		56,932
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		53		82		—		—		135
Nonaccrual		—		—		—		—		—		—		—		—
Total construction and land development		26,472		23,733		3,418		1,489		1,954		—		1		57,067
Current period gross charge-offs		—		—		—		—		—		—		—		—

Commercial real estate:
Owner occupied
Pass		2,340		10,597		1,144		8,428		5,438		20,620		4,148		52,715
Special mention		—		601		—		—		—		—		—		601
Substandard accruing		102		—		485		—		—		—		—		587
Nonaccrual		—		—		—		—		—		—		—		—
Total owner occupied		2,442		11,198		1,629		8,428		5,438		20,620		4,148		53,903
Current period gross charge-offs		—		—		—		—		—		378		—		378

Hotel/motel
Pass		17,672		4,838		14,126		5,816		8,619		5,221		—		56,292
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total hotel/motel		17,672		4,838		14,126		5,816		8,619		5,221		—		56,292
Current period gross charge-offs		—		—		—		—		—		—		—		—

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Year of Origination	2026		2025		2024		2023		2022		Prior to 2022		Revolving Loans		Total Loans
(Dollars in thousands)
September 30, 2026:
Multifamily
Pass		3,268		1,220		3,538		19,839		16,110		9,295		685		53,955
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		2,918		—		2,918
Nonaccrual		—		—		—		—		—		—		—		—
Total multifamily		3,268		1,220		3,538		19,839		16,110		12,213		685		56,873
Current period gross charge-offs		—		—		—		—		—		—		—		—

Other
Pass		30,209		21,705		30,393		16,252		25,723		33,530		1,253		159,065
Special mention		—		—		842		—		—		—		—		842
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total other		30,209		21,705		31,235		16,252		25,723		33,530		1,253		159,907
Current period gross charge-offs		—		—		—		—		—		—		—		—

Residential real estate:
Consumer mortgage
Pass		6,327		5,282		3,525		15,285		15,676		12,258		656		59,009
Special mention		—		—		—		—		51		224		—		275
Substandard accruing		—		—		—		—		—		616		—		616
Nonaccrual		—		—		—		—		—		196		—		196
Total consumer mortgage		6,327		5,282		3,525		15,285		15,727		13,294		656		60,096
Current period gross charge-offs		—		—		—		—		—		—		—		—

Investment property
Pass		11,178		5,677		7,093		8,562		8,954		12,924		3,879		58,267
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		36		—		1		—		37
Nonaccrual		—		—		—		—		—		—		—		—
Total investment property		11,178		5,677		7,093		8,598		8,954		12,925		3,879		58,304
Current period gross charge-offs		—		—		—		—		—		—		—		—

Consumer installment
Pass		4,042		2,233		1,355		557		587		82		—		8,856
Special mention		—		—		11		—		—		—		—		11
Substandard accruing		—		2		16		1		—		—		—		19
Nonaccrual		—		—		—		—		—		—		—		—
Total consumer installment		4,042		2,235		1,382		558		587		82		—		8,886
Current period gross charge-offs		1		23		—		14		—		—		—		38

Total loans
Pass		116,105		79,669		67,667		79,183		87,178		117,159		19,298		566,259
Special mention		—		601		853		—		51		224		—		1,729
Substandard accruing		174		2		501		90		199		3,535		—		4,501
Nonaccrual		—		—		—		—		22		196		—		218
Total loans	$	116,279		80,272		69,021		79,273		87,450		121,114		19,298	$	572,707
Total current period gross charge-offs	$	1		23		—		19		—		378		—	$	421

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Year of Origination	2025		2024		2023		2022		2021		Prior to 2021		Revolving Loans		Total Loans
(Dollars in thousands)
December 31, 2025:
Commercial and industrial
Pass	$	8,566		5,035		3,970		2,865		4,366		8,074		778	$	33,654
Special mention		74		4		7		—		—		—		—		85
Substandard accruing		—		—		7		139		2		—		—		148
Nonaccrual		—		—		—		—		—		—		—		—
Total commercial and industrial		8,640		5,039		3,984		3,004		4,368		8,074		778		33,887
Current period gross charge-offs		40		—		99		3		—		—		—		142

Municipal
Pass	$	837		—		1,156		4,190		6,013		9,145		3,172	$	24,513
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total municipal		837		—		1,156		4,190		6,013		9,145		3,172		24,513
Current period gross charge-offs		—		—		—		—		—		—		—		—

*Construction and land development*
Pass		31,315		14,175		7,321		2,080		69		711		765		56,436
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total construction and land development		31,315		14,175		7,321		2,080		69		711		765		56,436
Current period gross charge-offs		—		—		—		—		—		—		—		—

Commercial real estate:
Owner occupied
Pass		9,755		1,312		11,889		6,235		13,830		11,618		2,682		57,321
Special mention		620		—		—		—		—		—		750		1,370
Substandard accruing		—		499		—		—		—		—		—		499
Nonaccrual		—		—		—		—		—		378		—		378
Total owner occupied		10,375		1,811		11,889		6,235		13,830		11,996		3,432		59,568
Current period gross charge-offs		—		—		—		—		—		296		—		296

Hotel/motel
Pass		5,012		14,161		6,143		8,976		2,948		10,630		—		47,870
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total hotel/motel		5,012		14,161		6,143		8,976		2,948		10,630		—		47,870
Current period gross charge-offs		—		—		—		—		—		—		—		—

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Year of Origination	2025		2024		2023		2022		2021		Prior to 2021		Revolving Loans		Total Loans
(Dollars in thousands)
December 31, 2025:
Multifamily
Pass		1,254		3,615		12,550		20,560		1,726		8,652		142		48,499
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		—		—		—		—		—		3,017		—		3,017
Nonaccrual		—		—		—		—		—		—		—		—
Total multifamily		1,254		3,615		12,550		20,560		1,726		11,669		142		51,516
Current period gross charge-offs		—		—		—		—		—		—		—		—

Other
Pass		25,027		41,004		12,501		28,033		17,244		24,310		17,589		165,708
Special mention		—		364		—		—		495		—		—		859
Substandard accruing		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total other		25,027		41,368		12,501		28,033		17,739		24,310		17,589		166,567
Current period gross charge-offs		—		—		—		—		—		—		—		—

Residential real estate:
Consumer mortgage
Pass		6,413		4,344		16,249		16,527		2,263		10,977		1,692		58,465
Special mention		—		—		—		—		—		184		65		249
Substandard accruing		—		—		—		—		—		754		245		999
Nonaccrual		—		—		68		—		—		—		—		68
Total consumer mortgage		6,413		4,344		16,317		16,527		2,263		11,915		2,002		59,781
Current period gross charge-offs		—		—		4		—		—		1		—		5

Investment property
Pass		9,332		8,045		10,016		9,849		6,790		10,375		1,999		56,406
Special mention		—		—		—		—		—		—		—		—
Substandard accruing		236		—		—		91		4		—		—		331
Nonaccrual		—		—		36		—		—		—		—		36
Total investment property		9,568		8,045		10,052		9,940		6,794		10,375		1,999		56,773
Current period gross charge-offs		—		—		2		—		—		—		—		2

Consumer installment
Pass		4,121		1,981		972		780		137		81		304		8,376
Special mention		—		7		2		—		—		—		—		9
Substandard accruing		8		7		21		—		—		—		—		36
Nonaccrual		—		—		—		—		—		—		—		—
Total consumer installment		4,129		1,995		995		780		137		81		304		8,421
Current period gross charge-offs		42		45		9		—		—		—		—		96

Total loans
Pass		101,632		93,672		82,767		100,095		55,386		94,573		29,123		557,248
Special mention		694		375		9		—		495		184		815		2,572
Substandard accruing		244		506		28		230		6		3,771		245		5,030
Nonaccrual		—		—		104		—		—		378		—		482
Total loans	$	102,570		94,553		82,908		100,325		55,887		98,906		30,183	$	565,332
Total current period gross charge-offs	$	82		45		114		3		—		297		—	$	541

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Allowance for Credit Losses

The allowance for credit losses is estimated under the Current Expected Credit Losses (“CECL”) methodology set forth in FASB ASC 326, Financial Instruments – Credit Losses. Under the CECL methodology, 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)	2026			2025			2026			2025
Provision for credit losses:
Loans	$	(107	)	$	(196	)	$	(317	)	$	(87	)
Reserve for unfunded commitments		57			(59	)		(57	)		(65	)
Total provision for credit losses	$	(50	)	$	(255	)	$	(374	)	$	(152	)

The provision for credit losses for the quarter and nine months reflects both changes in credit conditions and the impact of the refinement in portfolio segmentation during the first quarter of 2026, including the reclassification of municipal loans previously included in commercial and industrial loans. 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			Municipal			Construction and land development			Commercial real estate			Residential real estate		Consumer installment			Total
*Quarter ended September 30, 2026:*
Beginning balance	$	542			150			675			3,959			1,094		166		$	6,586
Charge-offs		—			—			—			—			—		(2	)		(2	)
Recoveries		1			—			—			—			2		7			10
Net (charge-offs) recoveries		1			—			—			—			2		5			8
Provision for credit losses		(13	)		(3	)		(13	)		(88	)		36		(26	)		(107	)
Ending balance	$	530			147			662			3,871			1,132		145		$	6,487

*Nine months ended September 30, 2026:*
Beginning balance	$	1,129		—	1,304		3,777		837	129		$	7,176
Charge-offs		(5	)	—	—		(378	)	—	(38	)		(421	)
Recoveries		5		—	—		—		11	33			49
Net (charge-offs) recoveries		—		—	—		(378	)	11	(5	)		(372	)
Provision for credit losses		(599	)	147	(642	)	472		284	21			(317	)
Ending balance	$	530		147	662		3,871		1,132	145		$	6,487

Quarter ended September 30, 2025:
Beginning balance	$	1,212		n/a	1,613		3,151		866		123		$	6,965
Charge-offs		—		n/a	—		—		—		(87	)		(87	)
Recoveries		—		n/a	—		—		4		5			9
Net (charge-offs) recoveries		—		n/a	—		—		4		(82	)		(78	)
Provision for credit losses		(86	)	n/a	(61	)	(113	)	(34	)	98			(196	)
Ending balance	$	1,126		n/a	1,552		3,038		836		139		$	6,691

*Nine months ended September 30, 2025:*
Beginning balance	$	1,244		n/a	1,059	3,842		588		138		$	6,871
Charge-offs		(103	)	n/a	—	—		(7	)	(96	)		(206	)
Recoveries		30		n/a	—	—		68		15			113
Net (charge-offs) recoveries		(73	)	n/a	—	—		61		(81	)		(93	)
Provision for credit losses		(45	)	n/a	493	(804	)	187		82			(87	)
Ending balance	$	1,126		n/a	1,552	3,038		836		139		$	6,691

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The Company designates certain individually evaluated loans on nonaccrual status as collateral-dependent loans. Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized costs. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The Company had no collateral dependent loans which were individually evaluated at September 30, 2026. The following table presents the amortized cost basis of collateral dependent loans, which were individually evaluated to determine expected credit losses at December 31, 2025.

(Dollars in thousands)	Real Estate		Total Loans

December 31, 2025:
Commercial real estate	$	378	$	378
Total	$	378	$	378

At September 30, 2026 and December 31, 2025, the Company had one additional individually evaluated commercial real estate loan in the amount of $3.0 million that was not considered collateral dependent and was accruing in accordance with its contractual terms. This loan had an allowance of $0.4 million at September 30, 2026 and $0.5 million at December 31, 2025, respectively. The allowance for this loan was measured using the present value of expected future cash flows, discounted at the loan’s effective interest rate. Expected cash flows were developed using probability of default and loss given default assumptions specific to the borrower.

The 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, 2026
Commercial and industrial	$	—		22	$	22
Residential real estate		—		196		196
Total	$	—		218	$	218

December 31, 2025
Commercial real estate	$	378		—	$	378
Residential real estate		—		104		104
Total	$	378		104	$	482

The Company did not recognize any interest income on nonaccrual loans during the quarter or nine months ended September 30, 2026 and 2025.

There were no modifications to borrowers experiencing financial difficulty during the quarter or nine months ended September 30, 2026 and 2025.

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NOTE 5: STOCK-BASED COMPENSATION

The Company maintains the 2024 Equity and Incentive Compensation Plan (the “Plan”), which permits the grant of equity-based awards, including restricted stock units (“RSUs”), to employees of the Company and its subsidiaries.

On June 5, 2026, the Compensation Committee (the “Committee”) of the Board of Directors adopted and approved grants of 8,172 RSUs pursuant to the Plan and a Notice of Discretionary Equity Award Agreement and related Terms and Conditions (together, the “RSU Award Agreement”). The RSUs vest in installments of 33% in 2027, 33% in 2028, and 34% in 2029, subject to the recipient’s continued service through each vesting date. The grant-date fair value of the RSUs was $25.09 per unit, based on the closing price of the Company’s common stock on the date of grant, resulting in an aggregate grant-date fair value of approximately $205 thousand. The RSUs accrue dividend equivalents on unvested units equal to cash dividends declared on the Company’s common stock, which are subject to the same vesting conditions as the underlying RSUs. Upon vesting, the Company will withhold a portion of the shares otherwise issuable to satisfy the recipients’ tax withholding obligations.

The Company recognized approximately $17 thousand and $22 thousand of stock-based compensation expense related to this grant during the quarter and nine months ended September 30, 2026, respectively. Such expense is included in salaries and benefits expense, with a corresponding increase to additional paid-in capital. At September 30, 2026, unrecognized compensation expense related to unvested RSUs was approximately $183 thousand.

RSUs granted on July 24, 2025 vested during the first quarter of 2026, and no unvested awards remained outstanding at September 30, 2026 related to that grant. The Company recognized $24 thousand of stock-based compensation expense related to those RSUs during the first nine months of 2026, all of which was recognized in the first quarter of 2026, compared to $25 thousand during both the quarter and nine months ended September 30, 2025.

Total stock-based compensation expense was $17 thousand and $46 thousand for the quarter and nine months ended September 30, 2026, respectively, compared to $25 thousand for both the quarter and nine months ended September 30, 2025.

NOTE 6: COMMITMENTS AND CONTINGENT LIABILITIES

Contingent Liabilities

During the second quarter of 2026, the Company identified a loss contingency in connection with the release of a mortgage lien. Based on the facts known to management, the Company determined that a loss was probable and reasonably estimable and recorded a pre-tax accrual of $390 thousand within other noninterest expense during the second quarter of 2026, in accordance with applicable accounting guidance for loss contingencies.

The Company has submitted a claim to its insurer for recovery, which is pending a final determination. As of September 30, 2026, the Company has not recorded a receivable for any potential insurance recovery, as the recognition criteria for a gain contingency under generally accepted accounting principles have not yet been satisfied. Any recovery received from the insurer will be recognized in the period in which it is realized or realizable.

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NOTE 7: DERIVATIVE INSTRUMENTS

The Company enters into interest rate swaps and interest rate floors to manage exposure to changes in interest rates on certain loans and investment securities. The Company does not enter into derivative instruments for speculative or trading purposes. All of the Company’s derivatives are designated as hedging instruments.

The Company’s pay-fixed, receive-SOFR interest rate swaps are designated as fair value hedges of the change in fair value of specified fixed-rate loans and, beginning in August 2026, of U.S. Treasury securities classified as available-for-sale, in each case attributable to changes in the SOFR benchmark rate. The swaps qualify for the shortcut method under ASC 815, and changes in the fair value of the swaps and of the hedged items attributable to the hedged risk are recognized in interest income (loans) or interest income (securities), as applicable. For the hedged securities, the change in fair value attributable to the hedged risk is recognized as an adjustment to amortized cost rather than in accumulated other comprehensive income (“AOCI”).

In August 2026, the Company terminated a $10.0 million swap hedging a specified loan and received a termination payment of $0.2 million; the related cumulative basis adjustment was reclassified to deferred loan fees and is being accreted into interest income (loans) over the remaining life of the loan. At September 30, 2026, $0.2 million of this basis adjustment remained unaccreted and is included in loans, net of unearned income. The terminated swap was the Company’s only derivative instrument outstanding at December 31, 2025.

In August 2026, the Company purchased a $90.0 million interest rate floor with a strike rate of 3.65% for a premium of $1.6 million, designated as a cash flow hedge of the variability in interest income on a pool of variable-rate investment securities. The floor expires in August 2031 and was assessed as highly effective at September 30, 2026. The time value of the floor is excluded from the assessment of effectiveness, and the premium is amortized into interest income (securities) on a straight-line basis over the term of the floor; the remaining change in the fair value of the floor is recorded in AOCI and reclassified into interest income (securities) as the hedged interest income affects earnings.

The following table presents the fair value of derivative instruments designated as hedging instruments as of September 30, 2026 and December 31, 2025:

	Balance Sheet	Notional		Fair Value		Fair Value
(Dollars in thousands)	Location	Amount		Asset		Liability
September 30, 2026:
Interest rate swaps (fair value hedges)	Other Assets	$	102,000		5,280	$	—
Interest rate floor (cash flow hedge)	Other Assets		90,000		939		—
Total derivative instruments		$	192,000		6,219	$	—

	Balance Sheet	Notional		Fair Value		Fair Value
(Dollars in thousands)	Location	Amount		Asset		Liability
December 31, 2025:
Interest rate swap (fair value hedge)	Other Liabilities	$	9,988		—	$	22
Total derivative instruments		$	9,988		—	$	22

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The following table presents the carrying amount of hedged loans and investment securities and the cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items:

			Cumulative Fair
			Value Hedging
	*Carrying Amount*		*Adjustment Included*
(Dollars in thousands)	*of Hedged Items*		*in Carrying Amount*
September 30, 2026:
Loans, net of unearned income	$	11,140	$	(860	)
Investment securities available-for-sale, at amortized cost		84,528		(4,420	)
December 31, 2025:
Loans, net of unearned income	$	10,010	$	22

The following table presents the effect of fair value hedge accounting on the consolidated statements of earnings for the quarters and nine months ended September 30, 2026 and 2025. Amounts for swaps hedging loans include the swap terminated in August 2026 through the date of termination:

	Quarter ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2026			2025		2026			2025
Interest income (loans):
Total interest income (loans)	$	8,303		$	7,793	$	24,420		$	23,012
Amount of gain (loss) recognized in income on derivative		786			—		1,100			—
Amount of gain (loss) recognized in income on hedged item attributable to hedged risk		(786	)		—		(1,100	)		—
Net impact on interest income (loans)	$	—		$	—	$	—		$	—
Interest income (securities):
Total interest income (securities)	$	1,590		$	1,288	$	4,015		$	3,956
Amount of gain (loss) recognized in income on derivative		4,420			—		4,420			—
Amount of gain (loss) recognized in income on hedged item attributable to hedged risk		(4,420	)		—		(4,420	)		—
Net impact on interest income (securities)	$	—		$	—	$	—		$	—

The following table presents the effect of the cash flow hedge on AOCI and the consolidated statements of earnings for the quarter and nine months ended September 30, 2026 and 2025:

	Quarter ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2026			2025		2026			2025
Amount of gain (loss) recognized in other comprehensive income on derivative	$	(628	)	$	—	$	(628	)	$	—
Amount of gain (loss) reclassified from AOCI into interest income (securities)		—			—		—			—
Amortization of excluded component recognized in interest income (securities)		(37	)		—		(37	)		—

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At September 30, 2026, accumulated other comprehensive loss of $25.7 million consisted of $25.2 million of net unrealized losses on securities available-for-sale and $0.5 million of net deferred loss on the interest rate floor, each net of tax. The amounts recognized in OCI related to the floor during 2026 represent the change in the floor’s time value, which is excluded from the assessment of hedge effectiveness. The Company expects to recognize approximately $0.3 million of premium amortization as a reduction of interest income (securities) over the next twelve months and, based on the forward SOFR curve at September 30, 2026, does not expect to reclassify a significant amount of the net deferred loss from AOCI into earnings over that period.

The Company had no derivatives designated as hedging instruments during the quarter and nine months ended September 30, 2025.

The Company is exposed to credit risk in the event of nonperformance by its derivative counterparty. The Company’s agreements with the counterparty provide that, if the Bank fails to remain “well capitalized” under applicable regulatory capital requirements, the counterparty could terminate the derivative positions and settle them at fair value. At September 30, 2026, the Company’s derivative positions were in a net asset position, and no additional collateral or settlement amount would have been required had this provision been triggered.

The Company’s derivatives are subject to a master netting arrangement with a single counterparty that provides for the netting of amounts due upon an event of default or early termination and for the exchange of collateral based on the net fair value of the derivatives; however, the Company does not offset derivative assets and liabilities on its consolidated balance sheets. At September 30, 2026, the gross and net amounts of derivative assets subject to the arrangement were each $6.2 million, and no collateral had been received from the counterparty. Subsequent to September 30, 2026, the Company received cash collateral from the counterparty as permitted under the arrangement in an amount approximating the net fair value of the Company’s derivative positions.

NOTE 8: FAIR VALUE

Fair Value Hierarchy

“Fair value” is defined by ASC 820, Fair Value Measurement, as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for an asset or liability at the measurement date. 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.

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.

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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, 2026, 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 from third-party pricing services. These third-party pricing services consider observable data that may include broker quotes, market spreads, cash flows, market consensus prepayment speeds, benchmark yields, reported trades for similar securities, credit information, and the securities’ terms and conditions. On a quarterly basis, management reviews the pricing received from the third-party pricing services for reasonableness given current market conditions. As part of its review, management may obtain non-binding third-party broker quotes to validate the fair value measurements. In addition, management will periodically submit pricing provided by the third-party pricing services to another independent valuation firm on a sample basis. This independent valuation firm will compare the price provided by the third-party pricing service with its own price and will review the significant assumptions and valuation methodologies used with management.

Interest Rate Swaps

The fair values of the Company’s interest rate swaps are estimated using a discounted cash flow model. The model considers the present value of expected future cash flows under the terms of the swap and incorporates observable market data such as: relevant interest rate swap curves, benchmark yield curves (e.g., SOFR-based or other market-based curves), and forward interest rate expectations over the contractual term of the instruments. Because the significant inputs used in valuing the interest rate swaps are observable in active markets, the Company classifies these instruments within Level 2 of the fair value hierarchy.

Interest Rate Floor

The fair value of the Company’s interest rate floor is estimated using an option-pricing model that incorporates observable market inputs, including the SOFR forward curve, benchmark discount rates and market-implied interest rate volatility over the remaining term of the floor. Because the significant inputs used in valuing the interest rate floor are observable in active markets, the Company classifies this instrument within Level 2 of the fair value hierarchy.

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The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025, 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, 2026:
Securities available-for-sale:
U.S. Treasury	$	84,784		—		84,784		—
Agency obligations		50,338		—		50,338		—
Agency MBS		140,742		—		140,742		—
State and political subdivisions		15,953		—		15,953		—
Total securities available-for-sale		291,817		—		291,817		—
Other assets - interest rate swaps		5,280		—		5,280		—
Other assets - interest rate floor		939		—		939		—
Total assets at fair value	$	298,036		—		298,036		—

December 31, 2025:
Securities available-for-sale:
Agency obligations	$	53,784		—		53,784		—
Agency MBS		161,927		—		161,927		—
State and political subdivisions		17,548		—		17,548		—
Total securities available-for-sale		233,259		—		233,259		—
Total assets at fair value	$	233,259		—		233,259		—

Other liabilities - interest rate swap		22		—		22		—
Total liabilities at fair value	$	22		—		22		—

Assets and liabilities measured at fair value on a nonrecurring basis

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 prepayment speeds, discount rate, default rates, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Periodically, the Company will review broker surveys and other market research to validate significant assumptions used in the model. The significant unobservable inputs include 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.

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The following table presents the balances of the assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2026 and December 31, 2025, respectively, by caption, on the accompanying consolidated balance sheets and by the ASC 820 valuation hierarchy 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, 2026:
Other assets ⁽²⁾	$	725		—		—		725
Total assets at fair value	$	725		—		—		725

December 31, 2025:
Loans, net⁽¹⁾	$	378		—		—		378
Other assets ⁽²⁾		771		—		—		771
Total assets at fair value	$	1,149		—		—		1,149

⁽¹⁾Loans considered collateral dependent under ASC 326 Financial Instruments - Credit Losses.

⁽²⁾Represents MSRs, net, carried at lower of cost or estimated fair value.

Quantitative Disclosures for Level 3 Fair Value Measurements

At September 30, 2026 and December 31, 2025, 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, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements are presented below.

					Range of				Weighted
	*Carrying*			*Significant*	*Unobservable*				*Average*
(Dollars in thousands)	*Amount*		*Valuation Technique*	*Unobservable Input*	*Inputs*				of Input
September 30, 2026:
Mortgage servicing rights, net	$	725	Discounted cash flow	Prepayment speed or CPR		5.6	-	9.4%		5.7	%
				Discount rate		10.0	-	12.0		10.0
December 31, 2025:
Collateral dependent loans	$	378	Appraisal	Appraisal discounts		10.0	-	10.0%		10.0	%
Mortgage servicing rights, net		771	Discounted cash flow	Prepayment speed or CPR		6.8	-	8.4		8.2
				Discount rate		9.5	-	11.5		9.5

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, for which 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.

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Loans held for sale

Loans held for sale are recorded at the lower of cost or fair value. Fair values are determined using quoted secondary market prices for similar loans.

Time Deposits

Fair values for time deposits were estimated using discounted cash flows. The discount rates were based on rates currently offered for deposits with similar remaining maturities.

The carrying values, related estimated fair values, and placements in the fair value hierarchy of the Company’s financial instruments at September 30, 2026 and December 31, 2025 are presented below. This table excludes financial instruments recorded at fair value on a recurring basis, and 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 the carrying value of 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, 2026:
Financial Assets:
Loans, net (1)	$	565,360	$	549,065		—		—	$	549,065
Financial Liabilities:
Time Deposits	$	186,499	$	185,529		—		185,529	$	—

December 31, 2025:
Financial Assets:
Loans, net (1)	$	558,178	$	542,382		—		—	$	542,382
Loans held for sale		172		179		—		179		—
Financial Liabilities:
Time Deposits	$	176,801	$	176,137		—		176,137	$	—

(1) Represents loans, net of allowance for credit losses. The fair value of loans was measured using an exit price notion.

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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, 2026 and 2025, as well as the information contained in our annual report on Form 10-K for the year ended December 31, 2025 and our interim reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026.

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”, 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, 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 such as hurricanes, tornados, floods and droughts, epidemics or pandemics, supply chain disruptions and changes in consumer behaviors;

●

the effects of war, other conflicts or attacks, acts of terrorism, trade restrictions, tariffs, sanctions, the value of the U.S. dollar against other currencies, disruptions of supply chains including energy supplies, or other events that may affect general economic conditions, and consumer and business confidence;

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●

governmental fiscal and monetary policies and changes, including taxes, the amount of federal deficit spending and the debt to fund such spending, changes in monetary policies, including changes in the Federal Reserve’s target federal funds rate, such as the increase in September 2026 and any further increases if inflation remains above the Federal Reserve’s 2% objective, the pace and duration of any such changes, and in the Federal Reserve’s holdings of securities through quantitative tightening or easing;

●

changes in market interest rates and the shape of the yield curve on changes in savings, deposit and payment behaviors, the levels, composition and costs of deposits, loan demand and mortgage loan originations, and the values and liquidity of and interest-sensitive assets and liabilities;

●

increases in market interest rates that may result in unrealized losses on our securities portfolio and derivatives designated as cash flow hedges, which adversely affect our stockholders’ equity for financial reporting purposes and our tangible equity;

●

the effectiveness of our interest rate hedging strategies, including the risk that our interest rate swaps and interest rate floor do not perform as intended, that hedge accounting is discontinued, that a counterparty fails to perform, and the effects of the related fair value and cash flow hedge adjustments on our reported net interest income, other comprehensive income and stockholders’ equity;

●

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 products, including stablecoin and other digital assets businesses, which 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;

●

more permissive regulation and/or enforcement of digital assets, such as cyber currency and stablecoins (including rewards or other forms of payments functionally similar to interest), that increases competition to banks, increases risks to the payment systems, increases risks of fraud and theft of digital assets and their effects on customers other financial institutions, including our counterparties, and that may adversely affect confidence in the financial system, generally;

●

changes in banking, securities and tax laws, regulations and rules and their application by the regulators, including capital and liquidity requirements, greater nonbank participation in the Federal Reserve payments system, and in the coverage and cost of FDIC deposit insurance;

●

legislative, executive branch and regulatory changes, including changes in policy, leadership and personnel, including reductions in the number and experience of personnel, at the bank and securities regulators and the CFPB, and the uncertain effects of all these, including the costs and benefits of such changes;

●

the effects of the potential privatization and changes to Fannie Mae and Freddie Mac and its purchases of mortgage-backed securities on the mortgage markets and to us as an originator, seller and servicer of residential mortgage loans;

●

the assumptions, judgments and estimates made by the Company, including those used in the Company’s CECL models to establish our allowance for credit losses and asset impairments, as well as differences in, and changes to, economic, market and credit conditions, including changes in employment levels and payment behaviors from those used in our CECL models and loan portfolio reviews;

●

changes in accounting pronouncements and interpretations;

●

changes in counterparty and borrower credit risks, including the risks resulting from changes in Fannie Mae’s mortgage borrower credit score requirements;

●

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 our technology or products that may be more difficult, costly and risky, or less effective than anticipated;

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●

threats of potential cyber-attacks and data breaches, in constantly changing forms and increasing sophistication, including through the use of artificial intelligence and state sponsorship of the attacks;

●

the estimates that our future taxable income could be inaccurate, and if lower taxable income is realized from our operations, the amount of our deferred tax assets that we anticipate will be reduced;

●

our future earnings and “eligible retained earnings” over rolling four calendar quarter periods may limit our dividends, share repurchases and discretionary bonuses; and

●

other factors and risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 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)	2026			2025			2026			2025
Net interest income (a)	$	8,121		$	7,641		$	23,948		$	22,164
Less: tax-equivalent adjustment		107			69			313			203
Net interest income (GAAP)		8,014			7,572			23,635			21,961
Noninterest income		974			829			2,745			2,365
Total revenue		8,988			8,401			26,380			24,326
Provision for credit losses		(50	)		(255	)		(374	)		(152	)
Noninterest expense		5,894			5,806			17,900			17,388
Income tax expense		621			623			1,835			1,500
Net earnings	$	2,523		$	2,227		$	7,019		$	5,590
Basic and diluted earnings per share	$	0.72		$	0.64		$	2.01		$	1.60

(a) Tax-equivalent. See "Table 1 - Explanation of Non-GAAP Financial Measures."

Financial Summary

The Company’s net earnings were $7.0 million for the first nine months of 2026, a 26% increase compared to $5.6 million for the first nine months of 2025. Basic and diluted earnings per share were $2.01 per share for the first nine months of 2026, compared to $1.60 per share for the first nine months of 2025.

The Company recorded a negative provision for credit losses of $374 thousand in the first nine months of 2026, compared to a negative provision for credit losses of $152 thousand in the first nine months of 2025. The provision for credit losses is affected by changes in the overall balance and composition of our loan portfolio and unfunded commitments, our internal assessment of the credit quality of the loan portfolio, our expectations about future economic conditions, and net charge-offs.

Noninterest income was $2.7 million in the first nine months of 2026, compared to $2.4 million in the first nine months of 2025. The increase was primarily due to increased bank-owned life insurance (“BOLI”) income related to non-taxable death benefits received during the second and third quarters of 2026 and increased other noninterest income.

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Noninterest expense was $17.9 million in the first nine months of 2026, compared to $17.4 million in the first nine months of 2025. The increase was primarily due to a $0.4 million loss contingency accrual recorded in other noninterest expense during the second quarter of 2026. See “Note 6 – Commitments and Contingent Liabilities” to the accompanying consolidated financial statements.

The provision for income tax expense was $1.8 million for the first nine months of 2026 compared to $1.5 million for the first nine months of 2025. The Company’s effective tax rate for the first nine months of 2026 was 20.73%, compared to 21.16% in the first nine months of 2025. The Company’s effective income tax rate is principally affected by tax-exempt earnings from the Company’s investments in municipal securities and loans, BOLI, and New Markets Tax Credits (“NMTCs”).

The Company paid cash dividends of $0.81 per share in the first nine months of 2026 and 2025. At September 30, 2026, the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current regulatory standards with a total risk-based capital ratio of 17.30%, a tier 1 leverage ratio of 10.74% and a common equity tier 1 (“CET1”) ratio of 16.32% at September 30, 2026. See “Balance Sheet Analysis – Capital Adequacy.”

For the third quarter of 2026, net earnings were $2.5 million, or $0.72 per share, compared to $2.2 million, or $0.64 per share, for the third quarter of 2025, a 13% increase in earnings per share. Net interest income (tax-equivalent) was $8.1 million for the third quarter of 2026 compared to $7.6 million for the third quarter of 2025. 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 3.36% in the third quarter of 2026 compared to 3.21% in the third quarter of 2025. The increase was primarily due to higher yields on interest-earning assets, a more favorable asset mix, including cash that was deployed into higher-yielding securities, and a decrease in our cost of interest-bearing deposits. The Company recorded a negative provision for credit losses of $50 thousand in the third quarter of 2026, compared to a negative provision for credit losses of $255 thousand in the third quarter of 2025. Noninterest income was $1.0 million for the third quarter of 2026, compared to $0.8 million for the third quarter of 2025. The increase was primarily due to an increase in bank-owned life insurance income from a non-taxable death benefit received in the third quarter of 2026. Noninterest expense was $5.9 million in the third quarter of 2026, compared to $5.8 million in the third quarter of 2025. The increase was primarily due to higher salaries and benefits and other noninterest expense, partially offset by lower net occupancy and equipment expense and professional fees. Income tax expense was $0.6 million for the third quarter of 2026, unchanged compared to the third quarter of 2025. The Company’s effective tax rate for the third quarter of 2026 was 19.75%, compared to 21.86% in the third quarter of 2025.

During the third quarter of 2026, the Company deployed a portion of its excess cash into higher-yielding securities by purchasing approximately $88.9 million of U.S. Treasury securities and entering into a $90.0 million interest rate swap designated as a fair value hedge that effectively converts the securities to a floating rate. The Company also purchased a $90.0 million interest rate floor, designated as a cash flow hedge, to protect floating-rate interest income against a decline in short-term interest rates. See “Note 7 – Derivative Instruments” and “Interest Rate Risk Management” below.

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, 2025.

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RESULTS OF OPERATIONS

Average Balance Sheet and Interest Rates

	Nine months ended September 30,
	2026					2025
	Average		Yield/			Average		Yield/
(Dollars in thousands)	Balance		Rate			Balance		Rate
Loans and loans held for sale	$	580,128		5.69	%	$	560,946		5.52	%
Securities		264,561		2.06	%		274,068		1.96	%
Federal funds sold		26,288		3.60	%		26,717		4.38	%
Interest-bearing bank deposits		92,376		3.72	%		76,254		4.46	%
Total interest-earning assets		963,353		4.44	%		937,985		4.36	%
Deposits:
NOW		219,724		1.22	%		202,381		1.35	%
Savings and money market		267,035		0.95	%		254,095		1.01	%
Time deposits		182,626		3.06	%		185,355		3.22	%
Total interest-bearing deposits		669,385		1.61	%		641,831		1.75	%
Short-term borrowings		44		3.04	%		37		3.61	%
Total interest-bearing liabilities		669,429		1.61	%		641,868		1.75	%
Net interest income and margin (tax-equivalent)	$	23,948		3.32	%	$	22,164		3.16	%

Net Interest Income and Margin

Net interest income (tax-equivalent) was $23.9 million for the first nine months of 2026, an 8% increase compared to $22.2 million for the first nine months of 2025. This increase was due to growth in average interest-earning assets and improvements in our net interest margin. Average interest-earning assets were $963.4 million during the first nine months of 2026, a 3% increase compared to $938.0 million during the first nine months of 2025. The Company’s net interest margin (tax-equivalent) was 3.32% for the first nine months of 2026 compared to 3.16% for the first nine months of 2025. This increase was primarily due to higher yields on interest-earning assets, a more favorable asset mix, and a decrease in our cost of interest-bearing deposits. The Federal Reserve announced a 25-basis point reduction in the target range for the federal funds rate in each of September, October and December 2025, and held the target range at 3.50% to 3.75% through the first eight months of 2026 as inflation remained above the Federal Reserve’s 2% objective. On September 16, 2026, the Federal Reserve increased the target range for the federal funds rate by 25 basis points to 3.75% to 4.00%, and the Federal Reserve Chair has signaled that additional increases could follow if inflation remains elevated and the labor market remains stable, consistent with the Federal Reserve’s dual mandate.

The tax-equivalent yield on total interest-earning assets increased by 8 basis points to 4.44% in the first nine months of 2026 compared to 4.36% in the first nine months of 2025. This increase was primarily due to higher yields on loans and a more favorable asset mix.

The cost of interest-bearing liabilities decreased 14 basis points in the first nine months of 2026 to 1.61%, compared to 1.75% in the first nine months of 2025, following the decreases to the federal funds rate in late 2025.

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 that interest rates, inflation and monetary policy may continue to fluctuate during the remainder of 2026, and the Federal Reserve’s September 2026 rate increase and any further increases may place upward pressure on our deposit costs. 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 2026.

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Provision for Credit Losses

The Company recorded a negative provision for credit losses of $374 thousand in the first nine months of 2026, compared to a negative provision for credit losses of $152 thousand in the first nine months of 2025. For the third quarter of 2026, the Company recorded a negative provision for credit losses of $50 thousand, compared to a negative provision for credit losses of $255 thousand in the third quarter of 2025. The provision for credit losses is affected by changes in overall balance and composition of our loan portfolio and unfunded commitments, our internal assessment of the credit quality of the loan portfolio, our expectations about future economic conditions, and net charge-offs.

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, 2026, the Company’s allowance for credit losses was $6.5 million, or 1.13% of total loans, compared to $7.2 million, or 1.27% of total loans, at December 31, 2025, and $6.7 million, or 1.20% of total loans, at September 30, 2025. The decrease from December 31, 2025 was primarily due to refinements in the Company’s calculation of current expected credit losses (“CECL”). During the first quarter of 2026, the Company established a new loan segment within its CECL calculation for municipal loans, which reduced the allowance for credit losses due to lower expected credit losses associated with these loans. Prior to this change, municipal loans were included in the commercial and industrial loan segment for CECL.

Noninterest Income

	Quarter ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2026		2025		2026		2025
Service charges on deposit accounts	$	158	$	154	$	464	$	461
Mortgage lending income		127		167		431		391
Bank-owned life insurance		247		103		526		309
Other		442		405		1,324		1,204
Total noninterest income	$	974	$	829	$	2,745	$	2,365

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)	2026		2025		2026		2025
Origination income	$	47	$	93	$	204	$	150
Servicing fees, net		80		74		227		241
Total mortgage lending income	$	127	$	167	$	431	$	391

Income from bank-owned life insurance increased due to non-taxable death benefits received during the second and third quarters of 2026.

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Other noninterest income increased primarily due to higher debit card interchange income.

Noninterest Expense

	Quarter ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2026		2025		2026		2025
Salaries and benefits	$	3,416	$	3,375	$	10,053	$	9,943
Net occupancy and equipment		555		598		1,682		1,916
Professional fees		281		312		1,057		984
Other		1,642		1,521		5,108		4,545
Total noninterest expense	$	5,894	$	5,806	$	17,900	$	17,388

The decrease in net occupancy and equipment expense was primarily due to increased leasing income associated with the Company’s headquarters.

The increase in professional fees for the first nine months of 2026 was primarily due to an increase in legal expenses.

The increase in other noninterest expense was primarily due to a $390 thousand loss contingency accrual recorded during the second quarter of 2026 related to the release of a mortgage lien in connection with a commercial lending relationship. The Company has submitted a claim to its insurer for recovery, but no insurance recovery has been recognized. See “Note 6 – Commitments and Contingent Liabilities” to the accompanying consolidated financial statements.

Income Tax Expense

Income tax expense was $1.8 million for the first nine months of 2026, compared to $1.5 million for the first nine months of 2025. The increase was primarily due to the level of pre-tax earnings. The Company’s effective tax rate was 20.73% for the first nine months of 2026, compared to 21.16% for the first nine months of 2025. The decrease in the effective tax rate was primarily due to a higher level of tax-exempt income, including the non-taxable BOLI death benefits received during the second and third quarters of 2026. 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 $291.8 million at September 30, 2026, compared to $233.3 million at December 31, 2025. This increase reflects a purchase of U.S. Treasury securities at a cost of approximately $88.9 million (an amortized cost basis of $84.5 million at September 30, 2026, which reflects a $4.4 million cumulative fair value hedging adjustment related to the interest rate swap designated as a fair value hedge of these securities; see “Note 7 – Derivative Instruments” to the accompanying consolidated financial statements) partially offset by a decrease in the amortized cost basis of securities available-for-sale in other securities types, primarily due to normal paydowns and maturities, of $18.2 million and a decrease in the fair value of securities available-for-sale of $7.8 million. The average annualized tax-equivalent yields earned on total securities were 2.06% in the first nine months of 2026 compared to 1.96% in the first nine months of 2025.

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The maturity distribution of securities available-for-sale at September 30, 2026 is presented in “Note 3 – Securities” to the accompanying consolidated financial statements. Because the composition of the portfolio changed significantly during the third quarter of 2026, the following table presents the weighted average yield of securities available-for-sale by contractual maturity at September 30, 2026. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid in whole or in part, with or without penalty.

	1 year			1 to 5			5 to 10			After 10			Total
Weighted Average yield (1)	or less			years			years			years
September 30, 2026
U.S. Treasury		—			—			—			5.18	%		5.18	%
Agency obligations		2.94	%		1.24	%		3.03	%		—			1.50	%
Agency MBS		—			1.23	%		1.72	%		2.27	%		2.04	%
State and political subdivisions		—			1.83	%		2.32	%		2.48	%		2.17	%
Total available-for-sale		2.94	%		1.29	%		2.06	%		3.60	%		2.87	%

(1) Calculated on amortized cost before the fair value hedging adjustment described in Note 3. The total weighted average yield was 1.94% at December 31, 2025.

Loans

	2026						2025
	Third		Second		First		Fourth		Third
(In thousands)	Quarter		Quarter		Quarter		Quarter		Quarter
Commercial and industrial	$	27,061		27,754		31,841		33,887		29,647
Municipal		34,318		35,020		35,703		24,513		25,455
Construction and land development		57,067		58,855		60,248		56,436		79,045
Commercial real estate		326,975		333,525		334,602		325,521		298,681
Residential real estate		118,400		114,808		111,143		116,554		116,279
Consumer installment		8,886		9,919		8,524		8,421		8,805
Total loans	$	572,707		579,881		582,061		565,332		557,912

Total loans were $572.7 million at September 30, 2026, compared to $565.3 million at December 31, 2025. Three loan categories represented the majority of the loan portfolio at September 30, 2026: commercial real estate (57%), residential real estate (21%), and construction and land development (10%). Approximately 16% of the Company’s commercial real estate loans were classified as owner-occupied at September 30, 2026. Total loans in the table above and in the discussion that follows exclude the cumulative fair value hedging adjustment of $(860) thousand at September 30, 2026 and $22 thousand at December 31, 2025 related to the Company’s interest rate swaps designated as fair value hedges of loans; this adjustment is included in loans, net of unearned income, on the consolidated balance sheets. See “Note 4 – Loans and Allowance for Credit Losses” and “Note 7 – Derivative Instruments” to the accompanying consolidated financial statements.

During the first quarter of 2026, the Company established a separate municipal loan segment following growth in these balances. Prior to this change in presentation, municipal loans were included in the commercial and industrial loan segment. Prior period amounts have been revised to conform with the current period presentation.

Within the residential real estate portfolio segment, the Company had junior lien mortgages of approximately $11.1 million, or 2% of total loans, and $12.3 million, or 2%, of total loans at September 30, 2026 and December 31, 2025, respectively. For residential real estate mortgage loans with a consumer purpose, the Company had no loans that required interest only payments at September 30, 2026 and December 31, 2025. 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 5.69% in the first nine months of 2026 and 5.52% in the first nine months of 2025.

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The specific economic and credit risks associated with our loan portfolio include, but are not limited to, the effects of current economic conditions, including the levels of market interest rates, supply chain disruptions, commercial office occupancy levels, housing supply shortages, and effects of inflation on our borrowers’ cash flows, real estate market sales volumes and liquidity, valuations used in making loans and evaluating collateral, availability and cost of financing properties, real estate industry concentrations, competitive pressures from a wide range of other lenders, deterioration in certain credits, interest rate fluctuations, reduced collateral values or non-existent collateral, title defects, inaccurate appraisals, financial deterioration of borrowers, fraud, and any violation of applicable laws and regulations. Various 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 $23.6 million. Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding plus unfunded commitments) to a single borrower of $21.3 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, 2026, 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, 2026 (and related balances at December 31, 2025).

	September 30,		December 31,
(Dollars in thousands)	2026		2025
Lessors of 1-4 family residential properties	$	58,304	$	56,773
Multifamily residential properties		56,873		51,516
Hotel/motel		56,292		47,870
Shopping centers/strip malls		41,791		42,444

Allowance for Credit Losses

Our allowance for credit losses was approximately $6.5 million and $7.2 million at September 30, 2026 and December 31, 2025, 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 1.13% at September 30, 2026, compared to 1.27% at December 31, 2025.

During the first quarter of 2026, the Company refined its loan portfolio segmentation to separately identify municipal loans, which were previously included within commercial and industrial loans, due to their recent growth and distinct risk characteristics. The allowance for credit losses related to municipal loans is determined using a discounted cash flow methodology incorporating probability of default and loss given default assumptions derived from external data sources. As a result of this refinement, the total allowance decreased due to the lower expected credit losses associated with these loans. This refinement represents a change in accounting estimate and is accounted for prospectively. No adjustments were made to prior periods.

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 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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Under the CECL methodology the allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and on an individual basis for loans that do not share similar risk characteristics with the collectively evaluated pools. 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, 2026, reasonable and supportable periods of 4 quarters were utilized followed by an 8-quarter straight line reversion period to long term averages.

The allowance for credit losses by loan category for the third quarter of 2026 and the previous four quarters is presented below.

	2026												2025
	Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter
(Dollars in thousands)	Amount		%*		Amount		%*		Amount		%*		Amount		%*		Amount		%*
Commercial and industrial	$	530		4.7	$	542		4.8	$	686		5.5	$	1,129		10.3	$	1,126		9.9
Municipal		147		6.0		150		6.0		154		6.1		n/a		n/a		n/a		n/a
Construction and land development		662		10.0		675		10.1		694		10.4		1,304		10.0		1,552		14.2
Commercial real estate		3,871		57.0		3,959		57.6		4,056		57.4		3,777		57.6		3,038		53.5
Residential real estate		1,132		20.7		1,094		19.8		1,029		19.1		837		20.6		836		20.8
Consumer installment		145		1.6		166		1.7		157		1.5		129		1.5		139		1.6
Total allowance for credit losses	$	6,487			$	6,586			$	6,776			$	7,176			$	6,691

* Loan balance in each category expressed as a percentage of total loans.

A summary of the changes in the allowance for credit losses and certain asset quality ratios for the third quarter of 2026 and the previous four quarters is presented below.

	2026									2025
	Third			Second			First			Fourth			Third
(Dollars in thousands)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance at beginning of period	$	6,586			6,776			7,176			6,691			6,965
Charge-offs:
Commercial and industrial		—			—			(5	)		(39	)		—
Commercial real estate		—			—			(378	)		(296	)		—
Consumer installment		(2	)		(3	)		(33	)		—			(87	)
Total charge-offs		(2	)		(3	)		(416	)		(335	)		(87	)
Recoveries		10			25			14			30			9
Net (charge-offs) recoveries		8			22			(402	)		(305	)		(78	)
Provision for credit losses - Loans		(107	)		(212	)		2			790			(196	)
Ending balance	$	6,487			6,586			6,776			7,176			6,691
as a % of loans		1.13	%		1.14			1.16			1.27			1.20
as a % of nonperforming loans		2,976	%		10,291			6,643			1,489			6,434
Net charge-offs (recoveries) as % of average loans (a)		(0.01	)%		(0.02	)		0.28			0.22			0.06

(a)	Net charge-offs (recoveries) are annualized.

Net charge-offs were $372 thousand for the first nine months of 2026, compared to net charge-offs of $93 thousand for the first nine months of 2025. Net charge-offs in the first nine months of 2026 were primarily related to one nonperforming collateral-dependent loan.

Nonperforming Assets

At September 30, 2026 and December 31, 2025, the Company had $0.2 million and $0.5 million, respectively, in nonperforming assets.

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The table below provides information concerning total nonperforming assets and certain asset quality ratios for the third quarter of 2026 and the previous four quarters.

	2026							2025
	Third			Second		First		Fourth		Third
(Dollars in thousands)	Quarter			Quarter		Quarter		Quarter		Quarter
Nonperforming assets:
Nonaccrual loans	$	218			64		102		482		104
Total nonperforming assets	$	218			64		102		482		104
as a % of loans and other real estate owned		0.04	%		0.01		0.02		0.09		0.02
as a % of total assets		0.02	%		0.01		0.01		0.05		0.01
Nonperforming loans as a % of total loans		0.04	%		0.01		0.02		0.09		0.02
Accruing loans 90 days or more past due	$	—			—		208		—		77

The table below provides information concerning the composition of nonaccrual loans for the third quarter of 2026 and the previous four quarters.

	2026						2025
	Third		Second		First		Fourth		Third
(In thousands)	Quarter		Quarter		Quarter		Quarter		Quarter
Nonaccrual loans:
Commercial and industrial	$	22		—		—		—		—
Commercial real estate		—		—		—		378		—
Residential real estate		196		64		102		104		104
Total nonaccrual loans	$	218		64		102		482		104

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 no loans 90 days or more past due and still accruing at September 30, 2026 or December 31, 2025.

The Company had no other real estate owned at September 30, 2026 or December 31, 2025.

Deposits

(In thousands)	September 30, 2026		December 31, 2025
Noninterest-bearing demand	$	264,477		268,026
NOW		203,960		214,827
Money market		179,983		170,352
Savings		88,419		92,920
Certificates of deposit under $250,000		101,378		97,458
Certificates of deposit and other time deposits of $250,000 or more		85,121		79,343
Total deposits	$	923,338		922,926

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Total deposits were $923.3 million at September 30, 2026, compared to $922.9 million at December 31, 2025. Noninterest-bearing deposits were 29% of total deposits at both September 30, 2026 and December 31, 2025. The Company had no brokered deposits at September 30, 2026 and December 31, 2025.

The average rate paid on total interest-bearing deposits was 1.61% in the first nine months of 2026, compared to 1.75% in the first nine months of 2025.

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 its balance sheet of $29.6 million at September 30, 2026, compared to $9.8 million at December 31, 2025. At September 30, 2026, the Company had $49.9 million reciprocal deposits sold, compared to $79.7 million at December 31, 2025.

At September 30, 2026, estimated uninsured deposits totaled $361.6 million, or 39% of total deposits, compared to $392.9 million, or 43% of total deposits at December 31, 2025. Uninsured amounts are estimated based on the portion of account balances that exceed FDIC insurance limits. The Bank’s uninsured deposits at September 30, 2026 and December 31, 2025 include approximately $202.5 million and $228.7 million, respectively, of deposits of state, county and local governments that are collateralized by securities. Deposits of state, county and local governments were 56% and 58% of our estimated uninsured deposits at September 30, 2026 and December 31, 2025, respectively.

The estimated uninsured time deposits by maturity as of September 30, 2026 are presented below.

(Dollars in thousands)	September 30, 2026
Maturity of:
3 months or less	$	45,978
Over 3 months through 6 months		20,721
Over 6 months through 12 months		13,701
Over 12 months		4,721
Total estimated uninsured time deposits	$	85,121

Other Borrowings and Available Credit

The Company had no long-term debt at September 30, 2026 and December 31, 2025. 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 $73.2 million and $65.2 million, with no federal fund borrowings outstanding at September 30, 2026, and December 31, 2025, respectively. The Bank is eligible to borrow from the FRB’s discount window, but had no such borrowings at September 30, 2026 and December 31, 2025.

The Bank is a member of the FHLB-Atlanta and has borrowed from the FHLB-Atlanta, and in the future may borrow from time to time under the FHLB-Atlanta’s advance program. FHLB-Atlanta advances include both fixed and variable terms and provide various maturities, and generally are secured by eligible assets. The Bank had no borrowings under FHLB-Atlanta’s advance program at September 30, 2026 and December 31, 2025. At those dates, the Bank had $325.5 million and $304.9 million, respectively, of available lines of credit at the FHLB-Atlanta.

CAPITAL ADEQUACY

At September 30, 2026, the Company’s consolidated stockholders’ equity (book value) was $89.6 million, or $25.74 per share, compared to $92.1 million, or $26.35 per share, at December 31, 2025. The decrease from December 31, 2025 was primarily driven by an other comprehensive loss of $6.3 million due to an increase in unrealized losses on securities available-for-sale and cash flow hedges, net of tax, cash dividends paid of $2.8 million, and stock repurchases of $0.4 million, partially offset by net earnings of $7.0 million. The Company’s equity-to-assets ratio was 8.81% at September 30, 2026, compared to 9.04% at December 31, 2025.

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All of the Company’s marketable securities are classified as available-for-sale. Therefore, any changes in the fair value of the Company’s securities portfolio are reflected in accumulated other comprehensive loss within total equity, net of tax, under generally accepted accounting principles, but do not affect our capital for regulatory purposes.

The Company paid cash dividends of $0.81 per share for both the first nine months of 2026 and the first nine months of 2025.

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 10.74%, CET1 risk-based capital ratio was 16.32%, tier 1 risk-based capital ratio was 16.32%, and total risk-based capital ratio was 17.30% at September 30, 2026. 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 Basel III regulatory capital framework applicable to us includes a “capital conservation buffer” of CET1 capital. A banking organization with a capital conservation buffer of 2.5% or less is subject to limitations on “distributions” from “eligible retained earnings”, including dividend payments, share repurchases and certain discretionary bonus payments. At September 30, 2026, the Bank had a capital conservation buffer of 9.30%.

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.

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

At September 30, 2026, our earnings simulation model indicated that we were in compliance with the policy guidelines noted above.

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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, 2026, 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.

The Company also uses derivative financial instruments to manage interest rate sensitivity. See “Note 7 – Derivative Instruments” and “Note 8 – Fair Value” to the accompanying consolidated financial statements.

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.

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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, repayments and maturities 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 - 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, 2026, the Bank had no FHLB - Atlanta advances outstanding and available credit from the FHLB of $325.5 million. At September 30, 2026, the Bank also had $73.2 million of available uncommitted 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.

The Company’s derivative instruments are with a single financial institution counterparty under a master netting agreement that provides for the daily exchange of collateral based on the net fair value of the instruments, with no minimum threshold. A decline in market interest rates would reduce the fair value of the Company’s derivative positions and could require the Company to post additional collateral, which the Company would fund from its existing liquidity sources.

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, 2026, the Bank had outstanding standby letters of credit of $2.8 million and unfunded loan commitments outstanding of $59.7 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 conforming 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.

As of September 30, 2026, the aggregate unpaid principal balance of residential mortgage loans, which we have originated and sold, but retained the servicing rights, was $179.3 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.

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The Company was not required to repurchase any loans during the first nine months of 2026 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, 2026.

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, 2026, 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 were 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. In addition, net interest income could be affected by asymmetrical changes in the different interest rate indexes, given that not all of our assets or liabilities are priced with the same index. Changes in market interest rates and in the size of the Federal Reserve’s securities holdings in response to inflation can affect economic activity, loan demand and growth, and unemployment rates. Although the Federal Reserve reduced its target federal funds rate range in late 2025 and has resumed purchases of Treasury securities, inflation has remained above the Federal Reserve’s longer-term 2% goal, and on September 16, 2026 the Federal Reserve increased its target federal funds rate range by 25 basis points to 3.75% to 4.00% and signaled that further increases could follow if inflation remains elevated. The timing and extent of future monetary policy actions are uncertain. Inflation and related changes in market interest rates 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. See “Item 1A Risk Factors.”

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CURRENT ACCOUNTING DEVELOPMENTS

The following ASUs have been issued by the FASB, but are not yet effective.

ASU 2025-01, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, clarifies the effective date of ASU 2024-03, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses to stipulate that ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. ASU 2025-01 will be effective for the Company beginning January 1, 2027 for the Company’s annual consolidated financial statements on Form 10-K and January 1, 2028 for the Company’s quarterly consolidated financial statements on Form 10-Q and is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), removes all references to prescriptive and sequential software development stages and clarifies that the threshold for when an entity is required to start capitalizing software costs is when (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans, expands the population of acquired loans accounted for under the “gross-up” approach, previously limited to purchased financial assets with credit deterioration, to include acquired non-PCD loans that qualify as purchased seasoned loans. ASU 2025-08 will be effective for the Company beginning January 1, 2027, on a prospective basis, with early adoption permitted. Because the Company has not historically acquired or purchased loans, ASU 2025-08 is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, amends Topic 815 to align hedge accounting more closely with an entity’s risk management activities, including amendments related to similar risk assessments for cash flow hedges, hedges of forecasted interest payments on variable-rate debt, and certain other hedging strategies. ASU 2025-09 will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, is intended to provide clarity about the current interim reporting requirements, provides a list of the interim disclosures required by all other Codification topics and establishes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s consolidated financial statements.

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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 our net interest margin and efficiency ratio. In the first quarter of 2026, we changed the presentation of net interest income on a tax-equivalent basis to account for tax-exempt interest income on municipal loans. Prior period amounts have been revised herein to conform with the current period presentation. These changes had no effect on the presentation of GAAP net interest income in current or prior periods.

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.

2026

2025

Third

Second

First

Fourth

Third

(in thousands)

Quarter

Net interest income (GAAP)

8,014

7,888

7,733

7,713

7,572

Tax-equivalent adjustment

107

Net interest income (Tax-equivalent)

8,121

7,995

7,832

7,780

7,641

	Nine months ended September 30,
(In thousands)	2026		2025
Net interest income (GAAP)	$	23,635		21,961
Tax-equivalent adjustment		313		203
Net interest income (Tax-equivalent)	$	23,948		22,164

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Table 2 – Selected Quarterly Financial Data

	2026									2025
	Third			Second			First			Fourth		Third
(Dollars in thousands, except per share amounts)	Quarter			Quarter			Quarter			Quarter		Quarter
Results of Operations
Net interest income (a)	$	8,121			7,995			7,832			7,780		7,641
Less: tax-equivalent adjustment		107			107			99			67		69
Net interest income (GAAP)		8,014			7,888			7,733			7,713		7,572
Noninterest income		974			878			893			754		829
Total revenue		8,988			8,766			8,626			8,467		8,401
Provision for credit losses		(50	)		(248	)		(76	)		783		(255	)
Noninterest expense		5,894			6,105			5,901			5,563		5,806
Income tax expense		621			611			603			456		623
Net earnings	$	2,523			2,298			2,198			1,665		2,227

Per share data:
Basic and diluted net earnings	$	0.72			0.66			0.63			0.48		0.64
Cash dividends declared		0.27			0.27			0.27			0.27		0.27
Weighted average shares outstanding:
Basic		3,484,168			3,492,107			3,494,229			3,493,699		3,493,699
Diluted		3,485,208			3,492,107			3,496,518			3,496,729		3,495,972
Shares outstanding, at period end		3,480,486			3,487,830			3,495,866			3,493,699		3,493,699
Book value	$	25.74			26.91			26.62			26.35		25.65
Common stock price:
High	$	27.82			28.88			26.50			27.98		28.47
Low		25.01			23.03			21.01			24.00		23.13
Period end:		26.25			27.04			23.87			26.95		28.44
To earnings ratio (b)	10.54		x		11.22			10.52			12.96		13.87
To book value		102	%		100			90			102		111
Performance ratios:
Annualized return on average equity		10.68	%		9.74			9.65			7.40		10.65
Annualized return on average assets		0.99	%		0.90			0.86			0.66		0.89
Dividend payout ratio		37.50	%		40.91			42.86			56.25		42.19
Asset Quality:
Allowance for credit losses as a % of:
Loans		1.13	%		1.14			1.16			1.27		1.20
Nonperforming loans		2,976	%		10,291			6,643			1,489		6,434
Nonperforming assets as a % of:
Loans and other real estate owned		0.04	%		0.01			0.02			0.09		0.02
Total assets		0.02	%		0.01			0.01			0.05		0.01
Nonperforming loans as a % of total loans		0.04	%		0.01			0.02			0.09		0.02
Annualized net charge-offs (recoveries) as % of average loans		(0.01	)%		(0.02	)		0.28			0.22		0.06
Capital Adequacy: (c)
CET 1 risk-based capital ratio		16.32	%		16.26			16.12			16.06		15.51
Tier 1 risk-based capital ratio		16.32	%		16.26			16.12			16.06		15.51
Total risk-based capital ratio		17.30	%		17.24			17.13			17.14		16.49
Tier 1 leverage ratio		10.74	%		10.65			10.60			10.71		10.72
Other financial data:
Net interest margin (a)		3.36	%		3.33			3.28			3.24		3.21
Effective income tax rate		19.75	%		21.00			21.53			21.50		21.86
Efficiency ratio (d)		64.80	%		68.80			67.63			65.19		68.55
Selected average balances:
Loans, net of unearned income	$	579,575			582,335			577,489			559,009		556,233
Total assets		1,018,667			1,021,742			1,026,163			1,009,953		997,892
Total deposits		921,216			925,608			930,474			917,178		909,293
Total stockholders’ equity		94,526			94,340			91,088			90,000		83,642
Selected period end balances:
Loans, net of unearned income	$	571,847			579,589			582,040			565,354		557,912
Allowance for credit losses		6,487			6,586			6,776			7,176		6,691
Total assets		1,016,988			1,085,803			1,026,946			1,018,797		1,011,184
Total deposits		923,338			988,318			931,109			922,926		917,266
Total stockholders’ equity		89,587			93,874			93,061			92,053		89,613

(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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Table 3 - Selected Financial Data

	Nine months ended September 30,
(Dollars in thousands, except per share amounts)	2026			2025
Results of Operations
Net interest income (a)	$	23,948			22,164
Less: tax-equivalent adjustment		313			203
Net interest income (GAAP)		23,635			21,961
Noninterest income		2,745			2,365
Total revenue		26,380			24,326
Provision for credit losses		(374	)		(152	)
Noninterest expense		17,900			17,388
Income tax expense		1,835			1,500
Net earnings	$	7,019			5,590

Per share data:
Basic and diluted net earnings	$	2.01			1.60
Cash dividends declared		0.81			0.81
Weighted average shares outstanding:
Basic		3,490,131			3,493,699
Diluted		3,491,127			3,494,465
Shares outstanding, at period end		3,480,486			3,493,699
Book value	$	25.74			25.65
Common stock price:
High	$	28.88			28.47
Low		21.01			19.48
Period end		26.25			28.44
To earnings ratio (b)	10.54		x		13.87
To book value		102	%		111
Performance ratios:
Annualized return on average equity		10.03	%		9.06
Annualized return on average assets		0.92	%		0.75
Dividend payout ratio		40.30	%		50.63
Asset Quality:
Allowance for credit losses as a % of:
Loans		1.13	%		1.20
Nonperforming loans		2,976	%		6,434
Nonperforming assets as a % of:
Loans and other real estate owned		0.04	%		0.02
Total assets		0.02	%		0.01
Nonperforming loans as a % of total loans		0.04	%		0.02
Annualized net charge-offs as a % of average loans		0.09	%		0.02
Capital Adequacy: (c)
CET 1 risk-based capital ratio		16.32	%		15.51
Tier 1 risk-based capital ratio		16.32	%		15.51
Total risk-based capital ratio		17.30	%		16.49
Tier 1 leverage ratio		10.74	%		10.72
Other financial data:
Net interest margin (a)		3.32	%		3.16
Effective income tax rate		20.73	%		21.16
Efficiency ratio (d)		67.06	%		70.89
Selected average balances:
Loans, net of unearned income	$	579,807			560,659
Total assets		1,022,163			991,935
Total deposits		925,732			907,105
Total stockholders’ equity		93,330			82,281
Selected period end balances:
Loans, net of unearned income	$	571,847			557,912
Allowance for credit losses		6,487			6,691
Total assets		1,016,988			1,011,184
Total deposits		923,338			917,266
Total stockholders’ equity		89,587			89,613

(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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Table 4 - Average Balances and Net Interest Income Analysis (1)

	Quarter ended September 30,
			2026							2025
			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 (2) (3)	$	579,925	$	8,393		5.74	%	$	556,736	$	7,844		5.59	%
Securities (3) (4)		286,221		1,607		2.23	%		268,248		1,306		1.93	%
Federal funds sold		25,033		233		3.69	%		27,572		304		4.37	%
Interest-bearing bank deposits		68,619		643		3.72	%		90,964		1,027		4.48	%
Total interest-earning assets		959,798	$	10,876		4.50	%		943,520	$	10,481		4.41	%
Cash and due from banks		13,394							13,627
Other assets (5)		45,475							40,745
Total assets	$	1,018,667						$	997,892
Interest-bearing liabilities:
Deposits:
NOW	$	209,454	$	597		1.13	%	$	199,060	$	650		1.30	%
Savings and money market		269,588		743		1.09	%		265,627		763		1.14	%
Time deposits		186,763		1,414		3.00	%		180,618		1,427		3.13	%
Total interest-bearing deposits		665,805		2,754		1.64	%		645,305		2,840		1.75	%
Short-term borrowings		132		1		3.01	%		—		—		0.00	%
Total interest-bearing liabilities		665,937	$	2,755		1.64	%		645,305	$	2,840		1.75	%
Noninterest-bearing deposits		255,411							263,988
Other liabilities		2,793							4,957
Stockholders' equity		94,526							83,642
Total liabilities and stockholders' equity	$	1,018,667						$	997,892

Net interest income and margin (tax-equivalent)			$	8,121		3.36	%			$	7,641		3.21	%

(1)	In the first quarter of 2026, we changed the presentation of net interest income on a tax-equivalent basis to account for tax-exempt interest income on municipal loans. Also, we reclassified average net unrealized gains (losses) on available-for-sale securities to average other assets so that average total securities are presented on an amortized cost basis in our calculation of net interest margin. Prior period amounts, including the presentation and calculation of our net interest margin, have been revised to conform with the current period presentation.
(2)	Loans on nonaccrual status have been included in the computation of average balances.
(3)	Reflects tax-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt municipal loans and securities to a tax-equivalent basis.
(4)	Securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.
(5)	Includes average net unrealized gains (losses) on securities available-for-sale of $(27.4) and $(31.0) million for the quarters ended September 30, 2026 and September 30, 2025, respectively.

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Table 5 - Average Balances and Net Interest Income Analysis (1)

	Nine months ended September 30,
			2026							2025
			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 (2) (3)	$	580,128	$	24,681		5.69	%	$	560,946	$	23,161		5.52	%
Securities (3) (4)		264,561		4,067		2.06	%		274,068		4,010		1.96	%
Federal funds sold		26,288		708		3.60	%		26,717		875		4.38	%
Interest-bearing bank deposits		92,376		2,567		3.72	%		76,254		2,541		4.46	%
Total interest-earning assets		963,353	$	32,023		4.44	%		937,985	$	30,587		4.36	%
Cash and due from banks		13,685							15,864
Other assets (5)		45,125							38,086
Total assets	$	1,022,163						$	991,935
Interest-bearing liabilities:
Deposits:
NOW	$	219,724	$	2,004		1.22	%	$	202,381	$	2,042		1.35	%
Savings and money market		267,035		1,895		0.95	%		254,095		1,910		1.01	%
Time deposits		182,626		4,175		3.06	%		185,355		4,470		3.22	%
Total interest-bearing deposits		669,385		8,074		1.61	%		641,831		8,422		1.75	%
Short-term borrowings		44		1		3.04	%		37		1		3.61	%
Total interest-bearing liabilities		669,429	$	8,075		1.61	%		641,868	$	8,423		1.75	%
Noninterest-bearing deposits		256,347							265,274
Other liabilities		3,057							2,512
Stockholders' equity		93,330							82,281
Total liabilities and stockholders' equity	$	1,022,163						$	991,935

Net interest income and margin (tax-equivalent)			$	23,948		3.32	%			$	22,164		3.16	%

(1)	In the first quarter of 2026, we changed the presentation of net interest income on a tax-equivalent basis to account for tax-exempt interest income on municipal loans. Also, we reclassified average net unrealized gains (losses) on available-for-sale securities to average other assets so that average total securities are presented on an amortized cost basis in our calculation of net interest margin. Prior period amounts, including the presentation and calculation of our net interest margin, have been revised to conform with the current period presentation.
(2)	Loans on nonaccrual status have been included in the computation of average balances.
(3)	Reflects tax-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt municipal loans and securities to a tax-equivalent basis.
(4)	Securities are included on an amortized cost basis with yield and net interest margin calculated accordingly.
(5)	Includes average net unrealized gains (losses) on securities available-for-sale of $(26.5) and $(34.8) million for the first nine months ended September 30, 2026 and September 30, 2025, respectively.

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Table 6 – Volume and Rate Variance Analysis

	Quarter ended									Nine months ended
	September 30, 2026 vs. 2025									September 30, 2026 vs. 2025

	Net			Due to change in						Net			Due to change in
(Dollars in thousands)	Change			Rate (2)			Volume (2)			Change			Rate (2)			Volume (2)
Interest income:
Loans and loans held for sale (1)	$	549			213			336		$	1,520			704			816
Securities (1)		301			203			98			57			203			(146	)
Federal funds sold		(71	)		(47	)		(24	)		(167	)		(155	)		(12	)
Interest-bearing bank deposits		(384	)		(175	)		(209	)		26			(422	)		448
Total interest income	$	395			194			201		$	1,436			330			1,106
Interest expense:
Deposits:
NOW	$	(53	)		(83	)		30		$	(38	)		(196	)		158
Savings and money market		(20	)		(31	)		11			(15	)		(107	)		92
Certificates of deposit		(13	)		(60	)		47			(295	)		(233	)		(62	)
Total interest-bearing deposits		(86	)		(174	)		88			(348	)		(536	)		188
Short-term borrowings		1			—			1			—			—			—
Long-term debt		—			—			—			—			—			—
Total interest expense		(85	)		(174	)		89			(348	)		(536	)		188
Net interest income	$	480			368			112		$	1,784			866			918

(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.

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Table 7 – Loan Maturities

	September 30, 2026
	1 year		1 to 5		5 to 15		After 15
(Dollars in thousands)	or less		years		years		years		Total
Commercial and industrial	$	13,442		13,041		578		—		27,061
Municipal		392		1,203		20,954		11,769		34,318
Construction and land development		33,632		22,082		1,353		—		57,067
Commercial real estate		53,585		189,304		79,556		4,530		326,975
Residential real estate		8,048		39,944		19,258		51,150		118,400
Consumer installment		2,905		5,096		885		—		8,886
Total loans	$	112,004		270,670		122,584		67,449		572,707

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Table 8 – Sensitivities to Changes in Interest Rates on Loans Maturing in More Than One Year

	September 30, 2026
	Variable		Fixed
(Dollars in thousands)	Rate		Rate		Total
Commercial and industrial	$	413		13,206		13,619
Municipal		60		33,866		33,926
Construction and land development		17,489		5,946		23,435
Commercial real estate		12,365		261,025		273,390
Residential real estate		51,147		59,205		110,352
Consumer installment		239		5,742		5,981
Total loans	$	81,713		378,990		460,703

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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, 2025.

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, 2025, 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 risks facing our Company.

Inflation has remained above the Federal Reserve’s 2% target. After reducing its target federal funds rate range in late 2025, the Federal Reserve held the range at 3.50% to 3.75% through August 2026 while resuming purchases of Treasury securities to maintain an ample level of reserves. Following the Federal Reserve’s July 29, 2026 meeting, yields on longer-term U.S. Treasury securities rose to their highest levels in 24 years, and 30-year residential mortgage rates and other interest rates also increased. On September 16, 2026, the Federal Reserve increased the target range by 25 basis points to 3.75% to 4.00% and signaled that additional increases could follow if inflation remains elevated. At its October 28, 2026 meeting of the Federal Open Market Committee (“FOMC”), the FOMC did not change its target federal funds range, but noted strong economic activity, little change in unemployment rates, and that inflation remains elevated and above the FOMC’s 2% goal. These developments have affected, and further increases in market interest rates could continue to affect, our deposit costs and mix, our borrowing costs, the market values of our securities and loans and the unrealized losses reflected in our stockholders’ equity, mortgage originations and loan demand, and our borrowers’ operating costs and cash flows available to service their loans. The timing and direction of future monetary policy actions, and the nature and extent of the Federal Reserve’s public communications regarding such actions, are uncertain. These and other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results in the future.

During the third quarter of 2026, we entered into an additional interest rate swap and an interest rate floor designated as hedging instruments to manage our exposure to changes in interest rates, and we may enter into additional derivative instruments in the future. Our interest rate swaps have an aggregate notional amount of $102.0 million and the interest rate floor has a notional amount of $90.0 million, all with a single financial institution counterparty. Hedging strategies involve risks, including that the instruments may not be effective in offsetting changes in the fair value of, or the interest income on, the hedged assets, that a hedging relationship may cease to qualify for hedge accounting and cause volatility in our earnings or stockholders’ equity, and that our counterparty may fail to perform its obligations, including the return of collateral we have posted.

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Our agreements with the counterparty provide for the daily exchange of collateral based on the net fair value of the derivative positions, with no minimum threshold. A decline in market interest rates would reduce the fair value of our pay-fixed swap positions and could require us to post collateral in amounts that could be significant. Posting cash collateral reduces our liquid assets, and posting securities would reduce the securities available to secure FHLB-Atlanta advances and public deposits. In addition, if the Bank fails to remain “well capitalized” under applicable regulatory capital requirements, the counterparty could terminate the positions and require immediate settlement at their fair value. These obligations could adversely affect our liquidity.

Military hostilities involving the United States, Israel and Iran commenced on February 28, 2026 and continue subject to various temporary cease fire arrangements and pauses. As a result, shipments of petroleum products through the Strait of Hormuz have been limited, reducing the total volumes of oil in the international markets and causing oil prices to rise significantly. More recently, attacks have been made on petroleum shipments through the Red Sea by forces aligned with Iran. Supply chains where petroleum is an input have been adversely affected, and transportation costs, prices and inflation in the United States and elsewhere have increased. These pressures may increase our and our borrowers’ operating costs and contribute to higher or more volatile interest rates, which could adversely affect our net interest margin, the value of our securities portfolio, and the ability of our borrowers to repay their loans. The duration of these hostilities and the long-term effects of the disruption of petroleum shipments and the other costs and effects of these hostilities cannot be predicted.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s repurchases of its common stock during the third quarter of 2026 were as follows:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 - July 31, 2026		3,006	$	26.36		3,006	$	4,726,537
August 1 - August 31, 2026		1,532		26.46		1,532		4,686,003
September 1 - September 30, 2026		2,806		26.72		2,806		4,611,014
Total		7,344	$	26.52		7,344	$	4,611,014

(1) On March 17, 2026, the Company announced that its Board of Directors had approved a stock repurchase program authorizing the repurchase, from time to time, of up to $5.0 million of the Company's issued and outstanding common stock. The program will remain in effect until the earliest of (i) the expenditure of $5.0 million on share repurchases, (ii) the termination or replacement of the program, and (iii) February 28, 2027. Repurchases may be made through open-market or private purchases, negotiated transactions, block purchases or otherwise. The Company is not required to acquire any specific number of shares and may suspend or terminate the program at any time. All purchases of shares pursuant to the stock repurchase program shown above were made in open market transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the quarter ended September 30, 2026, no director or officer of the Company adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as those terms are defined in Item 408 of Regulation S-K.

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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		inline XBRL Instance Document

101.SCH		inline XBRL Taxonomy Extension Schema Document

101.CAL		inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*	Incorporated by reference from Registrant’s Form 10-Q dated June 30, 2002.
**	Incorporated by reference from Registrant’s Form 10-K dated March 31, 2008.
***	Incorporated by reference from Registrant’s Form 8-K dated July 30, 2025.

****	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.

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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.
	(Registrant)

Date:	November 6, 2026	By:	/s/ David A. Hedges
		David A. Hedges
		President and Chief Executive Officer

Date:	November 6, 2026	By:	/s/ W. James Walker, IV
		W. James Walker, IV
		Senior Vice President and Chief Financial Officer

Source: View Original Filing on SEC EDGAR

Auburn National Q3 2026 earnings rise to $2.52M

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