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, 2025

☐

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 11, 2025

Common Stock, $0.01 par value per share

3,493,699

shares

Table of Contents

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

INDEX

P

ART I. FINANCIAL INFORMATION

PAGE

Item 1

Financial Statements

Consolidated Balance Sheets (Unaudited) as of September 30, 2025 and December 31, 2024

3

Consolidated Statements of Earnings (Unaudited) for the quarter and nine months ended September 30,

2025 and 2024

4

Consolidated Statements of Comprehensive Income (Unaudited) for the quarter and nine months ended

September 30, 2025 and 2024

5

Consolidated Statements of Stockholders’ Equity (Unaudited) for the quarter and nine months ended

September 30, 2025 and 2024

6

Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and

2024

7

Notes to Consolidated Financial Statements (Unaudited

)

8

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Table 1 – Explanation of Non-GAAP Financial Measures

41

Table 2 – Selected Quarterly Financial Data

42

Table 3 – Selected Financial Data

43

Table 4 – Average Balances and Net Interest Income Analysis – for the quarter ended September 30,

2025 and 2024

44

Table 5 – Average Balances and Net Interest Income Analysis – for the nine months ended September

30, 2025 and 2024

45

Table 6 – Volume and Rate Variance Analysis for the quarter and nine months ended September 30, 2025

46

46

Item 3

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4

Controls and Procedures

47

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

47

Item 1A

Risk Factors

47

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3

Defaults Upon Senior Securities

48

Item 4

Mine Safety Disclosures

48

Item 5

Other Information

48

Item 6

Exhibits

49

Table of Contents

3

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,

(Dollars in thousands, except share data)

2025

2024

Assets:

Cash and due from banks

$

15,016

$

15,142

Federal funds sold

15,101

37,200

Interest-bearing bank deposits

112,808

41,012

Cash and cash equivalents

142,925

93,354

Securities available-for-sale

236,420

243,012

Loans held for sale

145

—

Loans

557,912

564,017

Allowance for credit losses

(6,691)

(6,871)

Loans, net

551,221

557,146

Premises and equipment, net

45,418

45,931

Bank-owned life insurance

17,822

17,513

Other assets

17,233

20,368

Total assets

$

1,011,184

$

977,324

Liabilities:

Deposits:

Noninterest-bearing

$

266,793

$

260,874

Interest-bearing

650,473

634,950

Total deposits

917,266

895,824

Accrued expenses and other liabilities

4,305

3,208

Total liabilities

921,571

899,032

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

3,957,135

shares

39

39

Additional paid-in capital

3,827

3,802

Retained earnings

118,520

115,759

Accumulated other comprehensive loss, net

(21,072)

(29,607)

Less treasury stock, at cost -

463,436

shares at both September 30, 2025

and December 31, 2024, respectively

(11,701)

(11,701)

Total stockholders’ equity

89,613

78,292

Total liabilities and stockholders’ equity

$

1,011,184

$

977,324

S

ee accompanying notes to consolidated financial statements

Table of Contents

4

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

(Unaudited)

Quarter ended September 30,

Nine months ended September 30,

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

2025

2024

2025

2024

Interest income:

Loans, including fees

$

7,793

$

7,641

$

23,012

$

22,082

Securities:

Taxable

1,220

1,327

3,751

4,109

Tax-exempt

68

77

205

225

Federal funds sold and interest-bearing bank deposits

1,331

914

3,416

2,356

Total interest income

10,412

9,959

30,384

28,772

Interest expense:

Deposits

2,840

3,169

8,422

8,613

Short-term borrowings

—

—

1

3

Total interest expense

2,840

3,169

8,423

8,616

Net interest income

7,572

6,790

21,961

20,156

Provision for credit losses

(255)

(127)

(152)

84

Net interest income after provision for credit losses

7,827

6,917

22,113

20,072

Noninterest income:

Service charges on deposit accounts

154

154

461

463

Mortgage lending

167

133

391

463

Bank-owned life insurance

103

100

309

301

Other

405

459

1,204

1,402

Total noninterest income

829

846

2,365

2,629

Noninterest expense:

Salaries and benefits

3,375

3,148

9,943

9,359

Net occupancy and equipment

598

614

1,916

1,980

Professional fees

312

291

984

931

Other

1,521

1,447

4,545

4,424

Total noninterest expense

5,806

5,500

17,388

16,694

Earnings before income taxes

2,850

2,263

7,090

6,007

Income tax expense

623

531

1,500

1,170

Net earnings

$

2,227

$

1,732

$

5,590

$

4,837

Net earnings per share:

Basic and diluted

$

0.64

$

0.50

$

1.60

$

1.38

Weighted average shares outstanding:

Basic

3,493,699

3,493,699

3,493,699

3,493,687

Diluted

3,495,972

3,493,699

3,494,465

3,493,687

S

ee accompanying notes to consolidated financial statements

Table of Contents

5

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

Net earnings

$

2,227

$

1,732

$

5,590

$

4,837

Other comprehensive income, net of tax:

Change in fair value on available-for-sale securities, net of tax

2,233

8,338

8,535

6,083

Other comprehensive income, net of tax

2,233

8,338

8,535

6,083

Comprehensive income

$

4,460

$

10,070

$

14,125

$

10,920

S

ee accompanying notes to consolidated financial statements

Table of Contents

6

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

(Unaudited)

Accumulated

Common

Additional

other

Shares

Common

paid-in

Retained

comprehensive

Treasury

(Dollars in thousands, except share data)

Outstanding

Stock

capital

earnings

income (loss)

stock

Total

Quarter ended September 30, 2025

Balance, June 30, 2025

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

—

—

25

—

—

—

25

Balance, September 30, 2025

3,493,699

$

39

$

3,827

$

118,520

$

(21,072)

$

(11,701)

$

89,613

Quarter ended September 30, 2024

Balance, June 30, 2024

3,493,699

$

39

$

3,802

$

114,353

$

(31,284)

$

(11,701)

$

75,209

Net earnings

—

—

—

1,732

—

—

1,732

Other comprehensive income

—

—

—

—

8,338

—

8,338

Cash dividends paid ($

.27

per share)

—

—

—

(943)

—

—

(943)

Balance, September 30, 2024

3,493,699

$

39

$

3,802

$

115,142

$

(22,946)

$

(11,701)

$

84,336

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

—

—

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, 2024

Balance, December 31, 2023

3,493,614

$

39

$

3,801

$

113,398

$

(29,029)

$

(11,702)

$

76,507

Cumulative effect of change in accounting

standard ASU 2023-12

—

—

—

(263)

—

—

(263)

Net earnings

—

—

—

4,837

—

—

4,837

Other comprehensive income

—

—

—

—

6,083

—

6,083

Cash dividends paid ($

.81

per share)

—

—

—

(2,830)

—

—

(2,830)

Sale of treasury stock

85

—

1

—

—

1

2

Balance, September 30, 2024

3,493,699

$

39

$

3,802

$

115,142

$

(22,946)

$

(11,701)

$

84,336

S

ee accompanying notes to consolidated financial statements

Table of Contents

7

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

Nine months ended September 30,

(Dollars in thousands)

2025

2024

Cash flows from operating activities:

Net earnings

$

5,590

$

4,837

Adjustments to reconcile net earnings to net cash provided by

operating activities:

Provision for credit losses

(152)

84

Depreciation and amortization

1,564

1,402

Premium amortization and discount accretion, net

1,047

1,155

Net gain on sale of loans held for sale

(150)

(194)

Loans originated for sale

(6,357)

(8,427)

Proceeds from sale of loans

6,318

8,002

Increase in cash surrender value of bank-owned life insurance

(309)

(301)

Stock-based compensation expense

25

—

Net decrease (increase) in other assets

111

(1,545)

Net increase in accrued expenses and other liabilities

1,162

2,996

Net cash provided by operating activities

8,849

8,009

Cash flows from investing activities:

Proceeds from prepayments and maturities of securities available-for-sale

16,942

19,592

Decrease (increase) in loans, net

6,012

(8,407)

Net purchases of premises and equipment

(845)

(1,930)

Decrease in FHLB stock

—

32

Net cash provided by investing activities

22,109

9,287

Cash flows from financing activities:

Net increase (decrease) in noninterest-bearing deposits

5,919

(479)

Net increase in interest-bearing deposits

15,523

5,960

Net decrease in federal funds purchased and securities sold

under agreements to repurchase

—

(1,486)

Dividends paid

(2,829)

(2,830)

Net cash provided by financing activities

18,613

1,165

Net change in cash and cash equivalents

49,571

18,461

Cash and cash equivalents at beginning of period

93,354

71,369

Cash and cash equivalents at end of period

$

142,925

$

89,830

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest

$

8,523

$

8,433

Income taxes

1,030

589

See accompanying notes to consolidated financial statements

Table of Contents

8

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Auburn National Bancorporation, Inc. (the “Company”) provides a full range of banking services to individuals and

commercial customers in Lee County, Alabama and surrounding areas through its wholly owned subsidiary, AuburnBank

(the “Bank”). The Company does not have any segments other than banking that are considered material.

Basis of Presentation and Use of Estimates

The unaudited consolidated financial statements in this report have been prepared in accordance with U.S. generally

accepted accounting principles (“GAAP”) for interim financial information. Accordingly, these financial statements do not

include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited

consolidated financial statements include, in the opinion of management, all adjustments necessary to present a fair

statement of the financial position and the results of operations for all periods presented. All such adjustments are of a

normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results of

operations that the Company and its subsidiaries may achieve for future interim periods or the entire year. For further

information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form

10-K for the year ended December 31, 2024.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

Significant intercompany transactions and accounts are eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of

the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could

differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term

include the determination of allowance for credit losses on loans and investment securities, the fair value of financial

instruments, and the valuation of deferred tax assets and other real estate owned (“OREO”).

Subsequent Events

The Company has evaluated the effects of events and transactions through the date of this filing that have occurred

subsequent to September 30, 2025. The Company does not believe there were any material subsequent events during this

period that would have required further recognition or disclosure in the unaudited consolidated financial statements

included in this report.

Reclassifications

Certain amounts reported in prior periods have been reclassified to conform to the current-period presentation. These

reclassifications had no effect on the Company’s previously reported net earnings or total stockholders’ equity.

Accounting Developments

I

n the first nine months of 2025, the Company did not adopt any new accounting guidance.

Table of Contents

9

NOTE 2: SECURITIES

At September 30, 2025 and December 31, 2024, respectively, all securities within the scope of ASC 320,

Investments –

Debt and Equity Securities,

were classified as available-for-sale. The fair value and amortized cost for securities available-

for-sale by contractual maturity at September 30, 2025 and December 31, 2024, respectively, are presented below.

1 year

1 to 5

5 to 10

After 10

Fair

Gross Unrealized

Amortized

(Dollars in thousands)

or less

years

years

years

Value

Gains

Losses

Cost

September 30, 2025

Agency obligations (a)

$

—

35,343

18,093

—

53,436

—

5,164

$

58,600

Agency MBS (a)

—

20,188

17,185

128,210

165,583

—

20,629

186,212

State and political subdivisions

—

1,653

9,095

6,653

17,401

1

2,346

19,746

Total available-for-sale

$

—

57,184

44,373

134,863

236,420

1

28,139

$

264,558

December 31, 2024

Agency obligations (a)

$

—

26,655

25,756

—

52,411

—

7,734

$

60,145

Agency MBS (a)

10

19,863

14,904

138,899

173,676

—

28,901

202,577

State and political subdivisions

—

966

8,244

7,715

16,925

—

2,901

19,826

Total available-for-sale

$

10

47,484

48,904

146,614

243,012

—

39,536

$

282,548

(a) Includes securities issued by U.S. government agencies or government -sponsored entities. Expected lives of these

securities may differ from contractual maturities because (i) issuers may have the right to call or repay such securities

obligations with or without prepayment penalties and (ii) borrowers of the loans included in Agency MBS generally

have the right to prepay such loan in whole or in part at any time.

Securities with aggregate fair values of $

202.8

million and $

222.3

million at September 30, 2025 and December 31, 2024,

respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, FHLB advances, and

for other purposes required or permitted by law.

Included in other assets on the accompanying consolidated balance sheets include non-marketable equity investments. The

carrying amounts of non-marketable equity investments were $

1.4

million at September 30, 2025 and December 31, 2024,

respectively. Non-marketable equity investments include FHLB of Atlanta stock, Federal Reserve Bank of Atlanta

(“FRB”) stock, and stock in a privately held financial institution.

Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at September 30, 2025 and December 31, 2024, respectively,

segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or

longer, are presented below.

Less than 12 Months

12 Months or Longer

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

Value

Losses

Value

Losses

Value

Losses

September 30, 2025:

Agency obligations

$

—

—

53,436

5,164

$

53,436

5,164

Agency MBS

96

1

165,487

20,628

165,583

20,629

State and political subdivisions

—

—

14,610

2,346

14,610

2,346

Total

$

96

1

233,533

28,138

$

233,629

28,139

December 31, 2024:

Agency obligations

$

—

—

52,411

7,734

$

52,411

7,734

Agency MBS

7

—

173,669

28,901

173,676

28,901

State and political subdivisions

1,798

17

14,776

2,884

16,574

2,901

Total

$

1,805

17

240,856

39,519

$

242,661

39,536

Table of Contents

10

For the securities in the previous table, the Company assesses whether or not it intends to sell the security, or more likely

than not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down

to fair value through net income. Because the Company currently does not intend to sell those securities that have an

unrealized loss at September 30, 2025, and it is not more-likely-than-not that the Company will be required to sell the

securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-

down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value of securities is the

result of credit deterioration, which would require the recognition of an allowance for credit losses. Such evaluations

consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other

known adverse conditions related to the specific security. The unrealized losses associated with securities at September 30,

2025 are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no

allowance for credit losses is considered necessary related to securities at September 30, 2025. These securities will

continue to be monitored as a part of the Company’s ongoing evaluation of credit quality. Management evaluates the

financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all

contractual principal and interest payments.

Realized Gains and Losses

The Company had no realized gains or losses on sale of securities during the quarter and nine months ended September 30,

2025 and 2024, respectively.

NOTE 3: LOANS AND ALLOWANCE FOR CREDIT LOSSES

September 30,

December 31,

(Dollars in thousands)

2025

2024

Commercial and industrial

$

55,102

$

63,274

Construction and land development

79,045

82,493

Commercial real estate:

Owner occupied

61,621

55,346

Hotel/motel

34,686

35,210

Multi-family

51,543

43,556

Other

150,831

155,880

Total commercial real estate

298,681

289,992

Residential real estate:

Consumer mortgage

59,419

60,399

Investment property

56,860

58,228

Total residential real estate

116,279

118,627

Consumer installment

8,805

9,631

Total Loans

$

557,912

$

564,017

Loans secured by real estate were approximately 88.5% of the Company’s total loan portfolio at September 30, 2025. At

September 30, 2025, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and

surrounding areas.

The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for

determining its allowance for credit losses. As part of the Company’s quarterly assessment of the allowance, the loan

portfolio included the following portfolio segments: commercial and industrial, construction and land development,

commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio

segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute,

risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk.

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

Commercial and industrial (“C&I”) —

includes loans to finance business operations, equipment purchases, or other needs

for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural

production. Generally, the primary source of repayment is the cash flow from business operations and activities of the

borrower.

Table of Contents

11

Construction and land development (“C&D”) —

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

carrying, and developing land into commercial developments or residential subdivisions. Also included are loans and credit

lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is

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

Commercial real estate (“CRE”) —

includes loans in these classes:

●

Owner occupied

– 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 repayment is the cash flow from business operations and activities of the borrower, who owns the

property.

●

Hotel/motel

– includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon

income generated from the hotel/motel securing the loan. The underwriting of these loans takes into consideration

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

●

Multi-family

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

for 5 or more unit residential properties and apartments leased to residents. Generally, the primary source of

repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans

takes into consideration the occupancy and rental rates, as well as the financial health of the respective borrowers.

●

Other

– primarily includes loans to finance income-producing commercial properties other than hotels/motels and

multi-family properties, and which are not owner occupied. Loans in this class include loans for neighborhood

retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to

local and other businesses. Generally, the primary source of repayment is dependent upon income generated from

the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates,

as well as the financial health of the borrower.

Residential real estate (“RRE”) —

includes loans in these two classes:

●

Consumer mortgage

– primarily includes first or second lien mortgages and home equity lines of credit 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 and property values, as

well as the financial health of the borrowers.

Consumer installment —

includes loans to individuals, which may be secured by personal property or are unsecured. Loans

include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with

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

borrower’s financial condition, satisfactory credit history, and, if applicable, property values.

Table of Contents

12

The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of

September 30, 2025 and December 31, 2024.

Accruing

Accruing

Total

30-89 Days

Greater than

Accruing

Non-

Total

(Dollars in thousands)

Current

Past Due

90 days

Loans

Accrual

Loans

September 30, 2025:

Commercial and industrial

$

55,058

44

—

55,102

—

$

55,102

Construction and land development

79,028

17

—

79,045

—

79,045

Commercial real estate:

Owner occupied

61,621

—

—

61,621

—

61,621

Hotel/motel

34,686

—

—

34,686

—

34,686

Multi-family

51,543

—

—

51,543

—

51,543

Other

150,831

—

—

150,831

—

150,831

Total commercial real estate

298,681

—

—

298,681

—

298,681

Residential real estate:

Consumer mortgage

59,269

5

77

59,351

68

59,419

Investment property

56,824

—

—

56,824

36

56,860

Total residential real estate

116,093

5

77

116,175

104

116,279

Consumer installment

8,780

25

—

8,805

—

8,805

Total

$

557,640

91

77

557,808

104

$

557,912

December 31, 2024:

Commercial and industrial

$

63,163

12

—

63,175

99

$

63,274

Construction and land development

82,089

—

—

82,089

404

82,493

Commercial real estate:

Owner occupied

55,346

—

—

55,346

—

55,346

Hotel/motel

35,210

—

—

35,210

—

35,210

Multi-family

43,556

—

—

43,556

—

43,556

Other

155,880

—

—

155,880

—

155,880

Total commercial real estate

289,992

—

—

289,992

—

289,992

Residential real estate:

Consumer mortgage

59,677

722

—

60,399

—

60,399

Investment property

58,179

49

—

58,228

—

58,228

Total residential real estate

117,856

771

—

118,627

—

118,627

Consumer installment

9,579

52

—

9,631

—

9,631

Total

$

562,679

835

—

563,514

503

$

564,017

Table of Contents

13

Credit Quality Indicators

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the

standard asset classification system used by the federal banking agencies. These categories are utilized to develop the

associated allowance for credit losses using historical losses adjusted for qualitative and environmental factors and are

defined as follows:

●

Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if

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

●

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or

inadequately protect the Company’s position at some future date. These loans are not adversely classified and do

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

●

Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment,

even though they are currently performing. These loans are characterized by the distinct possibility that the

Company may incur a loss in the future if these weaknesses are not corrected.

●

Nonaccrual – includes loans where management has determined that full payment of principal and interest is not

expected.

Substandard accrual and nonaccrual loans are often collectively referred to as “classified.”

Table of Contents

14

The following tables presents credit quality indicators for the loan portfolio segments and classes by year of origination as

of September 30, 2025 and December 31, 2024.

Year of Origination

2025

2024

2023

2022

2021

Prior to

2021

Revolving

Loans

Total

Loans

(Dollars in thousands)

September 30, 2025:

Commercial and industrial

Pass

$

5,899

4,440

5,140

7,832

11,061

19,001

1,395

$

54,768

Special mention

114

6

1

—

—

46

9

176

Substandard

—

—

7

—

—

—

151

158

Nonaccrual

—

—

—

—

—

—

—

—

Total commercial and industrial

6,013

4,446

5,148

7,832

11,061

19,047

1,555

55,102

Current period gross charge-offs

—

—

99

4

—

—

—

103

Construction and land development

Pass

17,376

37,622

16,279

2,116

372

80

5,200

79,045

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total construction and land development

17,376

37,622

16,279

2,116

372

80

5,200

79,045

Current period gross charge-offs

—

—

—

—

—

—

—

—

Commercial real estate:

Owner occupied

Pass

9,789

1,377

12,017

6,368

11,830

14,281

4,067

59,729

Special mention

628

—

—

—

764

—

—

1,392

Substandard

—

500

—

—

—

—

—

500

Nonaccrual

—

—

—

—

—

—

—

—

Total owner occupied

10,417

1,877

12,017

6,368

12,594

14,281

4,067

61,621

Current period gross charge-offs

—

—

—

—

—

—

—

—

Hotel/motel

Pass

5,068

429

6,082

9,092

2,982

10,886

147

34,686

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total hotel/motel

5,068

429

6,082

9,092

2,982

10,886

147

34,686

Current period gross charge-offs

—

—

—

—

—

—

—

—

Table of Contents

15

Year of Origination

2025

2024

2023

2022

2021

Prior to

2021

Revolving

Loans

Total

Loans

(Dollars in thousands)

September 30, 2025:

Multi-family

Pass

785

3,640

11,905

20,644

1,794

7,608

2,118

48,494

Special mention

—

—

—

—

—

—

3,049

3,049

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total multi-family

785

3,640

11,905

20,644

1,794

7,608

5,167

51,543

Current period gross charge-offs

—

—

—

—

—

—

—

—

Other

Pass

21,843

33,824

17,194

29,184

18,848

26,974

2,100

149,967

Special mention

—

366

—

—

498

—

—

864

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total other

21,843

34,190

17,194

29,184

19,346

26,974

2,100

150,831

Current period gross charge-offs

—

—

—

—

—

—

—

—

Residential real estate:

Consumer mortgage

Pass

4,245

4,784

16,110

17,385

2,411

11,417

1,668

58,020

Special mention

—

—

—

—

—

249

—

249

Substandard

245

—

—

—

—

837

—

1,082

Nonaccrual

—

—

68

—

—

—

—

68

Total consumer mortgage

4,490

4,784

16,178

17,385

2,411

12,503

1,668

59,419

Current period gross charge-offs

—

—

4

—

—

1

—

5

Investment property

Pass

6,582

8,515

10,506

9,964

7,015

12,298

1,611

56,491

Special mention

—

—

—

—

—

—

—

—

Substandard

237

—

—

—

5

—

91

333

Nonaccrual

—

—

36

—

—

—

—

36

Total investment property

6,819

8,515

10,542

9,964

7,020

12,298

1,702

56,860

Current period gross charge-offs

—

—

2

—

—

—

—

2

Consumer installment

Pass

3,507

2,377

1,197

1,063

153

86

362

8,745

Special mention

—

10

15

—

—

—

—

25

Substandard

8

6

13

8

—

—

—

35

Nonaccrual

—

—

—

—

—

—

—

—

Total consumer installment

3,515

2,393

1,225

1,071

153

86

362

8,805

Current period gross charge-offs

42

45

9

—

—

—

—

96

Total loans

Pass

75,094

97,008

96,430

103,648

56,466

102,631

18,668

549,945

Special mention

742

382

16

—

1,262

295

3,058

5,755

Substandard

490

506

20

8

5

837

242

2,108

Nonaccrual

—

—

104

—

—

—

—

104

Total loans

$

76,326

97,896

96,570

103,656

57,733

103,763

21,968

$

557,912

Total current period gross charge-offs

$

42

45

114

4

—

1

—

$

206

Table of Contents

16

Year of Origination

2024

2023

2022

2021

2020

Prior to

2020

Revolving

Loans

Total

Loans

(Dollars in thousands)

December 31, 2024:

Commercial and industrial

Pass

$

11,290

7,265

8,488

9,677

4,659

16,989

4,425

$

62,793

Special mention

49

74

—

—

—

—

—

123

Substandard

50

21

181

7

—

—

—

259

Nonaccrual

—

99

—

—

—

—

—

99

Total commercial and industrial

11,389

7,459

8,669

9,684

4,659

16,989

4,425

63,274

Current period gross charge-offs

—

—

9

—

—

—

—

9

Construction and land development

Pass

31,144

29,520

16,504

1,794

1,434

104

1,589

82,089

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

404

—

—

—

—

—

—

404

Total construction and land development

31,548

29,520

16,504

1,794

1,434

104

1,589

82,493

Current period gross charge-offs

—

—

—

—

—

—

—

—

Commercial real estate:

Owner occupied

Pass

1,921

11,206

6,776

17,114

3,396

12,030

1,552

53,995

Special mention

—

249

—

—

591

—

—

840

Substandard

511

—

—

—

—

—

—

511

Nonaccrual

—

—

—

—

—

—

—

—

Total owner occupied

2,432

11,455

6,776

17,114

3,987

12,030

1,552

55,346

Current period gross charge-offs

—

—

—

—

—

—

—

—

Hotel/motel

Pass

480

6,480

5,303

3,079

1,299

14,437

4,132

35,210

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total hotel/motel

480

6,480

5,303

3,079

1,299

14,437

4,132

35,210

Current period gross charge-offs

—

—

—

—

—

—

—

—

Table of Contents

17

Year of Origination

2024

2023

2022

2021

2020

Prior to

2020

Revolving

Loans

Total

Loans

(Dollars in thousands)

December 31, 2024:

Multi-family

Pass

3,739

6,041

17,037

1,863

3,493

6,400

4,983

43,556

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

—

—

—

—

Nonaccrual

—

—

—

—

—

—

—

—

Total multi-family

3,739

6,041

17,037

1,863

3,493

6,400

4,983

43,556

Current period gross charge-offs

—

—

—

—

—

—

—

—

Other

Pass

43,753

21,085

32,521

21,249

16,743

16,289

4,120

155,760

Special mention

—

—

—

—

—

—

—

—

Substandard

—

—

—

—

120

—

—

120

Nonaccrual

—

—

—

—

—

—

—

—

Total other

43,753

21,085

32,521

21,249

16,863

16,289

4,120

155,880

Current period gross charge-offs

—

—

—

—

—

—

—

—

Residential real estate:

Consumer mortgage

Pass

5,885

18,389

18,434

2,466

2,565

10,590

808

59,137

Special mention

243

—

—

—

2

486

—

731

Substandard

—

—

—

—

—

531

—

531

Nonaccrual

—

—

—

—

—

—

—

—

Total consumer mortgage

6,128

18,389

18,434

2,466

2,567

11,607

808

60,399

Current period gross charge-offs

—

—

—

—

—

61

—

61

Investment property

Pass

10,339

10,824

10,651

8,305

11,435

4,794

1,317

57,665

Special mention

—

—

—

—

—

—

—

—

Substandard

278

40

93

9

143

—

—

563

Nonaccrual

—

—

—

—

—

—

—

—

Total investment property

10,617

10,864

10,744

8,314

11,578

4,794

1,317

58,228

Current period gross charge-offs

—

—

—

—

—

—

—

—

Consumer installment

Pass

5,015

2,057

1,911

296

90

113

67

9,549

Special mention

—

9

—

9

—

—

—

18

Substandard

39

15

10

—

—

—

—

64

Nonaccrual

—

—

—

—

—

—

—

—

Total consumer installment

5,054

2,081

1,921

305

90

113

67

9,631

Current period gross charge-offs

25

42

42

1

—

4

—

114

Total loans

Pass

113,566

112,867

117,625

65,843

45,114

81,746

22,993

559,754

Special mention

292

332

—

9

593

486

—

1,712

Substandard

878

76

284

16

263

531

—

2,048

Nonaccrual

404

99

—

—

—

—

—

503

Total loans

$

115,140

113,374

117,909

65,868

45,970

82,763

22,993

$

564,017

T

otal current period gross charge-offs

$

25

42

51

1

—

65

—

$

184

Table of Contents

18

Allowance for Credit Losses

The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and for

loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an

individual basis.

The composition of the provision for credit losses for the respective periods is presented below.

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

Provision for credit losses:

Loans

$

(196)

$

(206)

$

(87)

$

15

Reserve for unfunded commitments

(59)

79

(65)

69

Total provision for credit losses

$

(255)

$

(127)

$

(152)

$

84

The following table details the changes in the allowance for credit losses for loans, by portfolio segment, for the respective

periods.

(Dollars in thousands)

Commercial and

industrial

Construction

and land

development

Commercial

real estate

Residential

real estate

Consumer

installment

Total

Quarter ended September 30, 2025:

Beginning balance

$

1,212

1,613

3,151

866

123

$

6,965

Charge-offs

—

—

—

—

(87)

(87)

Recoveries

—

—

—

4

5

9

Net recoveries (charge-offs)

—

—

—

4

(82)

(78)

Provision for credit losses

(86)

(61)

(113)

(34)

98

(196)

Ending balance

$

1,126

1,552

3,038

836

139

$

6,691

Nine months ended September 30, 2025:

Beginning balance

$

1,244

1,059

3,842

588

138

$

6,871

Charge-offs

(103)

—

—

(7)

(96)

(206)

Recoveries

30

—

—

68

15

113

Net (charge-offs) recoveries

(73)

—

—

61

(81)

(93)

Provision for credit losses

(45)

493

(804)

187

82

(87)

Ending balance

$

1,126

1,552

3,038

836

139

$

6,691

Quarter ended September 30, 2024:

Beginning balance

$

1,366

942

4,091

603

140

$

7,142

Charge-offs

—

—

—

(54)

(40)

(94)

Recoveries

25

—

—

2

7

34

Net recoveries (charge-offs)

25

—

—

(52)

(33)

(60)

Provision for credit losses

(231)

43

(102)

44

40

(206)

Ending balance

$

1,160

985

3,989

595

147

$

6,876

Nine months ended September 30, 2024:

Beginning balance

$

1,288

960

3,921

546

148

$

6,863

Charge-offs

(9)

—

—

(54)

(83)

(146)

Recoveries

99

—

—

7

38

144

Net recoveries (charge-offs)

90

—

—

(47)

(45)

(2)

Provision for credit losses

(218)

25

68

96

44

15

Ending balance

$

1,160

985

3,989

595

147

$

6,876

Table of Contents

19

The Company had no collateral dependent loans which were individually evaluated at September 30, 2025. The following

table presents the amortized cost basis of collateral dependent loans, which were individually evaluated to determine

expected credit losses at December 31, 2024.

Business

(Dollars in thousands)

Real Estate

Assets

Total Loans

December 31, 2024:

Commercial and industrial

$

—

99

$

99

Construction and land development

404

—

404

Total

$

404

99

$

503

The following table summarizes the Company’s nonaccrual loans by major categories for the respective periods.

Nonaccrual Loans

Nonaccrual Loans

Total

(Dollars in thousands)

With No Allowance

With An Allowance

Nonaccrual Loans

September 30, 2025

Residential real estate

$

—

104

$

104

Total

$

—

104

$

104

December 31, 2024

Commercial and industrial

$

—

99

$

99

Construction and land development

404

—

404

Total

$

404

99

$

503

Table of Contents

20

NOTE 4: MORTGAGE SERVICING RIGHTS, NET

Mortgage servicing rights (“MSRs”) are recognized based on the fair value of the servicing rights on the date the

corresponding mortgage loans are sold. An estimate of the fair value of the Company’s MSRs is determined using

assumptions that market participants would use in estimating future net servicing income, including estimates of

prepayment speeds, discount rates, default rates, costs to service, escrow account earnings, contractual servicing fee

income, ancillary income, and late fees. Subsequent to the date of transfer, the Company has elected to measure its MSRs

under the amortization method. Under the amortization method, MSRs are amortized in proportion to, and over the period

of, estimated net servicing income.

The Company generally sells, without recourse, conforming, fixed-rate, closed-end, residential mortgages to Fannie Mae,

where the Company services the mortgages sold and records MSRs. MSRs are included in other assets on the

accompanying consolidated balance sheets.

The Company evaluates MSRs for impairment on a quarterly basis. Impairment is determined by stratifying MSRs into

groupings based on predominant risk characteristics, such as interest rate and loan type. If, by individual stratum, the

carrying amount of the MSRs exceeds fair value, a valuation allowance is established. The valuation allowance is adjusted

as the fair value changes. Changes in the valuation allowance are recognized in earnings as a component of mortgage

lending income.

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

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

MSRs, net:

Beginning balance

$

827

$

942

$

892

$

992

Additions, net

27

28

44

54

Amortization expense

(48)

(51)

(130)

(127)

Ending balance

$

806

$

919

$

806

$

919

Valuation allowance included in MSRs, net:

Beginning of period

$

—

$

—

$

—

$

—

End of period

—

—

—

—

Fair value of amortized MSRs:

Beginning of period

$

2,203

$

2,346

$

2,204

$

2,382

End of period

2,110

2,171

2,110

2,171

NOTE 5: FAIR VALUE

Fair Value Hierarchy

“Fair value” is defined by ASC 820,

Fair Value Measurements and Disclosures

, and focuses on the exit price, i.e., the price

that would be received to sell an asset or paid to transfer a liability in an orderly transaction occurring in the principal

market (or most advantageous market in the absence of a principal market) for an asset or liability at the measurement date.

GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active

markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as

follows:

Level 1—inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active

markets.

Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets,

quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable for the

asset or liability, either directly or indirectly.

Table of Contents

21

Level 3—inputs to the valuation methodology are unobservable and reflect the Company’s own assumptions about the

inputs market participants would use in pricing the asset or liability.

Level changes in fair value measurements

Transfers between levels of the fair value hierarchy are generally recognized at the end of each reporting period. The

Company monitors the valuation techniques utilized for each category of financial assets and liabilities to ascertain when

transfers between levels have been affected. The nature of the Company’s financial assets and liabilities generally is such

that transfers in and out of any level are expected to be infrequent. For the nine months ended September 30, 2025, there

were no transfers between levels and no changes in valuation techniques for the Company’s financial assets and liabilities.

Assets and liabilities measured at fair value on a recurring basis

Securities available-for-sale

Fair values of securities available for sale were primarily measured using Level 2 inputs. For these securities, the Company

obtains pricing data from third-party pricing services. These third-party pricing services consider observable data that may

include broker/dealer quotes, market spreads, cash flows, benchmark yields, reported trades for similar securities, market

consensus prepayment speeds, credit information, and the securities’ terms and conditions. On a quarterly basis,

management reviews the pricing data received from the third-party pricing services for reasonableness given current market

conditions. As part of its review, management may obtain non-binding third-party broker/dealer quotes to validate the fair

value measurements. In addition, management will periodically submit pricing information provided by the third-party

pricing services to another independent valuation firm on a sample basis. This independent valuation firm will compare the

prices provided by the third-party pricing service with its own prices and will review the significant assumptions and

valuation methodologies used with management.

The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of

September 30, 2025 and December 31, 2024, respectively, by caption, on the accompanying consolidated balance sheets by

ASC 820 valuation hierarchy (as described above).

Quoted Prices in

Significant

Active Markets

Other

Significant

for

Observable

Unobservable

Identical Assets

Inputs

Inputs

(Dollars in thousands)

Amount

(Level 1)

(Level 2)

(Level 3)

September 30, 2025:

Securities available-for-sale:

Agency obligations

$

53,436

—

53,436

—

Agency MBS

165,583

—

165,583

—

State and political subdivisions

17,401

—

17,401

—

Total securities available -for-sale

236,420

—

236,420

—

Total assets at fair value

$

236,420

—

236,420

—

December 31, 2024:

Securities available-for-sale:

Agency obligations

$

52,411

—

52,411

—

Agency MBS

173,676

—

173,676

—

State and political subdivisions

16,925

—

16,925

—

Total securities available -for-sale

243,012

—

243,012

—

Total assets at fair value

$

243,012

—

243,012

—

Table of Contents

22

Assets and liabilities measured at fair value on a nonrecurring basis

Loans held for sale

Loans held for sale are carried at the lower of cost or fair value. Fair values of loans held for sale are determined using

quoted secondary market prices for similar loans. Loans held for sale are classified within Level 2 of the fair value

hierarchy.

Collateral dependent loans

Collateral dependent loans are measured at the fair value of the collateral securing the loan less estimated selling costs. The

fair value of real estate collateral is determined based on real estate appraisals which are generally based on recent sales of

comparable properties which are then adjusted for property specific factors. Non-real estate collateral is valued based on

various sources, including third party asset valuations and internally determined values based on cost adjusted for

depreciation and other judgmentally determined discount factors. Collateral dependent loans are classified within Level 3 of

the hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower's

underlying financial condition.

Mortgage servicing rights, net

MSRs, net, included in other assets on the accompanying consolidated balance sheets, are carried at the lower of cost or

estimated fair value. MSRs do not trade in an active market with readily observable prices. To determine the fair value of

MSRs, the Company engages an independent third party. The independent third party’s valuation model calculates the

present value of estimated future net servicing income using assumptions that market participants would use in estimating

future net servicing income, including estimates of mortgage prepayment speeds, discount rates, default rates, costs to

service, escrow account earnings, contractual servicing fee income, ancillary income, and late fees. Periodically, the

Company will review broker surveys and other market research to validate significant assumptions used in the model. The

significant unobservable inputs include mortgage prepayment speeds or the constant prepayment rate (“CPR”) and the

weighted average discount rate. Because the valuation of MSRs requires the use of significant unobservable inputs, all of

the Company’s MSRs are classified within Level 3 of the valuation hierarchy.

The following table presents the balances of the assets and liabilities measured at fair value on a nonrecurring basis as of

September 30, 2025 and December 31, 2024, respectively, by caption, on the accompanying consolidated balance sheets

and by FASB ASC 820 valuation hierarchy (as described above):

Quoted Prices in

Active Markets

Other

Significant

for

Observable

Unobservable

Carrying

Identical Assets

Inputs

Inputs

(Dollars in thousands)

Amount

(Level 1)

(Level 2)

(Level 3)

September 30, 2025:

Loans held for sale

$

145

—

145

—

Other assets

(2)

806

—

—

806

Total assets at fair value

$

951

—

145

806

December 31, 2024:

Loans, net

(1)

$

503

—

—

503

Other assets

(2)

892

—

—

892

Total assets at fair value

$

1,395

—

—

1,395

(1)

Loans considered collateral dependent under ASC 326.

(2)

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

Table of Contents

23

Quantitative Disclosures for Level 3 Fair Value Measurements

At September 30, 2025 and December 31, 2024, the Company had no Level 3 assets measured at fair value on a recurring

basis. For Level 3 assets measured at fair value on a non-recurring basis at September 30, 2025 and December 31, 2024,

the significant unobservable inputs used in the fair value measurements and the range of such inputs with respect to such

assets are presented below.

Range of

Weighted

Carrying

Significant

Unobservable

Average

(Dollars in thousands)

Amount

Valuation Technique

Unobservable Input

Inputs

of Input

September 30, 2025:

Mortgage servicing rights, net

$

806

Discounted cash flow

Prepayment speed or CPR

6.4

-

11.2

%

7.9

%

Discount rate

9.5

-

11.5

9.5

December 31, 2024:

Collateral dependent loans

$

503

Appraisal

Appraisal discounts

10.0

-

10.0

%

10.0

%

Mortgage servicing rights, net

892

Discounted cash flow

Prepayment speed or CPR

6.7

-

11.2

7.3

Discount rate

10.0

-

12.0

10.0

Fair Value of Financial Instruments

ASC 825,

Financial Instruments

, requires disclosure of fair value information about financial instruments, whether or not

recognized on the face of the balance sheet, where it is practicable to estimate that value. The assumptions used in the

estimation of the fair value of the Company’s financial instruments are explained below. Where quoted market prices are

not available, fair values are based on estimates using discounted cash flow analyses. Discounted cash flows can be

significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The

following fair value estimates cannot be substantiated by comparison to independent markets and should not be considered

representative of the liquidation value of the Company’s financial instruments, but rather are good-faith estimates of the fair

value of financial instruments held by the Company. ASC 825 excludes certain financial instruments and all nonfinancial

instruments from its disclosure requirements.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Loans, net

Fair values for loans were calculated using discounted cash flows. The discount rates reflected current rates at which similar

loans would be made for the same remaining maturities. Expected future cash flows were projected based on contractual

cash flows, adjusted for estimated prepayments. The fair value of loans was measured using an exit price notion.

Loans held for sale

Fair values of loans held for sale are determined using quoted secondary market prices for similar loans.

Time Deposits

Fair values for time deposits were estimated using discounted cash flows. The discount rates were based on rates currently

offered for deposits with similar remaining maturities.

Table of Contents

24

The carrying value, related estimated fair value, and placement in the fair value hierarchy of the Company’s financial

instruments at September 30, 2025 and December 31, 2024 are presented below. This table excludes financial instruments

for which the carrying amount approximates fair value. Financial assets for which fair value approximates carrying value

included cash and cash equivalents. Financial liabilities for which fair value approximates carrying value included

noninterest-bearing demand deposits, interest-bearing demand deposits, and savings deposits. Fair value approximates

carrying value in these financial liabilities due to these products having no stated maturity. Additionally, financial

liabilities for which fair value approximates carrying value included overnight borrowings such as federal funds purchased

and securities sold under agreements to repurchase.

The following table summarizes our fair value estimates:

Fair Value Hierarchy

Carrying

Estimated

Level 1

Level 2

Level 3

(Dollars in thousands)

amount

fair value

inputs

inputs

Inputs

September 30, 2025:

Financial Assets:

Loans, net (1)

$

551,221

$

534,754

—

—

$

534,754

Loans held for sale

145

148

—

148

—

Financial Liabilities:

Time Deposits

$

180,957

$

180,076

—

180,076

$

—

December 31, 2024:

Financial Assets:

Loans, net (1)

$

557,146

$

532,344

—

—

$

532,344

Financial Liabilities:

Time Deposits

$

191,247

$

190,636

—

190,636

$

—

(

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

Table of Contents

25

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

General

Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company registered with the Board of Governors

of the Federal Reserve System (the “Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the

“BHC Act”). The Company was incorporated in Delaware in 1990, and in 1994 it succeeded its Alabama predecessor as the

bank holding company controlling AuburnBank, an Alabama state member bank with its principal office in Auburn,

Alabama (the “Bank”). The Company and its predecessor have controlled the Bank since 1984. As a bank holding

company, the Company may diversify into a broader range of financial services and other business activities than currently

are permitted to the Bank under applicable laws and regulations. The holding company structure also provides greater

financial and operating flexibility than is presently permitted to the Bank.

The Bank has operated continuously since 1907 and currently conducts its business primarily in East Alabama, including

Lee County and surrounding areas. The Bank has been a member of the Federal Reserve System since April 1995. The

Bank’s primary regulators are the Federal Reserve and the Alabama Superintendent of Banks (the “Alabama

Superintendent”). The Bank has been a member of the FHLB of Atlanta since 1991. Certain of the statements made in this

discussion and analysis and elsewhere, including information incorporated herein by reference to other documents, are

“forward-looking statements” as more fully described under “Special Cautionary Notice Regarding Forward-Looking

Statements” below.

The following discussion and analysis is intended to provide a better understanding of various factors related to the results

of operations and financial condition of the Company and the Bank. This discussion is intended to supplement and

highlight information contained in the accompanying unaudited condensed consolidated financial statements and related

notes for the quarters and nine months ended September 30, 2025 and 2024, as well as the information contained in our

annual report on Form 10-K for the year ended December 31, 2024 and our interim reports on Form 10-Q for the quarters

ended March 31, 2025 and June 30, 2025.

Special Cautionary Notice Regarding Forward-Looking Statements

Various of the statements made herein under the captions “Management’s Discussion and Analysis of Financial Condition

and Results of Operations”, “Quantitative and Qualitative Disclosures about Market Risk”, “Risk Factors” “Description of

Property” and elsewhere, are “forward-looking statements” within the meaning and protections of Section 27A of the

Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations,

anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks,

uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance,

achievements or financial condition of the Company to be materially different from future results, performance,

achievements or financial condition expressed or implied by such forward-looking statements. You should not expect us to

update any forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can

identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,”

“should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “designed,” “plan,” “point to,”

“project,” “could,” “intend,” “target,” “seek” and other similar words and expressions of the future. These forward-looking

statements may not be realized due to a variety of factors, including, without limitation:

●

the effects of future economic, business and market conditions and changes, foreign, domestic and locally,

including inflation, seasonality, natural disasters or climate change, such as rising sea and water levels, hurricanes

and tornadoes, epidemics or pandemics including supply chain disruptions, inventory volatility, and changes in

consumer behaviors;

●

the effects of war or other conflicts, acts of terrorism, trade restrictions, tariffs, sanctions, the value of the U.S.

dollar against other currencies, or other events that may affect general economic conditions, including inflation,

and consumer and business confidence;

Table of Contents

26

●

governmental monetary and fiscal policies, including taxes, federal deficit spending and the debt required to fund

such spending, changes in monetary policies in response to inflation and changes in prices and unemployment,

including changes in the Federal Reserve’s target federal funds rate and changes in the Federal Reserve’s holdings

of securities through quantitative tightening or easing; and the timing and speed of any changes in furtherance of

the Federal Reserve’s long-term inflation target of 2% while supporting maximum employment;

●

the effects of the federal government shutdown that began October 1, 2025 due to federal budget disputes, which

continues and the effects of any resolution of such disputes;

●

legislative, executive branch and regulatory changes, including changes by executive orders, the possible

reorganization and/or consolidation of the bank regulatory agencies, the SEC and/or the CFPB, changes in the

leadership and personnel, including reductions in the number and experience of personnel, at the bank and

securities regulators and the CFPB, oversight by the Office of Management and Budget of these agencies, freezes

on changes in regulations and interpretations, numerous new Executive Orders, and the uncertain effects of all

these, including the costs and benefits of such changes;

●

the effects of the potential privatization of Fannie Mae and Freddie Mac and their release from conservatorship on

the mortgage markets and us as an originator, seller and servicer of residential mortgage loans;

●

recent Supreme Court rulings that may lead to more court challenges to regulations and regulatory actions, which

may cause uncertainty, wasted implementation costs and time by the industry, and lengthy delays until ultimate

resolution;

●

changes in banking, securities and tax laws, regulations and rules and their application and enforcement by the

regulators, including capital and liquidity requirements, and changes in the scope and cost of FDIC insurance;

●

changes in accounting pronouncements and interpretations;

●

the failure of assumptions and estimates, including those used in the Company’s CECL models to establish our

allowance for credit losses and estimate asset impairments, as well as differences in, and changes to, economic,

market and credit conditions, including changes in borrowers’ credit risks and payment behaviors from those used

in our CECL models and loan portfolio reviews;

●

the risks of changes in market interest rates and the shape of the yield curve on customer behaviors; the levels,

composition and costs of deposits, loan demand and mortgage loan originations; the values and liquidity of loan

collateral, our securities portfolio and interest-sensitive assets and liabilities; and the risks and uncertainty of the

amounts realizable on collateral;

●

the risks of increases in market interest rates creating unrealized losses on our securities available for sale, which

adversely affect our stockholders’ equity for financial reporting purposes and our tangible equity;

●

changes in borrower liquidity and credit risks, and changes in savings, deposit and payment behaviors;

●

changes in the availability and cost of credit and capital in the financial markets, and the types of instruments that

may be included as capital for regulatory purposes;

●

changes in the prices, values and sales volumes of residential and commercial real estate;

●

the effects of competition from a wide variety of local, regional, national and other providers of financial,

investment and insurance services, including the disruptive effects of financial technology and other competitors

who are not subject to the same regulation, including capital and liquidity requirements, internal controls, and

supervision and examination, as the Company and the Bank, and competition from credit unions, which are not

subject to federal income taxation;

Table of Contents

27

●

legislation such as the federal GENIUS Act on stablecoins signed into law on July 18, 2025, and the proposed

CLARITY Act and the Anti-CBDC Surveillance Act bills being considered by Congress, more permissive

policies, regulation and/or enforcement regarding digital assets, such as cyber currency and stable coins, including

the chartering of new depository institutions focused on crypto coins and which creates additional competition to

banks and potential disintermediation of deposits, and greater risks to the payment systems that the banking

industry, including the Company, relies on, and greater risks of fraud and theft of digital assets and their effects on

customers, other financial institutions, including our counterparties, financial stability and confidence in the

financial system, generally;

●

the timing and amount of rental income from third parties from office space in our Auburn Center headquarters

and in former office locations;

●

the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of

implementing such transactions, integrating operations as part of these transactions and possible failures to achieve

expected gains, revenue growth and/or expense savings from such transactions;

●

changes in technology or products that may be more difficult, costly, or less effective than anticipated;

●

cyber-attacks and data breaches that may compromise our systems, our vendors’ systems or customers’

information;

●

the risks that our deferred tax assets (“DTAs”) included in “other assets” on our consolidated balance sheets, if

any, could be reduced if estimates of future taxable income from our operations and tax planning strategies are less

than currently estimated, and sales of our capital stock could trigger a reduction in the amount of net operating loss

carry-forwards that we may be able to utilize for income tax purposes;

●

the risks that our dividends, share repurchases and discretionary bonuses are limited by regulation requiring the

maintenance of capital, including a capital conservation buffer of 2.5% and to the amount of our future earnings

and “eligible retained earnings” over rolling four calendar quarter periods;

●

other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we make

with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

All written or oral forward-looking statements that we make or are attributable to us are expressly qualified in their entirety

by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-

looking statements after the date of this report, or after the respective dates on which such statements otherwise are made.

Summary of Results of Operations

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands, except per share amounts)

2025

2024

2025

2024

Net interest income (a)

$

7,590

$

6,811

$

22,015

$

20,216

Less: tax-equivalent adjustment

18

21

54

60

Net interest income (GAAP)

7,572

6,790

21,961

20,156

Noninterest income

829

846

2,365

2,629

Total revenue

8,401

7,636

24,326

22,785

Provision for credit losses

(255)

(127)

(152)

84

Noninterest expense

5,806

5,500

17,388

16,694

Income tax expense

623

531

1,500

1,170

Net earnings

$

2,227

$

1,732

$

5,590

$

4,837

Basic and diluted earnings per share

$

0.64

$

0.50

$

1.60

$

1.38

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

Table of Contents

28

Financial Summary

The Company’s net earnings were $5.6 million for the first nine months of 2025, a 16% increase compared to $4.8 million

for the first nine months of 2024. Basic and diluted earnings per share were $1.60 per share for the first nine months of

2025, compared to $1.38 per share for the first nine months of 2024.

Net interest income (tax-equivalent) was $22.0 million for the first nine months of 2025, a 9% increase compared to $20.2

million for the first nine months of 2024. This increase was primarily due to an increase in the Company’s net interest

margin and an increase in average interest-earning assets. The Company’s net interest margin (tax-equivalent) was 3.26%

for the first nine months of 2025 compared to 3.05% for the first nine months of 2024. This increase was primarily due to

improvements in our yields on interest-earning assets, and a decrease in our cost of interest-bearing deposits. See “Results

of Operations – Average Balance Sheet and Interest Rates” and “Net Interest Income and Margin” below.

At September 30, 2025, the Company’s allowance for credit losses was $6.7 million, or 1.20% of total loans, compared to

$6.9 million, or 1.22% of total loans, at December 31, 2024, and $6.9 million, or 1.22% of total loans, at September 30,

2024.

The Company recorded a negative provision for credit losses during the first nine months of 2025 of $152 thousand,

compared to a charge to provision of $84 thousand during the first nine months of 2024. The provision for credit losses

under CECL reflects the Company’s evaluation of its credit risk profile and its future economic outlook and forecasts. Our

CECL model is largely influenced by economic factors including, the anticipated Alabama unemployment rate, which may

be affected by government policies, including monetary, fiscal and other policies, including tariffs.

Noninterest income was $2.4 million in the first nine months of 2025, compared to $2.6 million in the first nine months of

2024. The decrease was primarily related to a decrease in mortgage lending income and other noninterest income.

Noninterest expense was $17.4 million in the first nine months of 2025, compared to $16.7 million for the first nine months

of 2024. The increase was primarily related to increases in salaries and benefits expense and other noninterest expense.

These increases were partially offset by a decrease in net occupancy and equipment expense.

Income tax expense was $1.5 million for the first nine months of 2025 compared to $1.2 million for the first nine months of

2024. The Company's effective tax rate for the first nine months of 2025 was 21.16%, compared to 19.48% in the first nine

months of 2024. The Company’s effective income tax rate is affected principally by tax-exempt earnings from the

Company’s investments in municipal securities and loans, bank-owned life insurance (“BOLI”), and New Markets Tax

Credits (“NMTCs”).

The Company paid cash dividends of $0.81 per share in the first nine months of 2025 and 2024. At September 30, 2025,

the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current

regulatory standards with a total risk-based capital ratio of 16.49%, a tier 1 leverage ratio of 10.72% and a common equity

tier 1 (“CET1”) ratio of 15.51% at September 30, 2025. See “Balance Sheet Analysis – Capital Adequacy”.

For the third quarter of 2025, net earnings were $2.2 million, or $0.64 per share, compared to $1.7 million, or $0.50 per

share, for the third quarter of 2024. Net interest income (tax-equivalent) was $7.6 million for the third quarter of 2025

compared to $6.8 million for the third quarter of 2024. The increase was due to growth in average interest-earning assets

and improvements in our net interest margin. The Company’s net interest margin (tax-equivalent) was 3.30% in the third

quarter of 2025 compared to 3.05% in the third quarter of 2024. The increase was primarily due to improved yields on

interest-earning assets, and a decrease in our cost of interest-bearing deposits. The Company recorded a negative provision

for credit losses of $255 thousand in the third quarter of 2025, compared to a negative provision for credit losses of $127

thousand in the third quarter of 2024. Noninterest income was $0.8 million for the third quarter of 2025 and 2024.

Noninterest expense was $5.8 million in the third quarter of 2025, compared to $5.5 million for the third quarter of 2024.

The increase in noninterest expense was primarily due to increases in salaries and benefits expense and increases in other

noninterest expense. Income tax expense was $0.6 million for the third quarter of 2025 compared to $0.5 million for the

third quarter of 2024. The Company’s effective tax rate for the third quarter of 2025 was 21.86%, compared to 23.46% in

the third quarter of 2024.

Table of Contents

29

CRITICAL ACCOUNTING POLICIES

The accounting principles we follow and our methods of applying these principles conform with U.S. GAAP and with

general practices within the banking industry. There have been no significant changes to our Critical Accounting Policies as

described in our Form 10-K as of and for the year ended December 31, 2024.

RESULTS OF OPERATIONS

Average Balance Sheet and Interest Rates

Nine months ended September 30,

2025

2024

Average

Yield/

Average

Yield/

(Dollars in thousands)

Balance

Rate

Balance

Rate

Loans and loans held for sale

$

560,946

5.48%

$

568,939

5.18%

Securities - taxable

230,165

2.18%

248,923

2.20%

Securities - tax-exempt

9,131

3.79%

10,235

3.71%

Total securities

239,296

2.24%

259,158

2.26%

Federal funds sold

26,717

4.38%

18,014

5.47%

Interest bearing bank deposits

76,254

4.46%

39,530

5.47%

Total interest-earning assets

903,213

4.51%

885,641

4.35%

Deposits:

NOW

202,381

1.35%

193,428

1.41%

Savings and money market

254,095

1.01%

250,146

0.79%

Time deposits

185,355

3.22%

196,584

3.45%

Total interest-bearing deposits

641,831

1.75%

640,158

1.80%

Short-term borrowings

37

3.61%

838

0.48%

Total interest-bearing liabilities

641,868

1.75%

640,996

1.80%

Net interest income and margin (tax-equivalent)

$

22,015

3.26%

$

20,216

3.05%

See Tables 4 and 5 – Average Balances and Net Interest Income Analysis for the quarters and nine months ended

September 30, 2025 and 2024, and Table 6 – Volume and Rate Variance Analysis.

Net Interest Income and Margin

Net interest income (tax-equivalent) was $22.0 million for the first nine months of 2025, a 9% increase compared to $20.2

million for the first nine months of 2024. This increase was primarily due to an increase in the Company’s net interest

margin and an increase in average interest-earning assets. The Company’s net interest margin (tax-equivalent) was 3.26%

in the first nine months of 2025 compared to 3.05% in the first nine months of 2024. This increase was primarily due to

improvements in our yields on interest-earning assets, and a decrease in our cost of our interest-bearing deposits. Since

March 2022, the Federal Reserve increased the target federal funds rate by 525 basis points before announcing a 50-basis

points rate reduction on September 18, 2024, its first decrease in rates since its March 2020 COVID rate reduction,

followed by two 25 basis points reductions in October and December 2024 and another 25 basis point reduction in

September 2025. At September 30, 2025, the Federal Reserve’s target federal funds rate ranged from 4.00% to 4.25%. The

Federal Reserve further reduced its target federal funds rate range to 3.75% to 4.00% on October 29, 2025.

The tax-equivalent yield on total interest-earning assets increased by 16 basis points to 4.51% in the first nine months of

2025 compared to 4.35% in the first nine months of 2024. This increase was primarily due to changes in our asset mix, as

cash and cash equivalents increased and securities declined. Average interest-earning assets were $903.2 million during the

first nine months of 2025, a 2% increase compared to $885.6 million during the first nine months of 2024.

The cost of interest-bearing liabilities decreased 5 basis points in the first first nine months of 2025 to 175 basis points,

compared to 180 basis points in the first first nine months of 2024. Our deposit costs may fluctuate as we compete for

deposit funds against other banks, money market mutual funds, Treasury securities and other interest-bearing alternative

investments.

Table of Contents

30

The Company continues to deploy various asset liability management strategies to manage its risks from interest rate

fluctuations. Deposit and loan pricing remain competitive in our markets. We believe this challenging rate environment

will continue throughout the remainder of 2025. Our ability to compete and manage our deposit costs until our interest-

earning assets reprice and we generate new loans with current market interest rates will be important to our net interest

margin during the remainder of 2025.

Provision for Credit Losses

The Company recorded a negative provision for credit losses during the first nine months of 2025 of $152 thousand,

compared to a charge of $84 thousand during the first nine months of 2024. Provision expense is affected by organic loan

growth in our loan portfolio, our internal assessment of the credit quality of the loan portfolio, our expectations about future

economic conditions and net charge-offs. Our CECL model is largely influenced by economic factors including, the

anticipated Alabama unemployment rate, which may be affected by government policies, including monetary, fiscal and

other policies, including tariffs. The negative provision for the first nine months of 2025 was primarily driven by

improvements in the economic forecasts utilized in the model, most notably a reduction in the Alabama unemployment

rate. The reclassification, upon completion of construction of two multifamily projects, from the construction and land

development loan segment to the multifamily loan segment, which carries lower modeled loss rates, also contributed to the

negative provision for credit losses during the current period.

Our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment

methodology, to adequately cover all expected credit losses as of the date the allowance is determined. At September 30,

2025, the Company’s allowance for credit losses was $6.7 million, or 1.20% of total loans, compared to $6.9 million, or

1.22% of total loans, at December 31, 2024, and $6.9 million, or 1.22% of total loans, at September 30, 2024.

Noninterest Income

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

Service charges on deposit accounts

$

154

$

154

$

461

$

463

Mortgage lending income

167

133

391

463

Bank-owned life insurance

103

100

309

301

Other

405

459

1,204

1,402

Total noninterest income

$

829

$

846

$

2,365

$

2,629

The Company’s mortgage lending income includes income from the (1) origination and sale of mortgage loans and (2)

servicing of mortgage loans. Origination income, net, is comprised of gains or losses from the sale of the mortgage loans

originated, origination fees, underwriting fees, and other fees associated with the origination of loans, which are netted

against the commission expense associated with these originations. The Company’s normal practice is to originate

mortgage loans for sale in the secondary market and to either sell or retain the associated MSRs when the loan is sold.

MSRs are recognized based on the fair value of the servicing right on the date the corresponding mortgage loan is sold.

The Company has elected to measure its MSRs under the amortization method. Servicing fee income is reported net of any

related amortization expense.

The Company evaluates MSRs for impairment on a quarterly basis. Impairment is determined by grouping MSRs by

common predominant characteristics, such as interest rate and loan type. If the aggregate carrying amount of a particular

group of MSRs exceeds the group’s aggregate fair value, a valuation allowance for that group is established. The valuation

allowance is adjusted as the fair value changes. An increase in mortgage interest rates typically results in an increase in the

fair value of the MSRs while a decrease in mortgage interest rates typically results in a decrease in the fair value of MSRs.

The following table presents a breakdown of the Company’s mortgage lending income.

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

Origination income

$

93

$

52

$

150

$

194

Servicing fees, net

74

81

241

269

Total mortgage lending income

$

167

$

133

$

391

$

463

Table of Contents

31

The Company’s mortgage lending income typically fluctuates as mortgage interest rates, housing sales and refinancings

change. Origination income decreased in the first nine months of 2025 compared to the first nine months of 2024 due to a

decrease in mortgage lending demand in our primary market area.

Other noninterest income was $2.4 million for the first nine months of 2025, compared to $2.6 million for the first nine

months of 2024. The decrease in other noninterest income was primarily due to decreased fee income on reciprocal

deposits sold through the Intrafi network.

Noninterest Expense

Quarter ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2025

2024

2025

2024

Salaries and benefits

$

3,375

$

3,148

$

9,943

$

9,359

Net occupancy and equipment

598

614

1,916

1,980

Professional fees

312

291

984

931

Other

1,521

1,447

4,545

4,424

Total noninterest expense

$

5,806

$

5,500

$

17,388

$

16,694

The increase in salaries and benefits expense was primarily due to routine annual increases in salaries and wages.

Income Tax Expense

Income tax expense was $1.5 million for the first nine months of 2025 compared to $1.2 million for the first nine months of

2024. The Company's effective tax rate for the first nine months of 2025 was 21.16%, compared to 19.48% in the first nine

months of 2024. The Company’s effective income tax rate is affected principally by tax-exempt earnings from the

Company’s investments in municipal securities and loans, BOLI, and NMTCs.

BALANCE SHEET ANALYSIS

Securities

Securities available-for-sale were $236.4 million at September 30, 2025, compared to $243.0 million at December 31,

2024. This decrease reflects the effects of an $18.0 million decrease in the amortized cost basis of securities available-for-

sale and an increase in the fair value of securities available-for-sale of $11.4 million. Unrealized losses on securities

declined 29% in the first nine months of 2025, primarily due to decreases in market interest rates.

The average annualized tax-equivalent yields earned on total securities were 2.24 % in the first nine months of 2025

compared to 2.26% in the first nine months of 2024.

Loans

2025

2024

Third

Second

First

Fourth

Third

(In thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

Commercial and industrial

$

55,102

59,773

59,061

63,274

61,510

Construction and land development

79,045

93,820

86,403

82,493

77,956

Commercial real estate

298,681

282,868

288,353

289,992

297,773

Residential real estate

116,279

117,160

117,500

118,627

118,582

Consumer installment

8,805

9,093

9,333

9,631

9,878

Total loans

$

557,912

562,714

560,650

564,017

565,699

Total loans were $557.9 million at September 30, 2025, a slight decrease compared to $564.0 million at December 31,

2024. Four loan categories represented the majority of the loan portfolio at September 30, 2025: commercial real estate

(54%), residential real estate (21%), construction and land development (14%) and commercial and industrial (10%).

Approximately 21% of the Company’s commercial real estate loans were classified as owner-occupied at September 30,

2025.

Table of Contents

32

Within the residential real estate portfolio segment, the Company had junior lien mortgages of approximately $12.2 million,

or 2% of total loans, and $11.2 million, or 2%, of total loans at September 30, 2025 and December 31, 2024, respectively.

For residential real estate mortgage loans with a consumer purpose, the Company had no loans that required interest only

payments at September 30, 2025 and December 31, 2024. The Company’s residential real estate mortgage portfolio does

not include any option or hybrid ARM loans, subprime loans, or any material amount of other consumer mortgage products

which are generally viewed as high risk.

The average yield earned on loans and loans held for sale was 5.48% in the first nine months of 2025 and 5.18% in the first

nine months of 2024.

The specific economic and credit risks associated with our loan portfolio include, but are not limited to, the effects of

current economic conditions, including the levels of market interest rates, supply chain disruptions, commercial office

occupancy levels, housing supply shortages, and effects of inflation on our borrowers’ cash flows, real estate market sales

volumes and liquidity, valuations used in making loans and evaluating collateral, availability and cost of financing

properties, real estate industry concentrations, competitive pressures from a wide range of other lenders, deterioration in

certain credits, interest rate fluctuations, reduced collateral values or non-existent collateral, title defects, in accurate

appraisals, financial deterioration of borrowers, fraud, and any violation of applicable laws and regulations. Vario us

projects financed earlier that were based on lower interest rate assumptions than currently in effect may not be as profitable

or successful at the higher interest rates currently in effect and which may exist in the future.

The Company attempts to reduce these economic and credit risks through its loan-to-value guidelines for collateralized

loans, investigating the creditworthiness of borrowers and monitoring borrowers’ financial position. Also, we have

established and periodically review, lending policies and procedures. Banking regulations limit a bank’s credit exposure by

prohibiting unsecured loan relationships that exceed 10% of its capital; or 20% of capital, if loans in excess of 10% of

capital are fully secured. Under these regulations, we are prohibited from having secured loan relationships in excess of

approximately $23.3 million. Furthermore, we have an internal limit for aggregate credit exposure (loans outstanding plus

unfunded commitments) to a single borrower of $20.9 million. Our loan policy requires that the Loan Committee of the

Board of Directors approve any loan relationships that exceed this internal limit. At September 30, 2025, the Bank had no

loan relationships exceeding our internal limit.

We periodically analyze our commercial and industrial and commercial real estate loan portfolios to determine if a

concentration of credit risk exists in any one or more industries. We use classification systems broadly accepted by the

financial services industry in order to categorize our commercial borrowers. Loans to borrowers in each of the following

classes exceeded 25% of the Bank’s total risk-based capital at September 30, 2025 (and related balances at December 31,

2024).

September 30,

December 31,

(Dollars in thousands)

2025

2024

Lessors of 1-4 family residential properties

$

56,860

$

58,228

Multi-family residential properties

51,543

43,556

Shopping centers/strip malls

34,387

37,349

Hotel/motel

34,686

35,210

Allowance for Credit Losses

Our allowance for credit losses was approximately $6.7 million and $6.9 million at September 30, 2025 and December 31,

2024, respectively, which our management believed to be adequate at each of the respective dates. Our allowance for credit

losses as a percentage of total loans was 1.20% at September 30, 2025, compared to 1.22% at December 31, 2024.

Our CECL models rely largely on projections of macroeconomic conditions to estimate future credit losses.

Macroeconomic factors used in the model include the Alabama unemployment rate, the Alabama home price index, the

national commercial real estate price index and the Alabama gross state product. Projections of these macroeconomic

factors, obtained from an independent third party, are utilized to predict quarterly rates of default.

Table of Contents

33

Under the CECL methodology the allowance for credit losses is measured on a collective basis for pools of loans with

similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools,

evaluations are performed on an individual basis. Losses are predicted over a period of time determined to be reasonable

and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages.

At September 30, 2025, reasonable and supportable periods of four quarters were utilized followed by an eight quarters

straight line reversion period to long term averages.

A summary of the changes in the allowance for credit losses and certain asset quality ratios for the third quarter of 2025 and

the previous four quarters is presented below.

2025

2024

Third

Second

First

Fourth

Third

(Dollars in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

Balance at beginning of period

$

6,965

6,750

6,871

6,876

7,142

Charge-offs:

Commercial and industrial

—

(3)

(100)

—

—

Residential real estate

—

(6)

(1)

(7)

(54)

Consumer installment

(87)

(9)

—

(31)

(40)

Total charge -offs

(87)

(18)

(101)

(38)

(94)

Recoveries

9

67

37

54

34

Net (charge-offs) recoveries

(78)

49

(64)

16

(60)

Provision for credit losses - Loans

(196)

166

(57)

(21)

(206)

Ending balance

$

6,691

6,965

6,750

6,871

6,876

as a % of loans

1.20

%

1.24

1.20

1.22

1.22

as a % of nonperforming loans

6,434

%

2,306

1,298

1,366

887

Net charge-offs (recoveries) as % of average loans (a)

0.06

%

(0.03)

0.05

(0.01)

0.04

(

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

Table of Contents

34

The allowance for credit losses by loan category for the third quarter of 2025 and the previous four quarters is presented

below.

2025

2024

Third Quarter

Second Quarter

First Quarter

Fourth Quarter

Third Quarter

(Dollars in thousands)

Amount

%*

Amount

%*

Amount

%*

Amount

%*

Amount

%*

Commercial and industrial

$

1,126

9.9

$

1,212

10.6

$

1,219

10.5

$

1,244

11.2

$

1,160

10.9

Construction and land

development

1,445

14.2

1,613

16.7

1,401

15.4

1,059

14.6

985

13.8

Commercial real estate

3,145

53.5

3,151

50.3

3,153

51.4

3,842

51.5

3,989

52.6

Residential real estate

836

20.8

866

20.8

861

21.0

588

21.0

595

21.0

Consumer installment

139

1.6

123

1.6

116

1.7

138

1.7

147

1.7

Total allowance for credit losses

$

6,691

$

6,965

$

6,750

$

6,871

$

6,876

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

Nonperforming Assets

At September 30, 2025 and December 31, 2024, the Company had $0.1 million and $0.5 million, respectively, in

nonperforming assets.

The table below provides information concerning total nonperforming assets and certain asset quality ratios for the third

quarter of 2025 and the previous four quarters.

2025

2024

Third

Second

First

Fourth

Third

(Dollars in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

Nonperforming assets:

Nonaccrual loans

$

104

302

520

503

775

Total nonperforming assets

$

104

302

520

503

775

as a % of loans and OREO

0.02

%

0.05

0.09

0.09

0.14

as a % of total assets

0.01

%

0.03

0.05

0.05

0.08

Nonperforming loans as a % of total loans

0.02

%

0.05

0.09

0.09

0.14

Accruing loans 90 days or more past due

$

77

—

77

—

—

The table below provides information concerning the composition of nonaccrual loans for the third quarter of 2025 and the

previous four quarters.

2025

2024

Third

Second

First

Fourth

Third

(In thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

Nonaccrual loans:

Commercial and industrial

$

—

—

3

99

—

Construction and land development

—

—

404

404

—

Commercial real estate

—

119

—

—

735

Residential real estate

104

183

113

—

40

Total nonaccrual loans

$

104

302

520

503

775

The Company discontinues the accrual of interest income when (1) there is a significant deterioration in the financial

condition of the borrower and full repayment of principal and interest is not expected or (2) the principal or interest is

90 days or more past due, unless the loan is both well-secured and in the process of collection.

The Company had $77 thousand in loans 90 days or more past due and still accruing at September 30, 2025 compared to

none at December 31, 2024.

Table of Contents

35

The Company had no OREO at September 30, 2025 or December 31, 2024.

Deposits

(In thousands)

2025

2024

Noninterest bearing demand

$

266,793

260,874

NOW

211,187

199,883

Money market

172,224

153,916

Savings

86,105

89,904

Certificates of deposit under $250,000

96,613

103,594

Certificates of deposit and other time deposits of $250,000 or more

84,344

87,653

Total deposits

$

917,266

895,824

Total deposits were $917.3 million at September 30, 2025, compared to $895.8 million at December 31, 2024. The 2%

increase in deposits compared to December 31, 2024 was primarily related to an increase in money market and interest-

bearing checking accounts. At September 30, 2025 the Company had $33.0 million in reciprocal deposits sold, compared

to $74.1 million at December 31, 2024. The Company had no brokered deposits at September 30, 2025 and December 31,

2024. Noninterest-bearing deposits were $266.8 million, or 29% of total deposits, at September 30, 2025, compared to

$260.9 million, or 29% of total deposits at December 31, 2024.

The average rate paid on total interest-bearing deposits was 1.75% in the first nine months of 2025, compared to 1.80% in

first nine months of 2024.

The Bank participates in the Certificates of Deposit Account Registry Service (the “CDARS”) and the Insured Cash Sweep

product (“ICS”), which provide for reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose

of improving the FDIC insurance coverage for our depositors. The Company had reciprocal deposits on balance sheet of

$34.1 million at September 30, 2025, compared to $6.9 million at December 31, 2024.

At September 30, 2025, estimated uninsured deposits totaled $369.1 million, or 40% of total deposits, compared to $359.7

million, or 40% of total deposits at December 31, 2024. Uninsured amounts are estimated based on the portion of account

balances in excess of FDIC insurance limits. The Bank’s estimated uninsured deposits at September 30, 2025 and

December 31, 2024 include approximately $207.6 million and $223.1 million, respectively, of deposits of state, county and

local governments that are collateralized by securities having an equal fair value to such deposits. Excluding estimated

uninsured deposits of state, county and local governments, our estimated uninsured deposits would have been 18% of total

deposits at September 30, 2025 and 15% of total deposits at December 31, 2024.

The estimated uninsured time deposits by maturity as of September 30, 2025 is presented below.

(Dollars in thousands)

September 30, 2025

Maturity of:

3 months or less

$

37,525

Over 3 months through 6 months

6,289

Over 6 months through 12 months

8,673

Over 12 months

3,107

Total estimated uninsured time deposits

$

55,594

Table of Contents

36

Other Borrowings and Available Credit

The Company had no long-term debt at September 30, 2025 and December 31, 2024. The Bank utilizes short and long-

term non-deposit borrowings from time to time. Short-term borrowings generally consist of federal funds purchased and

securities sold under agreements to repurchase with an original maturity of one year or less. The Bank had available federal

funds lines totaling $65.2 million with no federal funds borrowings outstanding at September 30, 2025, and December 31,

2024, respectively. The Company had no securities sold under agreements to repurchase, which generally have been

entered into on behalf of certain customers at both September 30, 2025 and December 31, 2024. The Bank is eligible to

borrow from the FRB’s discount window, but had no such borrowings at September 30, 2025 and December 31, 2024. The

Bank never borrowed from the Federal Reserve’s Bank Term Facility Program (“BTFP”), which ceased making new loans

on March 11, 2024.

The Bank is a member of the FHLB of Atlanta and has borrowed, and may in the future borrow from time to time under the

FHLB of Atlanta’s advance program. FHLB advances include both fixed and variable rates and are taken out with varying

maturities, and are generally secured by eligible assets. The Bank had no borrowings under FHLB of Atlanta’s advance

program at September 30, 2025 and December 31, 2024, respectively. At those dates, the Bank had $308.6 million and

$296.9 million, respectively, of available lines of credit at the FHLB of Atlanta.

CAPITAL ADEQUACY

The Company’s consolidated stockholders’ equity was $89.6 million and $78.3 million as of September 30, 2025 and

December 31, 2024, respectively. The increase from December 31, 2024 was primarily driven by net earnings of $5.6

million and other comprehensive income due to the change in unrealized gains/losses on securities available-for-sale, net of

tax of $8.6 million, partially offset by cash dividends of $2.8 million. Unrealized losses do not affect the Bank’s capital for

regulatory capital purposes.

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

2024.

During July of 2025, the Company granted certain officers restricted stock units (“RSUs”) on 3,030 shares of Company

common stock pursuant to the Company’s 2024 Equity and Incentive Compensation Plan. The RSUs are reflected in the

consolidated statements of stockholders’ equity and in earnings per share, were not material to the Company’s financial

condition, results of operations, or cash flows for the period. The Form of Award Agreement is filed as Exhibit 10.1 to this

report.

Federal Reserve rules require a capital conservation buffer of CET1 capital of 2.5% that is added to the minimum

requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of 2.5% or less is

subject to limitation on “distributions” from “eligible retained earnings”, including dividend payments, share repurchases

and certain discretionary bonus payments.

The Federal Reserve has treated us as a “small bank holding company’ under the Federal Reserve’s Small Bank Holding

Company Policy. Accordingly, our capital adequacy is evaluated at the Bank level, and not for the Company and its

consolidated subsidiaries. The Bank’s tier 1 leverage ratio was 10.72%, CET1 risk-based capital ratio was 15.51%, tier 1

risk-based capital ratio was 15.51%, and total risk-based capital ratio was 16.49% at September 30, 2025. These ratios

exceed the minimum regulatory capital percentages of 5.0% for tier 1 leverage ratio, 6.5% for CET1 risk-based capital

ratio, 8.0% for tier 1 risk-based capital ratio, and 10.0% for total risk-based capital ratio to be considered “well capitalized.”

The Bank’s capital conservation buffer was 8.49% at September 30, 2025.

MARKET AND LIQUIDITY RISK MANAGEMENT

Management’s objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within

the framework of established liquidity, loan, investment, borrowing, and capital policies. The Bank’s Asset Liability

Management Committee (“ALCO”) is charged with the responsibility of monitoring these policies, which are designed to

ensure an acceptable asset/liability composition. Two critical areas of focus for ALCO are interest rate risk and liquidity

risk management.

Table of Contents

37

Interest Rate Risk Management

In the normal course of business, the Company is exposed to market risk arising from fluctuations in interest rates. ALCO

measures and evaluates interest rate risk so that the Bank can meet customer demands for various types of loans and

deposits. Measurements used to help manage interest rate sensitivity include an earnings simulation model and an economic

value of equity (“EVE”) model.

Earnings simulation

. Management believes that interest rate risk is best estimated by our earnings simulation modeling.

Forecasted levels of earning assets, interest-bearing liabilities, and off-balance sheet financial instruments are combined

with ALCO forecasts of market interest rates for the next 12 months and other factors in order to produce various earnings

simulations and estimates. To help limit interest rate risk, we have guidelines for earnings at risk which seek to limit the

variance of net interest income from gradual changes in interest rates. For changes up or down in rates from management’s

flat interest rate forecast over the next 12 months, policy limits for net interest income variances are as follows:

●

+/- 20% for a gradual change of 400 basis points

●

+/- 15% for a gradual change of 300 basis points

●

+/- 10% for a gradual change of 200 basis points

●

+/- 5% for a gradual change of 100 basis points

While a gradual change in interest rates was used in the above analysis to provide an estimate of exposure under these

scenarios, our modeling under both a gradual and instantaneous change in interest rates indicates our balance sheet is

liability sensitive over the forecast period of 12 months.

At September 30, 2025, our earnings simulation model indicated that we were in compliance with the policy guidelines

noted above.

Economic Value of Equity

. EVE measures the extent that the estimated economic values of our assets, liabilities, and off-

balance sheet items will change as a result of interest rate changes. Economic values are estimated by discounting expected

cash flows from assets, liabilities, and off-balance sheet items, which establishes a base case EVE. In contrast with our

earnings simulation model, which evaluates interest rate risk over a 12-month timeframe, EVE uses a terminal horizon

which allows for the re-pricing of all assets, liabilities, and off-balance sheet items. Further, EVE is measured using values

as of a point in time and does not reflect any actions that ALCO might take in responding to or anticipating changes in

interest rates, or market and competitive conditions. To help limit interest rate risk, we have stated policy guidelines for an

instantaneous basis point change in interest rates, such that our EVE should not decrease from our base case by more than

the following:

●

35% for an instantaneous change of +/- 400 basis points

●

30% for an instantaneous change of +/- 300 basis points

●

25% for an instantaneous change of +/- 200 basis points

●

15% for an instantaneous change of +/- 100 basis points

At September 30, 2025, our EVE model indicated that we were in compliance with our policy guidelines.

Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by

changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities

may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest

rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have

similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates, and other

economic and market factors, including market perceptions. Interest rates on certain types of assets and liabilities fluctuate

in advance of changes in general market rates, while interest rates on other types of assets and liabilities may lag behind

changes in general market rates. In addition, certain assets, such as adjustable-rate mortgage loans, have features (generally

referred to as “interest rate caps and floors”) which limit changes in interest rates. Prepayments and early withdrawal levels

also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many

borrowers to service their debts also may decrease during periods of rising interest rates or economic stress, which may

differ across industries and economic sectors. ALCO reviews each of the above interest rate sensitivity analyses along with

several different interest rate scenarios in seeking satisfactory, consistent levels of profitability within the framework of the

Company’s established liquidity, loan, investment, borrowing, and capital policies.

Table of Contents

38

The Company may also use derivative financial instruments to improve the balance between interest-sensitive assets and

interest-sensitive liabilities, and as a tool to manage interest rate sensitivity while continuing to meet the credit and deposit

needs of our customers. From time to time, the Company also may enter into back-to-back interest rate swaps to facilitate

customer transactions and meet their financing needs. These interest rate swaps qualify as derivatives, but are not

designated as hedging instruments. At September 30, 2025 and December 31, 2024, the Company had no derivative

contracts designated as part of a hedging relationship to assist in managing its interest rate sensitivity.

Liquidity Risk Management

Liquidity is the Company’s ability to convert assets into cash equivalents in order to meet daily cash flow requirements,

primarily for deposit withdrawals, loan demand and maturing obligations. The Company seeks to manage its liquidity to

manage or reduce its costs of funds by maintaining liquidity believed adequate to meet its anticipated funding needs, while

balancing against excessive liquidity that likely would reduce earnings due to the cost of foregoing alternative higher-

yielding assets.

Liquidity is managed at two levels. The first is the liquidity of the Company. The second is the liquidity of the Bank. The

management of liquidity at both levels is essential, because the Company and the Bank are separate and distinct legal

entities with different funding needs and sources, and each are subject to regulatory guidelines and requirements. The

Company depends upon dividends from the Bank for liquidity to pay its operating expenses, debt obligations and

dividends, and Federal Reserve Regulation W restricts Company borrowings from, and other transactions with, the Bank.

The Bank’s payment of dividends depends on its earnings, liquidity, capital and the absence of regulatory restrictions on

such dividends.

The primary source of funding and liquidity for the Company has been dividends received from the Bank. If needed, the

Company could also borrow money, or issue common stock or other securities. Primary uses of funds by the Company

include payment of Company expenses, dividends paid to stockholders and Company stock repurchases.

Primary sources of funding for the Bank include customer deposits, other borrowings, interest payments on earning assets,

repayment and maturity of securities and loans, sales of securities, and the sale of loans, particularly residential mortgage

loans. The Bank has access to federal funds lines from various banks and borrowings from the Federal Reserve discount

window. In addition to these sources, the Bank is eligible to participate in the FHLB of Atlanta’s advance program to obtain

funding for growth and liquidity. Advances include both fixed and variable terms and may be taken out with varying

maturities. At September 30, 2025, the Bank had no FHLB of Atlanta advances outstanding and available credit from the

FHLB of $308.6 million. At September 30, 2025, the Bank also had $65.2 million of available federal funds lines with no

borrowings outstanding. Primary uses of funds include repayment of maturing obligations and growing the loan portfolio.

The Company also has access to the FRB discount window.

Management believes that the Company and the Bank have adequate sources of liquidity to meet all their respective known

contractual obligations and unfunded commitments, including loan commitments and reasonably expected borrower,

depositor, and creditor requirements over the next twelve months.

Off-Balance Sheet Arrangements, Commitments, Contingencies and Contractual Obligations

At September 30, 2025, the Bank had outstanding standby letters of credit of $0.8 million and unfunded loan commitments

outstanding of $61.1 million. Because these commitments generally have fixed expiration dates and many will expire

without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to

fund these outstanding commitments, the Bank could use its cash and cash equivalents, deposits with other banks, liquidate

federal funds sold or a portion of our securities available-for-sale, or draw on its available credit facilities or raise deposits.

Mortgage lending activities

We generally sell residential mortgage loans in the secondary market to Fannie Mae while retaining the servicing of these

loans. The sale agreements for these residential mortgage loans with Fannie Mae and other investors include various

customary representations and warranties regarding the origination and characteristics of the residential mortgage loans.

Although the representations and warranties vary among investors, they typically cover ownership of the loan, validity of

the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, compliance with

loan criteria set forth in the applicable agreement and compliance with applicable federal, state, and local laws, among other

matters.

Table of Contents

39

As of September 30, 2025, the aggregate unpaid principal balance of residential mortgage loans, which we have originated

and sold, but retained the servicing rights, was $193.5 million. Although these loans are generally sold on a non-recourse

basis, we may be obligated to repurchase residential mortgage loans or reimburse investors for losses incurred (make whole

requests) if a loan review reveals a potential breach of our seller representations and warranties. Upon receipt of a

repurchase or make whole request, we work with investors to arrive at a mutually agreeable resolution. Repurchase and

make whole requests are typically reviewed on an individual loan by loan basis to validate the claims made by the investor

and to determine if a contractually required repurchase or make whole event has occurred. We seek to reduce and manage

the risks of potential repurchases, make whole requests, or other claims by mortgage loan investors through our

underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market

standards.

The Company was not required to repurchase any loans during the first nine months of 2025 as a result of representation

and warranty provisions contained in the Company’s sale agreements with Fannie Mae, and had no pending repurchase or

make-whole requests at September 30, 2025.

We service all residential mortgage loans originated and sold by us to Fannie Mae. As servicer, our primary duties are to:

(1) collect payments due from borrowers; (2) advance certain delinquent payments of principal and interest; (3) maintain

and administer any hazard, title, or primary mortgage insurance policies relating to the mortgage loans; (4) maintain any

required escrow accounts for payment of taxes and insurance and administer escrow payments; and (5) foreclose on

defaulted mortgage loans or take other actions to mitigate the potential losses to investors consistent with the agreements

governing our rights and duties as servicer.

Our mortgage servicing agreements generally specify our standards of responsibility as servicer and provide protection

against expenses and liabilities incurred by us when acting in compliance with these servicing agreements. However, if we

commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a

specified period following notice. The standards governing servicing and the possible remedies for violations of such

standards are determined by our agreements with Fannie Mae and Fannie Mae’s mortgage servicing guides. Remedies

could include repurchase of an affected loan.

Although repurchase and make whole requests related to representation and warranty provisions and servicing activities

have been limited to date, it is possible that requests to repurchase mortgage loans or reimburse investors for losses incurred

(make whole requests) may increase in frequency if investors more aggressively pursue all means of recovering losses on

their purchased loans. As of September 30, 2025, we do not believe that this exposure is material due to the historical level

of repurchase requests and loss trends, in addition to the fact that 99% of our residential mortgage loans serviced for Fannie

Mae was current as of such date. We maintain ongoing communications with our mortgage purchasers and will continue to

evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in our

investor portfolios.

The Bank sells mortgage loans to Fannie Mae and services these on an actual/actual basis. As a result, the Bank is not

obligated to make any advances to Fannie Mae on principal and interest on such mortgage loans where the borrower is

entitled to forbearance.

Effects of Inflation and Changing Prices

The consolidated financial statements and related consolidated financial data presented herein have been prepared in

accordance with GAAP and practices within the banking industry which require the measurement of financial position and

operating results in terms of historical dollars without considering the changes in the relative purchasing power of money

over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution

are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance

than the effects of general levels of inflation.

Inflation can increase our noninterest expenses. It also can affect our customers’ behaviors, the mix of deposits between

interest and noninterest bearing, the levels of interest rates we have to pay on our deposits and other borrowings, and the

interest rates we earn on our earning assets. The difference between our interest expense and interest income is also affected

by the shape of the yield curve and the speeds and amounts at which our various assets and liabilities, respectively, reprice

in response to interest rate changes. The yield curve was inverted during most of 2024, until September, when it began to

normalize. An inverted yield curve means shorter term interest rates are higher than longer term interest rates. This results

in a lower spread between our costs of funds and our interest income. As of October 31, 2025, yields on one- and two-

m

onth maturity Treasury securities were higher than other Treasury securities with maturities of 10 years or less.

Table of Contents

40

Net interest income could be affected by asymmetrical changes in the different interest rate indexes, given that not all of our

assets or liabilities are priced with the same index. Higher market interest rates and reductions in the securities held by the

Federal Reserve to reduce inflation generally reduce economic activity and may reduce loan demand and growth, and may

adversely affect unemployment rates. Inflation and related changes in market interest rates, as the Federal Reserve

maintains interest rates to meet its longer-term inflation goal of 2%, also can adversely affect the values and liquidity of our

loans and securities, the value of collateral securing loans to our borrowers, and the success of our borrowers and such

borrowers’ available cash to pay interest on and principal of our loans to them.

Beginning in September 2024, in light of inflation moderating, the Federal Reserve’s Federal Open Market Committee

(“FOMC”) had three reductions in its target federal funds rate range totaling 100 basis points to 4.25% to 4.50%. While the

FOMC reaffirmed its target inflation rate of 2% over the longer run, it indicated it was “recalibrating” its policy based on

decreasing inflation rates and the risks of increasing unemployment, but would act on incoming data, the evolving outlook

and the balance of the risks of inflation and unemployment levels. In the future, the Federal Reserve could further decrease

target interest rates, or could increase such target rates, depending on the data and its outlook. On July 31, 2025, the FOMC

stated that it seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty

about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. …

The [FOMC’s] assessments will take into account a wide range of information, including readings on labor market

conditions, inflation pressures and inflation expectations, and financial and international developments.”

On September 17, 2025, the FOMC reduced its target federal funds rate range 25 basis points to 4.00% to 4.25%, and stated

it would continue to reduce its holdings of Treasury and agency debt and mortgage-backed securities (“MBS”). Most

recently, on October 29, 2025, the FOMC noted inflation had risen and was somewhat elevated, and that downside risks to

employment had risen in recent months. As a result, the FOMC reduced its target federal funds rate range 25 basis points

to 3.75% to 4.00%. The FOMC took further action with respect to its overnight repurchase and reverse repurchase rates

and daily volume limitations and effective October 30, 2025, limited the rate of reduction in the Federal Reserve’s

securities holdings, subject to modest deviations for operational reasons:

●

The Federal Reserve will roll over and reinvest at auction principal payments on Treasury securities maturing in

excess of $5 billion per month.

●

Beginning December1, all principal payments on Treasury securities would be rolled over and reinvested.

●

Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS

received in October and November that exceeds a cap of $35 billion per month in Treasury securities to roughly

match the maturity composition of Treasury securities outstanding.

●

Beginning, all principal payments from the Federal Reserve's holdings of agency securities would be reinvested in

Treasury bills.

CURRENT ACCOUNTING DEVELOPMENTS

The following ASU has been issued by the FASB but is not yet effective.

●

ASU 2023-09,

Income Taxes (Topic 740): Improvements to Income Tax disclosures

ASU 2023-09 seeks to enhance the transparency and decision usefulness of income tax disclosures. For public business

entities, the new standard is effective for annual periods beginning after December 15, 2024. The Company does not

e

xpect the new standard to have a material impact on the Company’s consolidated financial statements.

Table of Contents

41

Table 1 – Explanation of Non-GAAP Financial Measures

In addition to results presented in accordance with U.S. generally accepted accounting principles (GAAP), this quarterly

report on Form 10-Q includes certain designated net interest income amounts presented on a tax-equivalent basis, a non-

GAAP financial measure, including the presentation and calculation of the efficiency ratio.

The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net

interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the

Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance,

these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-

GAAP financial measures to their most directly comparable GAAP financial measures are presented below.

2025

2024

Third

Second

First

Fourth

Third

(in thousands)

Quarter

Quarter

Quarter

Quarter

Quarter

Net interest income (GAAP)

$

7,572

7,344

7,045

6,969

6,790

Tax-equivalent adjustment

18

19

17

19

21

Net interest income (Tax -equivalent)

$

7,590

7,363

7,062

6,988

6,811

Nine months ended September 30,

(In thousands)

2025

2024

Net interest income (GAAP)

$

21,961

20,156

Tax-equivalent adjustment

54

60

N

et interest income (Tax-equivalent)

$

22,015

20,216

Table of Contents

42

Table 2 - Selected Quarterly Financial Data

2025

2024

Third

Second

First

Fourth

Third

(Dollars in thousands, except per share amounts)

Quarter

Quarter

Quarter

Quarter

Quarter

Results of Operations

Net interest income (a)

$

7,590

7,363

7,062

6,988

6,811

Less: tax-equivalent adjustment

18

19

17

19

21

Net interest income (GAAP)

7,572

7,344

7,045

6,969

6,790

Noninterest income

829

789

747

845

846

Total revenue

8,401

8,133

7,792

7,814

7,636

Provision for credit losses

(255)

113

(10)

(48)

(127)

Noninterest expense

5,806

5,702

5,880

5,472

5,500

Income tax expense

623

485

392

830

531

Net earnings

$

2,227

1,833

1,530

1,560

1,732

Per share data:

Basic and diluted net earnings

$

0.64

0.52

0.44

0.45

0.50

Cash dividends declared

0.27

0.27

0.27

0.27

0.27

Weighted average shares outstanding:

Basic

3,493,699

3,493,699

3,493,699

3,493,699

3,493,699

Diluted

3,495,972

3,493,699

3,493,699

3,493,699

3,493,699

Shares outstanding, at period end

3,493,699

3,493,699

3,493,699

3,493,699

3,493,699

Book value

$

25.65

24.64

23.79

22.41

24.14

Common stock price:

High

$

28.47

25.28

23.37

24.57

24.35

Low

23.13

19.48

20.36

20.06

17.50

Period end:

28.44

25.00

21.59

23.49

22.90

To earnings ratio (b)

13.87

x

13.09

11.42

12.77

91.60

To book value

111

%

101

91

105

95

Performance ratios:

Annualized return on average equity

10.65

%

9.00

7.83

7.49

9.10

Annualized return on average assets

0.89

%

0.74

0.62

0.63

0.71

Dividend payout ratio

42.19

%

51.92

61.36

60.00

54.00

Asset Quality:

Allowance for credit losses as a % of:

Loans

1.20

%

1.24

1.20

1.22

1.22

Nonperforming loans

6,434

%

2,306

1,298

1,366

887

Nonperforming assets as a % of:

Loans and other real estate owned

0.02

%

0.05

0.09

0.09

0.14

Total assets

0.01

%

0.03

0.05

0.05

0.08

Nonperforming loans as a % of total loans

0.02

%

0.05

0.09

0.09

0.14

Annualized net charge-offs (recoveries) as % of average loans

0.06

%

(0.03)

0.05

(0.01)

0.04

Capital Adequacy: (c)

CET 1 risk-based capital ratio

15.51

%

15.32

15.04

14.80

14.75

Tier 1 risk-based capital ratio

15.51

%

15.32

15.04

14.80

14.75

Total risk-based capital ratio

16.49

%

16.35

16.05

15.81

15.76

Tier 1 leverage ratio

10.72

%

10.64

10.52

10.49

10.43

Other financial data:

Net interest margin (a)

3.30

%

3.27

3.20

3.09

3.05

Effective income tax rate

21.86

%

20.92

20.40

34.73

23.46

Efficiency ratio (d)

68.96

%

69.95

75.30

69.86

71.83

Selected average balances:

Securities

$

237,161

240,177

240,588

255,168

251,723

Loans, net of unearned income

556,233

559,770

566,082

567,634

571,651

Total assets

997,892

990,523

987,272

991,275

982,656

Total deposits

909,293

905,227

906,805

904,605

904,860

Total stockholders’ equity

83,642

81,447

78,158

83,325

76,113

Selected period end balances:

Securities

$

236,420

239,681

242,468

243,012

258,285

Loans, net of unearned income

557,912

562,714

560,650

564,017

565,699

Allowance for credit losses

6,691

6,965

6,750

6,871

6,876

Total assets

1,011,184

1,029,224

996,786

977,324

990,143

Total deposits

917,266

939,851

910,503

895,824

901,724

Total stockholders’ equity

89,613

86,071

83,115

78,292

84,336

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

(b) Calculated by dividing period end share price by earnings per share for the previous four quarters.

(c) Regulatory capital ratios presented are for the Company's wholly-owned subsidiary, AuburnBank.

(d) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income.

See Table 1 - Explanation of Non-GAAP Measures.

Table of Contents

43

Table 3 - Selected Financial Data

Nine months ended September 30,

(Dollars in thousands, except per share amounts)

2025

2024

Results of Operations

Net interest income (a)

$

22,015

20,216

Less: tax-equivalent adjustment

54

60

Net interest income (GAAP)

21,961

20,156

Noninterest income

2,365

2,629

Total revenue

24,326

22,785

Provision for credit losses

(152)

84

Noninterest expense

17,388

16,694

Income tax expense

1,500

1,170

Net earnings

$

5,590

4,837

Per share data:

Basic and diluted net earnings

$

1.60

1.38

Cash dividends declared

0.81

0.81

Weighted average shares outstanding:

Basic

3,493,699

3,493,687

Diluted

3,494,465

3,493,687

Shares outstanding, at period end

3,493,699

3,493,699

Book value

$

25.65

24.14

Common stock price:

High

$

28.47

24.35

Low

19.48

16.63

Period end

28.44

22.90

To earnings ratio (b)

13.87

x

91.60

To book value

111

%

95

Performance ratios:

Annualized return on average equity

9.06

%

8.59

Annualized return on average assets

0.75

%

0.66

Dividend payout ratio

50.63

%

58.70

Asset Quality:

Allowance for credit losses as a % of:

Loans

1.20

%

1.22

Nonperforming loans

6,434

%

887

Nonperforming assets as a % of:

Loans and other real estate owned

0.02

%

0.14

Total assets

0.01

%

0.08

Nonperforming loans as a % of total loans

0.02

%

0.14

Annualized net recoveries as a % of average loans

0.02

%

—

Capital Adequacy: (c)

CET 1 risk-based capital ratio

15.51

%

14.75

Tier 1 risk-based capital ratio

15.51

%

14.75

Total risk-based capital ratio

16.49

%

15.76

Tier 1 leverage ratio

10.72

%

10.43

Other financial data:

Net interest margin (a)

3.26

%

3.05

Effective income tax rate

21.16

%

19.48

Efficiency ratio (d)

71.32

%

73.08

Selected average balances:

Securities

$

239,296

259,158

Loans, net of unearned income

560,659

568,628

Total assets

991,935

979,243

Total deposits

907,105

900,876

Total stockholders’ equity

82,281

75,044

Selected period end balances:

Securities

$

236,420

258,285

Loans, net of unearned income

557,912

565,699

Allowance for credit losses

6,691

6,876

Total assets

1,011,184

990,143

Total deposits

917,266

901,724

Total stockholders’ equity

89,613

84,336

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

(b) Calculated by dividing period end share price by earnings per share for the previous four quarters.

(c) Regulatory capital ratios presented are for the Company's wholly-owned subsidiary, AuburnBank.

(d) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income.

See Table 1 - Explanation of Non-GAAP Measures.

Table of Contents

44

Table 4 - Average Balances and Net Interest Income Analysis

Quarter ended September 30,

2025

2024

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

(Dollars in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Interest-earning assets:

Loans and loans held for sale (1)

$

556,736

$

7,793

5.55%

$

571,917

$

7,642

5.32%

Securities - taxable (2)

228,127

1,220

2.12%

241,604

1,327

2.19%

Securities - tax-exempt (2)(3)

9,034

86

3.78%

10,119

97

3.81%

Total securities

237,161

1,306

2.18%

251,723

1,424

2.25%

Federal funds sold

27,572

304

4.37%

18,696

255

5.43%

Interest bearing bank deposits

90,964

1,027

4.48%

46,174

659

5.68%

Total interest-earning assets

912,433

$

10,430

4.54%

888,510

$

9,980

4.47%

Cash and due from banks

13,627

17,909

Other assets

71,832

76,237

Total assets

$

997,892

$

982,656

Interest-bearing liabilities:

Deposits:

NOW

$

199,060

$

650

1.30%

$

192,781

$

729

1.50%

Savings and money market

265,627

763

1.14%

253,943

614

0.96%

Time deposits

180,618

1,427

3.13%

198,009

1,826

3.67%

Total interest-bearing deposits

645,305

2,840

1.75%

644,733

3,169

1.96%

Short-term borrowings

—

—

—

2

—

—

Total interest-bearing liabilities

645,305

$

2,840

1.75%

644,735

$

3,169

1.96%

Noninterest-bearing deposits

263,988

260,127

Other liabilities

4,957

1,681

Stockholders' equity

83,642

76,113

Total liabilities and stockholders' equity

$

997,892

$

982,656

Net interest income and margin (tax-equivalent)

$

7,590

3.30%

$

6,811

3.05%

(1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included

in the computation of average balances.

(2) Includes average net unrealized gains (losses) on investment securities available for sale

(3) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal income

tax rate of 21%.

Table of Contents

45

Table 5 - Average Balances and Net Interest Income Analysis

Nine months ended September 30,

2025

2024

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

(Dollars in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Interest-earning assets:

Loans and loans held for sale (1)

$

560,946

$

23,012

5.48%

$

568,939

$

22,082

5.18%

Securities - taxable (2)

230,165

3,751

2.18%

248,923

4,109

2.20%

Securities - tax-exempt (2)(3)

9,131

259

3.79%

10,235

284

3.71%

Total securities

239,296

4,010

2.24%

259,158

4,393

2.26%

Federal funds sold

26,717

875

4.38%

18,014

738

5.47%

Interest bearing bank deposits

76,254

2,541

4.46%

39,530

1,619

5.47%

Total interest-earning assets

903,213

$

30,438

4.51%

885,641

$

28,832

4.35%

Cash and due from banks

15,864

17,917

Other assets

72,858

75,685

Total assets

$

991,935

$

979,243

Interest-bearing liabilities:

Deposits:

NOW

$

202,381

$

2,042

1.35%

$

193,428

$

2,045

1.41%

Savings and money market

254,095

1,910

1.01%

250,146

1,486

0.79%

Time deposits

185,355

4,470

3.22%

196,584

5,082

3.45%

Total interest-bearing deposits

641,831

8,422

1.75%

640,158

8,613

1.80%

Short-term borrowings

37

1

3.61%

838

3

0.48%

Total interest-bearing liabilities

641,868

$

8,423

1.75%

640,996

$

8,616

1.80%

Noninterest-bearing deposits

265,274

260,718

Other liabilities

2,512

2,485

Stockholders' equity

82,281

75,044

Total liabilities and stockholders' equity

$

991,935

$

979,243

Net interest income and margin (tax-equivalent)

$

22,015

3.26%

$

20,216

3.05%

(1) Average loan balances are shown net of unearned income and loans on nonaccrual status have been included

in the computation of average balances.

(2) Includes average net unrealized gains (losses) on investment securities available for sale

(3) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal income

tax rate of 21%.

Table of Contents

46

Table 6 –Volume and Rate Variance Analysis

Quarter ended

Nine months ended

September 30, 2025 vs. 2024

September 30, 2025 vs. 2024

Net

Due to change in

Net

Due to change in

(Dollars in thousands)

Change

Rate (2)

Volume (2)

Change

Rate (2)

Volume (2)

Interest income:

Loans and loans held for sale

$

151

342

(191)

$

930

1,275

(345)

Securities - taxable

(107)

(38)

(69)

(358)

(48)

(310)

Securities - tax-exempt (1)

(11)

(1)

(10)

(25)

7

(32)

Total securities

(118)

(39)

(79)

(383)

(41)

(342)

Federal funds sold

49

(49)

98

137

(147)

284

Interest bearing bank deposits

368

(139)

507

922

(299)

1,221

Total interest income

$

450

115

335

$

1,606

788

818

Interest expense:

Deposits:

NOW

$

(79)

(101)

22

$

(3)

(91)

88

Savings and money market

149

113

36

424

395

29

Certificates of deposit

(399)

(266)

(133)

(612)

(336)

(276)

Total interest-bearing deposits

(329)

(254)

(75)

(191)

(32)

(159)

Short-term borrowings

—

—

—

(2)

20

(22)

Long-term debt

—

—

—

—

—

—

Total interest expense

(329)

(254)

(75)

(193)

(12)

(181)

Net interest income

$

779

369

410

$

1,799

800

999

(1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using an income

tax rate of 21%. See "Table 1 - Explanation of Non-GAAP Financial Measures."

(

2) Changes that are not solely a result of volume or rate have been allocated to volume.

Table of Contents

47

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by ITEM 3 is set forth in ITEM 2 under the caption “MARKET AND LIQUIDITY RISK

MANAGEMENT” and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

The Company, with the participation of its management, including its Chief Executive Officer and Chief Financial Officer,

carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as

defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the

period covered by this report. Based upon that evaluation and as of the end of the period covered by this report, the

Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and

procedures were effective to allow timely decisions regarding disclosure in its reports that the Company files or submits to

the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. There have been no

changes in the Company’s internal control over financial reporting that occurred during the period covered by this report

that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial

reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of its business, the Company and the Bank are, from time to time, involved in legal proceedings. The

Company’s and Bank’s management believe there are no pending or threatened legal, governmental, or regulatory

proceedings that, upon resolution, are expected to have a material adverse effect upon the Company’s or the Bank’s

financial condition or results of operations. See also, Part I, Item 3 of the Company’s Annual Report on Form 10-K for the

year ended December 31, 2024.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I,

Item 1A. “RISK FACTORS” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024,

which could materially affect our business, financial condition or future results. The risks described in our annual report on

Form 10-K are not the only the risks facing our Company. The persistence of inflation above the Federal Reserve’s long

term targets, and the maintenance of or further increases in, tightened Federal Reserve monetary policy by increased target

interest rates and reductions in the Federal Reserve’s securities portfolio, have and may continue to affect the levels of

interest rates, mortgage originations and income, the market values of our securities portfolio and loans and have resulted in

unrealized securities losses that have adversely affected our stockholders’ equity. Although inflation has remained above

the 2% rate, during the last year the Federal Reserve has reduced its target federal funds range from 5.25% to 5.50% to

3.75% to 4.00%, and on October 29, 2025 announced that it would end the roll-off of maturing securities it held beginning

December 1, 2025 as the Federal Reserve sought to meet its dual mandate of maximum employment and 2% inflation over

the longer run. These actions, and the changes from tighter to more accommodative monetary policy have affected and are

expected to continue to affect our deposit costs and mixes, and consumer savings and payment behaviors. These may also

affect our borrowers’ operating costs, expected returns and cash flows available to service our loans. Additional risks and

uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our

b

usiness, financial condition, and/or operating results in the future.

Table of Contents

48

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

The Company did not make any unregistered sales of common stock or other equity securities during the third quarter of

2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

N

ot applicable.

Table of Contents

49

ITEM 6. EXHIBITS

Exhibit

Number Description

3.1

Certificate of Incorporation of Auburn National Bancorporation, Inc. and all amendments thereto.*

3.2

Amended and Restated Bylaws of Auburn National Bancorporation, Inc., adopted as of November 13, 2007. **

10.1

Form of Notice of Discretionary Equity Award Agreement and related Terms and Conditions (together, the

“RSU Award Agreement”)

***

31.1

Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section

302 of the Sarbanes-Oxley Act of 2002, by David A. Hedges, President and Chief Executive Officer.

31.2

Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section

302 of the Sarbanes-Oxley Act of 2002, by W. James Walker, IV, Senior Vice President and Chief Financial

Officer.

32.1

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley

Act of 2002, by David A. Hedges, President and Chief Executive Officer.** **

32.2

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley

Act of 2002, by W. James Walker, IV, Senior Vice President and Chief Financial Officer.****

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

104

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

*

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.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned thereunto duly authorized.

AUBURN NATIONAL BANCORPORATION, INC.

(Registrant)

Date: November 12, 2025

By: /s/ David A. Hedges

David A. Hedges

President and CEO

Date: November 12, 2025

By: /s/

W.

James Walker, IV

W. James Walker, IV

Senior Vice President and Chief Financial Officer