Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Summary of Signficant Accounting Policies

Nature of Business Policy

Nature of Business

Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company whose primary business is conducted

by its wholly-owned subsidiary, AuburnBank (the “Bank”). AuburnBank is a commercial bank located in Auburn,

Alabama. The Bank provides a full range of banking services in its primary market area, Lee County, which includes the

Auburn-Opelika Metropolitan Statistical Area.

Basis of Presentation Policy

Basis of Presentation

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

intercompany transactions and accounts are eliminated in consolidation.

COVID-19 Uncertainty

COVID-19 has adversely affected, and may continue to adversely affect economic activity globally, nationally and locally.

Following the COVID-19 outbreak in December 2019 and January 2020, market interest rates declined significantly. The

federal banking agencies encouraged financial institutions to prudently work with borrowers and passed legislation to

provide relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. The spread of

COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and

cancellation of physical participation in meetings, events and conferences. The rapid development and fluidity of this

situation precludes any predication as to the ultimate impact of the COVID-19 outbreak. Nevertheless, the outbreak

presents uncertainty and risk with respect to the Company, its performance, and its financial results.

Revenue Recognition Policy

Revenue Recognition 

On January 1, 2018, the Company implemented ASU 2014 -09,

 Revenue from Contracts with Customers

, codified

at

 ASC

 606. The Company adopted ASC 606 using the modified retrospective transition method. The majority of the

Company’s revenue stream is generated from interest income on loans and deposits which are outside the scope of ASC

606. 

The Company’s sources of income that fall within the scope of ASC 606 include service charges on deposits, investment

services, interchange fees and gains and losses on sales of other real estate, all of which are presented as components of

noninterest income. The following is a summary of the revenue streams that fall within the scope of ASC 606: 

Service charges on deposits, investment services, ATM and interchange fees – Fees from these services are either

transaction-based, for which the performance obligations are satisfied when the individual transaction is processed, or set

periodic service charges, for which the performance obligations are satisfied over the period the service is provided.

Transaction-based fees are recognized at the time the transaction is processed, and periodic service charges are recognized

over the service period.

Gains on sales of other real estate

 –

A gain on sale should be recognized when a contract for sale exists and control of the

asset has been transferred to the buyer. ASC 606 lists several criteria required to conclude that a contract for sale exists,

including a determination that the institution will collect substantially all of the consideration to which it is entitled. In

addition to the loan-to-value, the analysis is based on various other factors, including the credit quality of the borrower, the

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

Use of Estimates Policy

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities as of the balance sheet date and the reported amounts of income and expense 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 the allowance for loan losses, fair value measurements,

valuation of other real estate owned, and valuation of deferred tax assets.

Change in Accounting Estimate

Change in Accounting Estimate

During the fourth quarter of 2019, the Company reassessed its estimate of the useful lives of certain fixed assets. The

Company revised its original useful life estimate for certain land improvements, buildings and improvements and furniture,

fixtures and equipment, with a carrying value of $

0.5

 million at December 31, 2019, to correspond with estimated

demolition dates planned as part of the redevelopment project for our main campus. This is considered a change in

accounting estimate, per ASC 250-10, where adjustments should be made prospectively. The effects of this change in

accounting estimate on the 2020 and 2019 consolidated financial statements, respectively, was a decrease in net earnings of

$

342

 thousand, or $

0.10

 per share and $

161

 thousand, or $

0.04

 per share.

Reclassifications Policy

Reclassifications 

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

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

Accounting Standards Adopted in 2019

Accounting Standards Adopted in 2020

In 2020, the Company adopted new guidance related to the following Accounting Standards Update (“Update” or “ASU”):

●

ASU 2018-13,

Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure

Requirements for Fair Value Measurement

; and

●

ASU 2018-15,

Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.

Information about these pronouncements is described in more detail below. 

ASU 2018-13,

Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for

Fair Value Measurement,

improves the disclosure requirements on fair value measurements by eliminating the

requirements to disclose (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

(ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value measurements.

This ASU also added specific disclosure requirements for fair value measurements for public entities including the

requirement to disclose the changes in unrealized gains and losses for the period included in other comprehensive income

for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used

to develop Level 3 fair value measurements.

The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2019, and all

interim periods within those fiscal years. Early adoption was permitted upon issuance of the ASU. Entities are permitted to

early adopt amendments that remove or modify disclosures and delay the adoption of the additional disclosures until their

effective date. The Company adopted this ASU on January 1, 2020. Adoption of this guidance did not have a material

impact on the Company’s consolidated financial statements.

ASU 2018-15,

Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

aligns the requirements for

capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for

capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that

include internal-use software license). This ASU requires entities to use the guidance in FASB ASC 350-40, Intangibles -

Goodwill and Other - Internal Use Software, to determine whether to capitalize or expense implementation costs related to

the service contract. This ASU also requires entities to (i) expense capitalized implementation costs of a hosting

arrangement that is a service contract over the term of the hosting arrangement; (ii) present the expense related to the

capitalized implementation costs in the same line item on the income statement as fees associated with the hosting element

of the arrangement; (iii) classify payments for capitalized implementation costs in the statement of cash flows in the same

manner as payments made for fees associated with the hosting element; and (iv) present the capitalized implementation

costs in the same balance sheet line item that a prepayment for the fees associated with the hosting arrangement would be

presented.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within

those fiscal years. Early adoption was permitted. The Company adopted this ASU on January 1, 2020. Adoption of this

guidance did not have a material impact on the Company’s consolidated financial statements.

Cash Equivalents

Cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, including interest

bearing deposits with other banks, and federal funds sold.

Securities

Securities are classified based on management’s intention at the date of purchase. At December 31, 2020, all of the

Company’s securities were classified as available-for-sale. Securities available-for -sale are used as part of the Company’s

interest rate risk management strategy, and they may be sold in response to changes in interest rates, changes in prepayment

risks or other factors. All securities classified as available-for-sale are recorded at fair value with any unrealized gains and

losses reported in accumulated other comprehensive income (loss), net of the deferred income tax effects. Interest and

dividends on securities, including the amortization of premiums and accretion of discounts are recognized in interest

income using the effective interest method. Premiums are amortized to the earliest call date while discounts are accreted

over the estimated life of the security. Realized gains and losses from the sale of securities are determined using the

specific identification method. 

On a quarterly basis, management makes an assessment to determine whether there have been events or economic

circumstances to indicate that a security on which there is an unrealized loss is other-than-temporarily impaired. 

For debt securities with an unrealized loss, an other-than -temporary impairment write-down is triggered when (1) the

Company has the intent to sell a debt security, (2) it is more likely than not that the Company will be required to sell the

debt security before recovery of its amortized cost basis, or (3) the Company does not expect to recover the entire amortized

cost basis of the debt security. If the Company has the intent to sell a debt security or if it is more likely than not that it will

be required to sell the debt security before recovery, the other-than-temporary write-down is equal to the entire difference

between the debt security’s amortized cost and its fair value. If the Company does not intend to sell the security or it is not

more likely than not that it will be required to sell the security before recovery, the other -than-temporary impairment write-

down is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The

credit loss component is recognized in earnings, as a realized loss in securities gains (losses), and is the difference between

the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference

between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit

related and is recognized in other comprehensive income, net of applicable taxes.

Loans held for sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the

aggregate. Loan sales are recognized when the transaction closes, the proceeds are collected, and ownership is transferred. 

Continuing involvement, through the sales agreement, consists of the right to service the loan for a fee for the life of the

loan, if applicable. Gains on the sale of loans held for sale are recorded net of related costs, such as commissions, and

reflected as a component of mortgage lending income in the consolidated statements of earnings. 

Cash Equivalents Policy

Cash Equivalents

Cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, including interest

bearing deposits with other banks, and federal funds sold.

Marketable Securities, Policy

Securities

Securities are classified based on management’s intention at the date of purchase. At December 31, 2020, all of the

Company’s securities were classified as available-for-sale. Securities available-for -sale are used as part of the Company’s

interest rate risk management strategy, and they may be sold in response to changes in interest rates, changes in prepayment

risks or other factors. All securities classified as available-for-sale are recorded at fair value with any unrealized gains and

losses reported in accumulated other comprehensive income (loss), net of the deferred income tax effects. Interest and

dividends on securities, including the amortization of premiums and accretion of discounts are recognized in interest

income using the effective interest method. Premiums are amortized to the earliest call date while discounts are accreted

over the estimated life of the security. Realized gains and losses from the sale of securities are determined using the

specific identification method. 

On a quarterly basis, management makes an assessment to determine whether there have been events or economic

circumstances to indicate that a security on which there is an unrealized loss is other-than-temporarily impaired. 

For debt securities with an unrealized loss, an other-than -temporary impairment write-down is triggered when (1) the

Company has the intent to sell a debt security, (2) it is more likely than not that the Company will be required to sell the

debt security before recovery of its amortized cost basis, or (3) the Company does not expect to recover the entire amortized

cost basis of the debt security. If the Company has the intent to sell a debt security or if it is more likely than not that it will

be required to sell the debt security before recovery, the other-than-temporary write-down is equal to the entire difference

between the debt security’s amortized cost and its fair value. If the Company does not intend to sell the security or it is not

more likely than not that it will be required to sell the security before recovery, the other -than-temporary impairment write-

down is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The

credit loss component is recognized in earnings, as a realized loss in securities gains (losses), and is the difference between

the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference

between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit

related and is recognized in other comprehensive income, net of applicable taxes.

Loans Held for Sale Policy

Loans held for sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the

aggregate. Loan sales are recognized when the transaction closes, the proceeds are collected, and ownership is transferred. 

Continuing involvement, through the sales agreement, consists of the right to service the loan for a fee for the life of the

loan, if applicable. Gains on the sale of loans held for sale are recorded net of related costs, such as commissions, and

reflected as a component of mortgage lending income in the consolidated statements of earnings. 

In the course of conducting the Bank’s mortgage lending activities of originating mortgage loans and selling those loans in

the secondary market, the Bank makes various representations and warranties to the purchaser of the mortgage loans. 

Every loan closed by the Bank’s mortgage center is run through a government agency automated underwriting system. 

Any exceptions noted during this process are remedied prior to sale. These representations and warranties also apply to

underwriting the real estate appraisal opinion of value for the collateral securing these loans. Failure by the Company to

comply with the underwriting and/or appraisal standards could result in the Company being required to repurchase the

mortgage loan or to reimburse the investor for losses incurred (make whole requests) if such failure cannot be cured by the

Company within the specified period following discovery.

Loans

Loans are reported at their outstanding principal balances, net of any unearned income, charge-offs, and any deferred fees

or costs on originated loans. Interest income is accrued based on the principal balance outstanding. 

Loan origination fees,

net of certain loan origination costs, are deferred and recognized in interest income over the contractual life of the loan

using the effective interest method. Loan commitment fees are generally deferred and amortized on a straight-line basis

over the commitment period, which results in a recorded amount that approximates fair value.

The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the

borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past

due, unless the loan is both well-collateralized and in the process of collection. Generally, all interest accrued but not

collected for loans that are placed on nonaccrual status is reversed against current interest income. Interest collections on

nonaccrual loans are generally applied as principal reductions. The Company determines past due or delinquency status of a

loan based on contractual payment terms.

A loan is considered impaired when it is probable the Company will be unable to collect all principal and interest payments

due according to the contractual terms of the loan agreement. Individually identified impaired loans are measured based on

the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable

market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired

loan exceeds the measure of fair value, a valuation allowance may be established as part of the allowance for loan losses.

Changes to the valuation allowance are recorded as a component of the provision for loan losses.

Impaired loans also include troubled debt restructurings (“TD Rs”). In the normal course of business, management may

grant concessions to borrowers who are experiencing financial difficulty. The concessions granted most frequently for

TDRs involve reductions or delays in required payments of principal and interest for a specified time, the rescheduling of

payments in accordance with a bankruptcy plan or the charge -off of a portion of the loan. In most cases, the conditions of

the credit also warrant nonaccrual status, even after the restructuring occurs. As part of the credit approval process, the

restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time

of restructuring. TDR loans may be returned to accrual status if there has been at least a six-month sustained period of

repayment performance by the borrower.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. If the

modification meets certain conditions, the modification does not need to be accounted for as a TDR. For more information,

please refer to Note 5, Loans and Allowance for Loan Losses.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that manage ment believes is adequate to absorb probable losses

inherent in the loan portfolio. Loan losses are charged against the allowance when they are known. Subsequent recoveries

are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of

the portfolio, current economic conditions, growth, composition of the loan portfolio, homogeneous pools of loans, risk

ratings of specific loans, historical loan loss factors, identified impaired loans and other factors related to the portfolio. This

evaluation is performed quarterly and is inherently subjective, as it requires various material estimates that are susceptible

to significant change, including the amounts and timing of future cash flows expected to be received on any impaired loans.

In addition, regulatory agencies, as an integral part of their examination process, will periodically review the Company’s

allowance for loan losses, and may require the Company to record additions to the allowance based on their judgment about

information available to them at the time of their examinations.

Loans Policy

Loans

Loans are reported at their outstanding principal balances, net of any unearned income, charge-offs, and any deferred fees

or costs on originated loans. Interest income is accrued based on the principal balance outstanding. 

Loan origination fees,

net of certain loan origination costs, are deferred and recognized in interest income over the contractual life of the loan

using the effective interest method. Loan commitment fees are generally deferred and amortized on a straight-line basis

over the commitment period, which results in a recorded amount that approximates fair value.

The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the

borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past

due, unless the loan is both well-collateralized and in the process of collection. Generally, all interest accrued but not

collected for loans that are placed on nonaccrual status is reversed against current interest income. Interest collections on

nonaccrual loans are generally applied as principal reductions. The Company determines past due or delinquency status of a

loan based on contractual payment terms.

A loan is considered impaired when it is probable the Company will be unable to collect all principal and interest payments

due according to the contractual terms of the loan agreement. Individually identified impaired loans are measured based on

the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable

market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired

loan exceeds the measure of fair value, a valuation allowance may be established as part of the allowance for loan losses.

Changes to the valuation allowance are recorded as a component of the provision for loan losses.

Impaired loans also include troubled debt restructurings (“TD Rs”). In the normal course of business, management may

grant concessions to borrowers who are experiencing financial difficulty. The concessions granted most frequently for

TDRs involve reductions or delays in required payments of principal and interest for a specified time, the rescheduling of

payments in accordance with a bankruptcy plan or the charge -off of a portion of the loan. In most cases, the conditions of

the credit also warrant nonaccrual status, even after the restructuring occurs. As part of the credit approval process, the

restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time

of restructuring. TDR loans may be returned to accrual status if there has been at least a six-month sustained period of

repayment performance by the borrower.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. If the

modification meets certain conditions, the modification does not need to be accounted for as a TDR. For more information,

please refer to Note 5, Loans and Allowance for Loan Losses.

Loans, Origination Fees Policy

Loan origination fees,

net of certain loan origination costs, are deferred and recognized in interest income over the contractual life of the loan

using the effective interest method. Loan commitment fees are generally deferred and amortized on a straight-line basis

over the commitment period, which results in a recorded amount that approximates fair value.

Loans, Nonacrrual Policy

The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the

borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past

due, unless the loan is both well-collateralized and in the process of collection. Generally, all interest accrued but not

collected for loans that are placed on nonaccrual status is reversed against current interest income. Interest collections on

nonaccrual loans are generally applied as principal reductions. The Company determines past due or delinquency status of a

loan based on contractual payment terms.

Loans, Impaired Policy

A loan is considered impaired when it is probable the Company will be unable to collect all principal and interest payments

due according to the contractual terms of the loan agreement. Individually identified impaired loans are measured based on

the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable

market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired

loan exceeds the measure of fair value, a valuation allowance may be established as part of the allowance for loan losses.

Changes to the valuation allowance are recorded as a component of the provision for loan losses.

Loans, Troubled Debt Restructuring Policy

Impaired loans also include troubled debt restructurings (“TD Rs”). In the normal course of business, management may

grant concessions to borrowers who are experiencing financial difficulty. The concessions granted most frequently for

TDRs involve reductions or delays in required payments of principal and interest for a specified time, the rescheduling of

payments in accordance with a bankruptcy plan or the charge -off of a portion of the loan. In most cases, the conditions of

the credit also warrant nonaccrual status, even after the restructuring occurs. As part of the credit approval process, the

restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time

of restructuring. TDR loans may be returned to accrual status if there has been at least a six-month sustained period of

repayment performance by the borrower.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. If the

modification meets certain conditions, the modification does not need to be accounted for as a TDR. For more information,

please refer to Note 5, Loans and Allowance for Loan Losses.

Allowance for Loan Losses Policy

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that manage ment believes is adequate to absorb probable losses

inherent in the loan portfolio. Loan losses are charged against the allowance when they are known. Subsequent recoveries

are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of

the portfolio, current economic conditions, growth, composition of the loan portfolio, homogeneous pools of loans, risk

ratings of specific loans, historical loan loss factors, identified impaired loans and other factors related to the portfolio. This

evaluation is performed quarterly and is inherently subjective, as it requires various material estimates that are susceptible

to significant change, including the amounts and timing of future cash flows expected to be received on any impaired loans.

In addition, regulatory agencies, as an integral part of their examination process, will periodically review the Company’s

allowance for loan losses, and may require the Company to record additions to the allowance based on their judgment about

information available to them at the time of their examinations.

Premises and Equipment Policy

Premises and Equipment

Land is carried at cost. Land improvements, buildings and improvements, and furniture, fixtures, and equipment are carried

at cost, less accumulated depreciation computed on a straight -line method over the useful lives of the assets or the expected

terms of the leases, if shorter. Expected terms include lease option periods to the extent that the exercise of such options is

reasonably assured.

Nonmarketable Equity Investments Policy

Nonmarketable equity investments

Nonmarketable equity investments include equity securities that are not publicly traded and securities acquired for various

purposes. The Bank is required to maintain certain minimum levels of equity investments with certain regulatory and other

entities in which the Bank has an ongoing business relationship based on the Bank’s common stock and surplus (with

regard to the relationship with the Federal Reserve Bank) or outstanding borrowings (with regard to the relationship with

the Federal Home Loan Bank of Atlanta). These nonmarketable equity securities are accounted for at cost which equals par

or redemption value. These securities do not have a readily determinable fair value as their ownership is restricted and there

is no market for these securities. These securities can only be redeemed or sold at their par value and only to the respective

issuing government supported institution or to another member institution. The Company records these nonmarketable

equity securities as a component of other assets, which are periodically evaluated for impairment. Management considers

these nonmarketable equity securities to be long-term investments. Accordingly, when evaluating these securities for

impairment, management considers the ultimate recoverability of the par value rather than by recognizing temporary

declines in value.

Transfers and Servicing of Financial Assets, Policy

Transfers of Financial Assets

Transfers of an entire financial asset (i.e. loan sales), a group of entire financial assets, or a participating interest in an entire

financial asset (i.e. loan participations sold) are accounted for as sales when control over the assets have been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company,

(2) the transferee obtains the right (free of conditions that constrain it from taking that right) to pledge or exchange the

transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an

agreement to repurchase them before their maturity.

Mortgage Servicing Rights Policy

Mortgage Servicing Rights

The Company recognizes as assets the rights to service mortgage loans for others, known as MSRs. The Company

determines the fair value of MSRs at the date the loan is transferred. An estimate 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 rate, default rates, cost 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

amortization of MSRs is analyzed monthly and is adjusted to reflect changes in prepayment speeds, as well as other factors. 

MSRs are evaluated for impairment based on the fair value of those assets. 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 through a charge to earnings. The

valuation allowance is adjusted as the fair value changes. MSRs are included in the other assets category in the

accompanying consolidated balance sheets.

Securities Sold Under Agreements to Repurchase Policy

Securities sold under agreements to repurchase 

Securities sold under agreements to repurchase generally mature less than one year from the transaction date. Securities

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

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

Income Taxes Policy

Income Taxes 

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying

amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces

deferred tax assets to the amount expected to be realized. The net deferred tax asset is reflected as a component of other

assets in the accompanying consolidated balance sheets.

Income tax expense or benefit for the year is allocated among continuing operations and other comprehensive income

(loss), as applicable. The amount allocated to continuing operations is the income tax effect of the pretax income or loss

from continuing operations that occurred during the year, plus or minus income tax effects of (1) changes in certain

circumstances that cause a change in judgment about the realization of deferred tax assets in future years, (2) changes in

income tax laws or rates, and (3) changes in income tax status, subject to certain exceptions. The amount allocated to other

comprehensive income (loss) is related solely to changes in the valuation allowance on items that are normally accounted

for in other comprehensive income (loss) such as unrealized gains or losses on available-for-sale securities.

Income Taxes, Uncertainties Policy

In accordance with ASC 740,

Income Taxes

, a tax position is recognized as a benefit only if it is “more likely than not” that

the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount

recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax

positions not meeting the “more likely than not” test, no tax benefit is recorded. It is the Company’s policy to recognize

interest and penalties related to income tax matters in income tax expense. The Company and its wholly-owned subsidiaries

file a consolidated income tax return.

Fair Value Measurements Policy

Fair Value Measurements 

ASC 820,

Fair Value Measurements,

which defines fair value, establishes a framework for measuring fair value in U.S.

generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 applies only to

fair-value measurements that are already required or permitted by other accounting standards. The definition of fair value

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 between market participants at the measurement date, not the entry price, i.e., the price that would be paid to

acquire the asset or received to assume the liability at the measurement date. The statement emphasizes that fair value is a

market-based measurement; not an entity-specific measurement. Therefore, the fair value measurement should be

determined based on the assumptions that market participants would use in pricing the asset or liability. For more

information related to fair value measurements, please refer to Note 15, Fair Value.

Subsequent Events Policy

Subsequent Events 

The Company has evaluated the effects of events or transactions through the date of this filing that ha ve occurred

subsequent to December 31, 2020. The Company does not believe there are any material subsequent events that would

require further recognition or disclosure.