Company: EMYB
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001449794-25-000002
Chunk: 2

Company: Embassy Bancorp, Inc.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 7A
Chunk 2
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 on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.‎ 

53    Embassy Bancorp, Inc.  

 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses – Loans – Qualitative Factors Critical Audit Matter Description As discussed in Notes 1 and 3 to the Company’s consolidated financial statements, the Company accounts for credit losses under ASC 326, Financial Instruments – Credit Losses. ASC 326 requires the measurement of expected credit losses over the estimated life of the existing portfolio of loans. As described in the notes, the allowance for credit losses is measured on a pool basis when similar risk characteristics exist. For the loans collectively evaluated on a pool basis, the allowance for credit losses is estimated via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts.  The qualitative factors used by the Company include factors such as changes in lending policies and procedures, national and local economic conditions, experience, ability and depth of lenders and staff, quality of the loan review system and Board oversight, the volume and severity of past due loans and non-accrual loans, portfolio concentrations, and the effect of external factors such as competition, and legal and regulatory requirements. The adjustments for qualitative factors require a significant amount of judgment by management and involve a high degree of estimation uncertainty. We identified the qualitative factor component of the allowance for credit losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management involve a high degree of subjectivity. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included, among others: 