AUBN

MKT CAP $92.2MP/E 11.0DIV YIELD 4.08%FCF YIELD —REV TTM —NET INCOME $8.4M +26.0%NET CASH $13.1M52W 21.01 – 28.88SEC XBRL · TTM TO Invalid Date

How AUBN rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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RISK FACTORS These disclosures under this item reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.
References to past events are examples only, and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Any of the following risks could harm our business, results of operations and financial condition and an investment in our stock.
The risks discussed below also include forward-looking statements, and our actual results and financial condition may differ substantially from those discussed in these forward-looking statements.
Operational Risks Market conditions and economic cyclicality may adversely affect us and our industry.
The Company’s income depends largely on the difference between interest income earned on its loans and securities (earning assets) and its interest expense on its deposits and other borrowings.
Market interest rates affect the spread between our interest income and our interest expense and the values of our investment securities.
Market rates are affected by Federal Reserve monetary policy, fiscal policy, inflation and inflation expectations, and various other factors.
Inflation more directly affects our noninterest costs, as well as our customers’ savings and payment behaviors.
Market developments, including unemployment rates, price and inflation levels, stock and bond market volatility, and changes, including those resulting from Russia’s war in Ukraine and other wars and armed conflicts, tariffs and foreign policies, and government fiscal, operational and monetary policies affect consumer confidence levels, economic activity and interest rates.
Increases in inflation and market interest rates and future expectations of these, and adverse changes in consumer and business confidence may change customers’ savings, payment and borrowing behaviors, and may increase in loan delinquencies and loan losses.
These could affect our credit quality, our results of operations and financial condition.
Changes in market interest rates and the shape of the yield curve affect the value of our investment securities.
Increased interest rates may result in unrealized losses on investment securities and accumulated other comprehensive income (“AOCI”).
Increases in AOCI reduce our reported stockholders’ equity.
Our allowance for loan losses is affected by general economic conditions and we may be negatively affected by credit risk exposures.
Our models for determining our allowance for credit losses are based on “current expected credit losses” (“CECL”) principles in generally accepted accounting principles (“GAAP”), and may be adversely affected by changes in the economy.
CECL uses current expected credit losses instead of the “as incurred” loss method used historically under GAAP, to estimate losses inherent in our credit exposures.
The process for estimating expected losses requires difficult, subjective and complex judgments, including forecasts of economic conditions, and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.
Macroeconomic factors used in our CECL model include the Alabama unemployment rate, the Alabama home price index, the national commercial real estate price index and the Alabama gross state product.
Changes in economic conditions and factors used in our CECL models, including the effects of changes in government policies, including monetary and fiscal policies, may increase the variability of our provisions for loan losses and our earnings.
The CECL standard has not been in effect over a full business cycle and its effects in times of severe economic stress may not be fully known.
See Note 1 to our Financial Statements – “Allowance for Credit Losses – Loans.” Unanticipated adverse changes in the economy, including those resulting from fiscal, monetary or other government policies adversely affect us.
We periodically review the expected effects of economic conditions and trends in reviewing our allowance for credit loss models.
We may be adversely affected because of unanticipated adverse changes in the economy, including fiscal and monetary policy changes, unemployment levels, inflation, market conditions or events adversely affecting specific customers, industries or markets, including disruptions of supply chains, war and armed conflicts, changes in taxes and regulation, and changes in borrower behaviors.
Borrowers and their businesses, and real estate and commercial projects and businesses may be adversely affected by inflation and higher interest rates, as well as from tighter monetary policies, and may request or need loan modifications and deferrals.
Businesses may be unable to fully pass on to their customers increased costs due to inflation, supply chain disruptions, tariffs and other factors, and their cash flows and profits may be adversely affected.
If the credit quality and risk profile of our customers materially change adversely, or if the risk profile of the market, industry or group of customers changes materially, or conditions in the real estate and other markets worsen, or borrower payment behaviors change, our business, could be materially adversely affected.
Changes in the real estate markets, including the origination and secondary markets for residential mortgage loans, may continue to adversely affect us.
Inflation and the Federal Reserve monetary actions to fight inflation have caused residential mortgage rates to increase significantly.
Higher interest rates and the increased prices of housing during and following the COVID-19 pandemic have slowed housing sales.
Although short term interest rates have decreased since Fall 2024, longer term mortgage rates have remained higher than before the pandemic, and purchase money residential mortgages and refinancings continue to be adversely affected.
Our mortgage loan production and income have been adversely affected.
Commercial real estate (“CRE”) is cyclical.
Rapid CRE growth and concentrations of CRE loans, in dollar amounts and geographic concentrations, present risks of possible loss.
Loans for the acquisition and development of land and residential construction which are generally viewed as higher risk than loans on existing structures.
We had approximately 68% of our loan portfolio in CRE loans at year-end 2025, of which approximately 18% were owner- occupied.
The bank regulators’ CRE Guidance requires banks with high levels of CRE and CRE growth, to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels.
Lower demand for CRE and fewer CRE purchase and sale transactions, and reduced availability of, and higher interest rates and costs for, CRE loans could adversely affect the values and liquidity of CRE collateral and our CRE loans, and sales of other real estate owned, and therefore our earnings and financial condition, including our capital and liquidity.
See Balance Sheet Analysis - Loans” and “Supervision and Regulation – CRE.” Resolution of the Fannie Mae and Freddie Mac Conservatorships may have adverse consequences Fannie Mae and Freddie Mac (the “GSEs”) have been in conservatorship since September 2008.

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Gone since FY2024

RISK FACTORS Any of the following risks could harm our business, results of operations and financial condition and an investment in our stock.
The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
Risk Factor Summary The following summarizes the risks provided after this summary and is qualified by the more detailed discussion of “Risk Factors” that follows this Summary, and which should be read in their entirety.
Our risks include operational risks, financial risks and legal and regulatory risks, which are related and intertwined as discussed more fully in the Risk Factors that follow this summary.
Operational risks are inherent in our business, and include: ● The effects of local, national and regional market and economic conditions and cyclicality, including the levels and rates of change in inflation and interest rates, and the effects on depositors, borrowers and markets, including the real estate and securities markets; ● Our allowance for credit losses is based on estimates and judgments and may prove to be inadequate to our credit risks; ● The risks and costs of nonperforming assets ● The soundness of other financial institutions and perceptions regarding our industry, especially when other banks experience difficulties or fail; ● Our concentrations in commercial real estate loans in our market; ● We operate in a highly competitive market and compete against a number of larger national and regional competitors, as well as smaller institutions, nonbanks and credit unions; ● Our ability to attract and retain key people; ● Inflation and strong labor markets may affect our non-interest expenses; ● Technological changes affect our business, and we may have fewer resources than our larger regulated and unregulated competitors, both in and outside our market area, which may increase the competition we face; ● Potential gaps in our risk management, including managing the risks related to maintaining our data security and cybersecurity and those of our third-party service providers; ● Continuity risks to us and our service providers due to power, information technology and telecommunication disruptions and outages, could affect our customer service, reputation and our results of operations, financial condition, customer relationship and reputation; ● Risks of severe weather, natural disasters, climate changes, epidemics and severe health issues in the population, wars and acts of terrorism and other events; and ● Future acquisitions may disrupt our business, dilute shareholder value and adversely affect our operating results and financial condition, among other risks.
Financial risks result in part from our operational risks and the risk of our business, and include: ● Increases in costs of funds due to inflation, monetary and fiscal policies, changes in costumer behaviors and competitive pressures; ● Our results of operations and financial condition, including the values of our assets and liquidity, may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions; ● Liquidity risks, including the costs and availability of funding, and the liquidity of our assets, including our investment securities portfolio, and institutional lending sources; ● Changes in accounting and tax rules; ● The adequacy of our capital and availability of capital, if needed; ● Potentially excessive risk taking by our associates; ● Our ability to pay dividends depends on our earnings, liquidity and regulatory requirements related to our capital and our risks; and ● Our common stock trades in limited volumes.
Legal and regulatory risks include: ● The Company is a legal entity separate and distinct from the Bank, and transactions between the Bank and the Company are limited by law; ● The Company is required to be a source of financial and managerial strength to the Bank, even in circumstances where further investment in the Bank may not be warranted; ● Privatization of Fannie Mae and Freddie Mac incident to the ending of their conservatorships and the resulting effects on the costs and availability of mortgage loans and the mortgage markets, generally, and the Company as a mortgage originator, and seller and servicer of residential mortgage loans; ● The scope, volume, complexity and clarity of regulations and regulatory and legal changes affect us, increase the time and costs of compliance and may limit our business and adversely affect our financial condition and results of operations; ● The pace and volume of regulatory changes and interpretations, especially by the bank regulators, the CFPB and the SEC, and well as numerous Executive Orders, and changes in government leadership, personnel and policies.
Even where changes ultimately will benefit the Company, changes in regulation and policies require time and attention, and involve costs to implement; ● Litigation, investigations and other claims by government agencies and private parties and regulatory actions, including those related to assertions of compliance failures; ● The amounts and changes in the capital we are required to maintain in respect of our business and risks, and regulatory perceptions of us and our industry; and ● Liquidity requirements and changes in rules that affect brokered and reciprocal deposits and other sources and measures of liquidity.
Additional Executive Orders and Administration and regulatory decisions, directives and actions, including modifications or changes to those discussed in this report, may occur at any time with currently unpredictable effects.
Operational Risks Market conditions and economic cyclicality may adversely affect our industry.
We believe the following, among other things, may affect us in 2025: ● Extraordinary monetary and fiscal stimulus in 2020 and in early 2021 offset certain of the COVID-19 pandemic’s adverse economic effects, but together with supply chain disruptions, continued consumer demand, Russia’s war in Ukraine and its effects on energy and food prices, and tight labor markets, resulted in inflation.
Inflation began running at levels unseen in decades and well above the Federal Reserve’s long term inflation goal of 2.0% annually.
Beginning in March 2022, the Federal Reserve raised its target federal funds interest rates and reduced its securities holdings in an effort to reduce inflation.
In February 2025 inflation remains above the Federal Reserve’s target rate, the labor market remains strong and the Federal Reserve cut its target federal funds rate in September through December 2024 100 basis points from 5.25-5.50% to 4.25%-4.50%, and reduced the rate of decline in reinvestments of maturing securities proceeds. ● The new presidential Administration that took office in January 2025 has established DOGE to increase government efficiency and reduce fiscal expenditures, imposed and threatened tariffs, and proposed tax cuts and tax cut extensions, the net effect of which is unknown.
The nature and timing of any future changes in monetary and fiscal policies, government policies and their administration and personnel, and their effects on us cannot be predicted. ● Market developments, including unemployment, inflation and price levels, stock and bond market volatility, and changes, including those resulting from Russia’s war in Ukraine and governmental fiscal, operational and monetary policies affect consumer confidence levels, economic activity and interest rates.
Increases in market interest rates and inflation, and adverse changes in consumer and business confidence may change customers’ savings and payment behaviors, including potential increases in loan delinquencies and default rates.
These could affect our credit quality, and our results of operations and financial condition. ● Our ability to assess the creditworthiness of our customers and those we do business with, and the values of our assets and loan collateral may be adversely affected and less predictable as a result of inflation and fluctuating market interest rates and changes in monetary and fiscal policies.
We adopted CECL on January 1, 2023 as required by generally accepted accounting principles (“GAAP”).
CECL changed the loss model to take into account current expected credit losses in place of the incurred loss method used historically under GAAP, and how to estimate losses inherent in our credit exposures.
The process for estimating expected losses requires difficult, subjective, and complex judgments, including forecasts of economic conditions, unemployment levels in Alabama, and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.
Changes in economic conditions and factors used in our CECL models may increase the variability of our provisions for loan losses and our earnings. ● Changes in market interest rates and the shape of the yield curve affect the value of our investment securities and our other accumulated other comprehensive income or “AOCI.” Our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk exposures.
We periodically review the allowance for loan losses for adequacy considering economic conditions and trends, collateral values and credit quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets.
We cannot be certain that our allowance for loan losses will be adequate over time to cover credit losses in our portfolio because of unanticipated adverse changes in the economy, including fiscal and monetary policy changes, inflation, market conditions or events adversely affecting specific customers, industries or markets, including disruptions of supply chains, the war in Ukraine, changes in taxes and regulations and changes in borrower behaviors.
Certain borrowers and their businesses and real estate and commercial projects and businesses may be adversely affected by inflation and higher interest rates, and economic slowdowns arising from tighter monetary policies, and may request or need loan modifications and deferrals.
Various businesses will be unable to fully pass on increased costs due to inflation, supply chain disruptions and changes and other factors, and their profits may shrink.
If the credit quality of our customer base materially decreases, if the risk profile of the market, industry or group of customers changes materially or weaknesses in the real estate markets worsen, borrower payment behaviors change, or if our allowance for loan losses is not adequate, our business, financial condition, including our liquidity and capital, and results of operations could be materially adversely affected.
CECL, the accounting standard for estimating expected future loan losses, became effective for the Company beginning January 1, 2023, and its effects upon the Company over a full business cycle are unknown.
The CECL model incorporates various economic condition factors, where changes in fiscal and monetary policy, as well as market interest rates and unemployment rates in our markets, among other factors, could result in more volatility in our provisions for loan losses under CECL, which could adversely affect our net income.
See Note 1 to our Financial Statements – “Allowance for Credit Losses – Loans.” Nonperforming and similar assets take significant time to resolve and may adversely affect our results of operations and financial condition.
Our nonperforming loans were 0.09% of total loans as of December 31, 2024, and we had no other real estate owned as result of foreclosures or otherwise in full or partial payments in respect of loans (“OREO”).
Non-performing assets may adversely affect our net income in various ways.
We do not record interest income on nonaccrual loans or OREO and these assets require higher loan administration and other costs, thereby adversely affecting our income.
Decreases in the value of these assets, or the underlying collateral, or in the related borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition.
In addition, the resolution of nonperforming assets requires commitments of time from management, which can be detrimental to the performance of their other responsibilities.
Loan deferrals and modifications made to help resolve borrower issues and avoid foreclosures may not be successful.
There can be no assurance that we will not experience increases in nonperforming loans in the future, much of which is affected by the economy and the levels of interest rates, generally.
Changes in the real estate markets, including the secondary market for residential mortgage loans, may continue to adversely affect us.
Beginning in March 2022, inflation and the Federal Reserve increases in interest rates to fight inflation have caused mortgage rates to increase significantly.
Higher interest rates and the increased level of housing costs since 2020 have slowed housing sales.
Although short term interest rates decreased in last half of 2024, longer term rates, including mortgage rates, have remained elevated.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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